Question

On December 31, 2012, Cia Company borrowed $400,000 from First Bank with interest payable annually at...

On December 31, 2012, Cia Company borrowed $400,000 from First Bank with interest payable annually at 10% maturing on December 31, 2015 in order to provide funds for the construction of a building to use as its corporate headquarters. On January 1, 2013, Cia Company started the construction. The project was completed and ready for occupancy on December 31, 2013. Cia incurred the following expenditures related to construction during 2013: January 1 $400,000 April 1 350,000 October 31 900,000 December 31 250,000 $1,900,000

Aside from the loan described above, Cia also had a $1,000,000 5-year note payable issued December 31, 2012 that bears interest annually at 8% and $1,200,000 of bonds payable issued on December 31, 2010 due in 10 years that bear interest annually at 9%.

  1. Compute weighted average accumulated expenditures for the construction project.

Homework Answers

Answer #1

Weighted-average accumulated expenditure is the product of expenditures incurred on a qualifying asset and a fraction representing the capitalization period in terms of years.

Weighted-average accumulated expenditures = expenditure incurred * months in capitalization period of the relevant year/12

Following schedule calculates the weighted-average accumulated expenditures:

Payment Date Expenditures
(A)
Capitalization Period
(B)
Weight
(C=B/12)
Weighted Expenditures
(A×C)
01-Jan-13 400,000 12 months 1.00 400,000
01-April-13 350,000 9 months 0.75 262,500
31-Oct-13 900,000 2 months 0.167 150,300
31-Dec-13 250,000 0 month 0 0
812,800

weighted average accumulated expenditures for the construction project =$812,800

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
On December 31, 2019, Coronado Inc. borrowed $4,260,000 at 12% payable annually to finance the construction...
On December 31, 2019, Coronado Inc. borrowed $4,260,000 at 12% payable annually to finance the construction of a new building. In 2020, the company made the following expenditures related to this building: March 1, $511,200; June 1, $852,000; July 1, $2,130,000; December 1, $2,130,000. The building was completed in February 2021. Additional information is provided as follows. 1. Other debt outstanding 10-year, 13% bond, December 31, 2013, interest payable annually $5,680,000 6-year, 10% note, dated December 31, 2017, interest payable...
Question 6 On December 31, 2019, Sunland Inc. borrowed $3,120,000 at 12% payable annually to finance...
Question 6 On December 31, 2019, Sunland Inc. borrowed $3,120,000 at 12% payable annually to finance the construction of a new building. In 2020, the company made the following expenditures related to this building: March 1, $374,400; June 1, $624,000; July 1, $1,560,000; December 1, $1,560,000. The building was completed in February 2021. Additional information is provided as follows. 1. Other debt outstanding 10-year, 13% bond, December 31, 2013, interest payable annually $4,160,000 6-year, 10% note, dated December 31, 2017,...
On December 31, 2019, Culver Inc. borrowed $4,320,000 at 13% payable annually to finance the construction...
On December 31, 2019, Culver Inc. borrowed $4,320,000 at 13% payable annually to finance the construction of a new building. In 2020, the company made the following expenditures related to this building: March 1, $518,400; June 1, $864,000; July 1, $2,160,000; December 1, $2,160,000. The building was completed in February 2021. Additional information is provided as follows. 1. Other debt outstanding 10-year, 14% bond, December 31, 2013, interest payable annually $5,760,000 6-year, 11% note, dated December 31, 2017, interest payable...
On December 31, 2019, Sheffield Inc. borrowed $3,240,000 at 13% payable annually to finance the construction...
On December 31, 2019, Sheffield Inc. borrowed $3,240,000 at 13% payable annually to finance the construction of a new building. In 2020, the company made the following expenditures related to this building: March 1, $388,800; June 1, $648,000; July 1, $1,620,000; December 1, $1,620,000. The building was completed in February 2021. Additional information is provided as follows. 1. Other debt outstanding 10-year, 14% bond, December 31, 2013, interest payable annually $4,320,000 6-year, 11% note, dated December 31, 2017, interest payable...
On December 31, 2019, Sandhill Inc. borrowed $3,060,000 at 13% payable annually to finance the construction...
On December 31, 2019, Sandhill Inc. borrowed $3,060,000 at 13% payable annually to finance the construction of a new building. In 2020, the company made the following expenditures related to this building: March 1, $367,200; June 1, $612,000; July 1, $1,530,000; December 1, $1,530,000. The building was completed in February 2021. Additional information is provided as follows. 1. Other debt outstanding 10-year, 14% bond, December 31, 2013, interest payable annually $4,080,000 6-year, 11% note, dated December 31, 2017, interest payable...
On December 31, 2019, Ayayai Inc. borrowed $3,720,000 at 13% payable annually to finance the construction...
On December 31, 2019, Ayayai Inc. borrowed $3,720,000 at 13% payable annually to finance the construction of a new building. In 2020, the company made the following expenditures related to this building: March 1, $446,400; June 1, $744,000; July 1, $1,860,000; December 1, $1,860,000. The building was completed in February 2021. Additional information is provided as follows. 1. Other debt outstanding 10-year, 14% bond, December 31, 2013, interest payable annually $4,960,000 6-year, 11% note, dated December 31, 2017, interest payable...
10-08 On December 31, 2019, Sheffield Inc. borrowed $4,200,000 at 13% payable annually to finance the...
10-08 On December 31, 2019, Sheffield Inc. borrowed $4,200,000 at 13% payable annually to finance the construction of a new building. In 2020, the company made the following expenditures related to this building: March 1, $504,000; June 1, $840,000; July 1, $2,100,000; December 1, $2,100,000. The building was completed in February 2021. Additional information is provided as follows. 1. Other debt outstanding 10-year, 14% bond, December 31, 2013, interest payable annually $5,600,000 6-year, 11% note, dated December 31, 2017, interest...
Exercise 10-08 On December 31, 2019, Blue Inc. borrowed $4,260,000 at 12% payable annually to finance...
Exercise 10-08 On December 31, 2019, Blue Inc. borrowed $4,260,000 at 12% payable annually to finance the construction of a new building. In 2020, the company made the following expenditures related to this building: March 1, $511,200; June 1, $852,000; July 1, $2,130,000; December 1, $2,130,000. The building was completed in February 2021. Additional information is provided as follows. 1. Other debt outstanding 10-year, 13% bond, December 31, 2013, interest payable annually $5,680,000 6-year, 10% note, dated December 31, 2017,...
On January 2, 2012, Dessin Ltd began construction of a new citrus processing plant. The automated...
On January 2, 2012, Dessin Ltd began construction of a new citrus processing plant. The automated plant was finished and ready for use on December 31, 2012. Expenditures for the construction were as follows: January 2, 2012 $150,000 March 1, 2012 700,000 September 1, 2012 500,000 December 1, 2012 180,000 December 31, 2012 200,000 Dessin Ltd borrowed $500,000 on a construction loan at 10% interest on January 2, 2012. This loan was outstanding during the construction period. The company also...
Exercise 10-8 (Part Level Submission) On December 31, 2013, Main Inc. borrowed $5,340,000 at 13% payable...
Exercise 10-8 (Part Level Submission) On December 31, 2013, Main Inc. borrowed $5,340,000 at 13% payable annually to finance the construction of a new building. In 2014, the company made the following expenditures related to this building: March 1, $640,800; June 1, $1,068,000; July 1, $2,670,000; December 1, $2,670,000. The building was completed in February 2015. Additional information is provided as follows. 1. Other debt outstanding 10-year, 12% bond, December 31, 2007, interest payable annually $7,120,000 6-year, 11% note, dated...