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On January 2, 2020, Vaughn Manufacturing began construction of a new citrus processing plant. The automated plant was finished and ready for use on September 30, 2021. Expenditures for the construction were as follows:

January 2, 2020 $613000
September 1, 2020 1802400
December 31, 2020 1802400
March 31, 2021 1802400
September 30, 2021 1203000
Indian River Groves borrowed $3,300,000 on a construction loan at 12% interest on January 2, 2017. This loan was outstanding during the construction period. The company also had $12,000,000 in 9% bonds outstanding in 2017 and 2018.
1. What were the weighted-average accumulated expenditures for 2017?
a. $1,600,000.
b. $1,500,000.
c. $1,200,000.
d. $3,000,000.
2. The interest capitalized for 2017 was:
a. $540,000.
b. $144,000
c. $456,000.
d. $180,000.
3. What were the weighted-average accumulated expenditures for 2018 by the end of the construction period?
a. $1,170,000.
b. $4,905,000.
c. $5,958,000.
d. $4,158,000.
4. The interest capitalized for 2018 was:
a. $374,220.
b. $354,915.
c. $ 77,220.
d. $297,000.

User Tharaka Dilshan
by
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1 Answer

13 votes
13 votes

Answer:

Vaughn Manufacturing

1. The weighted-average accumulated expenditures for 2017 were:

c. $1,200,000.

2. The interest capitalized for 2017 was:

b. $144,000

3. The weighted-average accumulated expenditures for 2018 by the end of the construction period were:

= $2,546,000.

4. The interest capitalized for 2018 was:

= $267,000.

Step-by-step explanation:

a) Data and Calculations:

Expenditures for the construction were as follows:

Date Amount of No. of months Weighted Average

expenditure Expenditure

2020:

January 2, 2020 $613,000 12/12 $613,000

September 1, 2020 1,802,400 4/12 600,800

December 31, 2020 1,802,400 0/12 0

Total weighted-average expenditure for 2020 = $1,213,800

Which is approximately = $1,200,000

Interest capitalized = $144,000 ($1,200,000 * 12%)

Capitalized expenditure by December 31, 2020 = $1,344,000 ($1,200,000 + $144,000)

Date Amount of No. of months Weighted Average

expenditure Expenditure

2021:

January 1, 2021 1,344,000 9/9 $1,344,000

March 31, 2021 1,802,400 6/9 1,201,600

September 30, 2021 1,203,000 0/9 0

Total weighted-average expenditure for 2020 = $2,545,600

Which is approximately $2,546,000

Interest capitalized for 2018 = $267,330 ($2,546,000 * 10.5%)

Approximately $267,000

User Laurence Moroney
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