Question

Whispering Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,944,000 on March 1, $1,224,000 on June 1, and $3,072,650 on December 31.
Compute Whispering’s weighted-average accumulated expenditures for interest capitalization purposes.

Answer 1

Answer and Explanation:

The weighted-average accumulated expenditure method will be used to compute the interest amount to be capitalized for a qualifying asset. Then the expenditure incurred during a particular month shall be multiplied by that month's outstanding and the sum is later divided over the total months in a given period.

(Check the attachment below for the computation of Whispering’s weighted-average accumulated expenditures for interest capitalization purposes.)

Therefore, Whispering's weighted-average accumulated expenditures for interest capitalization purposes is $2,334,000.