Question

Cullumber Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $2,052,000 on March 1, $1,200,000 on June 1, and $3,072,650 on December 31. Compute Cullumber weighted-average accumulated expenditures for interest capitalization purposes.

Answer 1

Answer: $2,410,000

Explanation:

Date: March 1st

Expenditure: $2,052,000

Capitalization period: 10/12 months

Weighted Average Accumulated Expenditure: $1,710,000

Date: June 1st

Expenditure: $1,200,000

Capitalization period: 7/12 months

Weighted Average Accumulated Expenditure: $700,000

Date: December 31st

Expenditure: $3,072,650

Capitalization period: 0

Weighted Average Accumulated Expenditure: $0

The Weighted Average Accumulated Expenditure will now be:

= $1,710,000 + $700,000 + $0

= $2,410,000

Note that Weighted Average Accumulated Expenditure for each date was gotten as:

= Expenditure × Capitalization period