Final answer:
To calculate the weighted-average accumulated expenditures for Felt Co., we consider the time each payment of $160,000 was outstanding. With $480,000 for the first payment, $320,000 for the second, and $160,000 for the third, the total weighted expenditure sums to $960,000. The correct answer is option b.
Step-by-step explanation:
In calculating the weighted-average accumulated expenditures for a construction project to determine the amount of interest cost to be capitalized, we need to consider how much money has been spent on the project over time. For Felt Co., which made payments of $160,000 monthly for three months beginning March 1, the expenditures would be weighted based on the period of time each payment was outstanding before completion of the building on June 1.
The first $160,000 was outstanding for three months, the second for two months, and the third for one month. So, we calculate the weighted-average accumulated expenditures like this:
- 1st payment: $160,000 x 3 months = $480,000
- 2nd payment: $160,000 x 2 months = $320,000
- 3rd payment: $160,000 x 1 month = $160,000
Add these figures together to get the total weighted expenditure:
$480,000 + $320,000 + $160,000 = $960,000
Then, to find the weighted-average accumulation, divide by the total number of months (which is 3):
$960,000 / 3 = $320,000
So, the weighted-average accumulated expenditures for Felt Co. is $320,000, which corresponds to option B.