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. $ 1,700,000
c. $ 1,900,000
d. $ 1,500,000
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 |
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