Question

On March 1, 2019, Asbah contracted Nabali & Fares Construction Co. to construct a building on land costing $800,000 (purchased from the contractor and included in the first payment). The construction began on the office building on March 1. The following expenditures were incurred for construction: Date Expenditures March 1, 2019 $ 1,200,000 May 1, 2019 1,680,000 August 1, 2019 3,000,000 September 30, 2019 4,800,000 The building was completed and ready for occupancy on September 30, 2019. To finance purchase of the land and construction of the building, $1,500,000 was borrowed on March 1, 2019 on a 9%, 3-year note payable. Other than the construction note, the only debt outstanding during 2019 was a $1,000,000, 12%, 6-year note payable dated January 1, 2019. The amount of weighted-average accumulated expenditures is Select one: a. $ 2,000,000 b. $ 1,500,000 c. $ 1,700,000 d. $ 1,900,000

Answer 1

Date incurred	Amount	# months to 30th September	Weighted Amount
1-Mar-19	$     1,200,000	7	$    8,400,000
1-May-19	$     1,680,000	5	$    8,400,000
1-Aug-19	$     3,000,000	2	$    6,000,000
30-Sep-19	$     4,800,000	0	$ -
Total			$ 22,800,000
Weighted average accumulated expenditures = 22800000/12 =	$    1,900,000
Answer: [d] 1,900,000