Question

g Messersmith Company is constructing a building. Construction began in 2020 and the building was completed 12/31/20. Messersmith made payments to the construction company of $3,000,000 on 7/1, $6,300,000 on 9/1, and $6,000,000 on 12/31. Weightedaverage accumulated expenditures were

Answer 1

Answer:

• Weighted average accumulated expenditures were

$ 3,600,000  

Explanation:

The Weighted average accumulated expenditures are calculated considering the payments made to the contructing company weighted by the time that the constructing company hold the money divided by the period of contruction.

Please see the details below:

Payment Date Expenditure Cap Period Weight Weighted Exp

07/01/2020      $3,000,000   6 (12-6)       0,50   $1,500,000  

09/01/2020      $6,300,000   4  (12-8)     0,33   $2,100,000  

12/31/2020       $6,000,000     0 -           0-             0-    

TOTAL              $15,300,000                      $3,600,000  

Capitalization Period: Example:  12 Months - 6 Months transcurred.

12/31/2020 -  ending of contruction

07/01/2020 - The moment went the payment was made, 6 months since the beginning of the construction.