Question

Wildhorse Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $2,004,000 on March 1, $1,284,000 on June 1, and $3,039,450 on December 31. Compute Wildhorse's weighted-average accumulated expenditures for interest capitalization purposes. Weighted-average accumulated expenditures

Answer 1

Wildhorse's weighted-average accumulated expenditures for interest capitalization purposes are calculated by weighting the expenditures based on the time they were outstanding during the construction period, resulting in a total of $2,417,333.

Step-by-step explanation:

To calculate Wildhorse's weighted-average accumulated expenditures for interest capitalization purposes, we need to determine the amount of time that each expenditure was outstanding during the construction period. This helps in determining the average amount of capital on which interest costs will be accrued. The construction began on February 1 and ended on December 31.

Expenditure on March 1: $2,004,000 (outstanding for 10 months)

Expenditure on June 1: $1,284,000 (outstanding for 7 months)

Expenditure on December 31: $3,039,450 (outstanding for 0 months, for calculation purposes, this amount will not be weighted as it was not outstanding during the construction period)

The weighted-average calculation is as follows:

March expenditure: $2,004,000 x 10/12 = $1,670,000

June expenditure: $1,284,000 x 7/12 = $747,333

The sum of these weighted expenditures is the total weighted-average accumulated expenditures:

Weighted-average accumulated expenditures = $1,670,000 + $747,333

= $2,417,333