Question

Vaughn Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,992,000 on March 1, $1,272,000 on June 1, and $3,029,260 on December 31. Compute Vaughn’s weighted-average accumulated expenditures for interest capitalization purposes.

Answer 1

$ 2,402,000.00

Step-by-step explanation:

We should multiply the expenditures by the time outstanding during the year.

construction capitalized interest

date expenditure weight * weighted expenditure

01-mar $1,992,000.00 0.833333333 1,660,000.00

01-jun $1,272,000.00 0.583333333 742,000.00

31-dic $3,029,260.00 0

2,402,000.00

from March 1st to December 31th we got 10 complete months over the 12 month of the year. So this ammount capitalize for 10/12 part of a year

from June 1st to December 31th we got 7 complete months over the 12 month of the year. It capitalize for 7/12 part of the year

The final expenditure; did not capitalize as it was done at the end of the year.

We then multiply weight by the expenditure and get the weigthed expenditure.

Finally we add them to get the total