XYZ Corp began construction on a building on January 1, 2016. On that date, it made its first $500,000 payment. An additional $600,000 were paid on 4/1/2016 and $300,000 was paid on 7/1/2016. A final payment of $100,000 was made on 12/31/2016, which is also the date when the construction project was finished and the building was ready to use.
To finance the project, XYZ Corp issued a $800,000 10% note. Furthermore, XYZ Corp had a $2,000,000 5% note outstanding that was not specifically related to the construction project. Both Notes were outstanding for the entire construction project.
What are the weighted average accumulated expenditures on the construction project?
Weighted Average accumulated expenditures
Weighted average accumulated expenditure is the amounts incurred on construction during the period multiplied by number of months remain in that period.
And it is calculated to calculate the amount of interest to be capitalized on selfconstruction assets
1. Calculation of weighted average accumulated expenditures
Period of Contract = January 1, 2016 –December 31, 2016 i.e. 12 months
Date of expenditure (A) 
Amount of expenditure (B) 
Period outstanding from the date of expenses ( C) 
Weighted average accumulated expenditure (D) = {B*C/12} 
1/1/2016 
500,000 
12 months 
500,000 
4/1/2016 
600,000 
9 months 
450,000 
7/1/2016 
300,000 
6 months 
150,000 
12/31/2016 
100,000 
0 months 
0 
Total weighted average accumulated expenditure 
1,100,000 
Additional Info:
Calculation of Actual Interest 

Specific debt : 800,000*10% 
80,000 
General debt: 2,000,000*5% 
100,000 
Total Actual Interest 
180,000 
Calculation of Avoidable Interest
Weighted Average Accumulated Expenditure 
Rate of Interest 
Amount of Avoidable Interest 
800,000 
10% 
80,000 
300,000 
5% 
15,000 
1,100,000 
95,000 
Avoidable Interest is less than actual interest.
Amount of interest to be capitalized is $95,000
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