Question

Novak Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $2,520,000 on March 1, $1,680,000 on June 1, and $4,200,000 on December 31. Compute Novak’s weighted-average accumulated expenditures for interest capitalization purposes.
Weighted-Average Accumulated Expenditures = $

Answer 1

Answer:

$3,080,000

Explanation:

March 1

$1,680,000 x10/12 = $2,100,000

June 1

$1,680,000 x07/12 = $980,000

December 31

$4,200,000 x0/12 = $0

$2,100,000 + $980,000 = 3,080,000

Answer 2

Answer: $2,940,000

Explanation: Weighted Average Accumulated Expenditure is the product of the amount incurred multiplied by the no of months its being capitalised.

on March 1st $ 2,520,000 was incurred = 10/12*2,520,000=2,100,000

on 1st June $1,680,000 was incurred = 6/12*1,680,000= 840,000

on 31st December $4,200,000 was incurred = 0/12*4,200,000=0

Total Weighted Average Accumulated Expenditures = 2,100,000+840,000

= $2,940,000