Question

On January 1, 2018, Dreamworld Co. began construction of a new warehouse. The building was finished and ready for use on September 30, 2019.

Expenditures on the project were as follows: January 1, 2018 $ 316,000 September 1, 2018 $ 462,000 December 31, 2018 $ 462,000 March 31, 2019 $ 462,000 September 30, 2019 $ 316,000

Dreamworld had $5,400,000 in 14% bonds outstanding through both years. The average accumulated expenditures for 2019 by the end of the construction period was:

Answer 1

Answer:

Date	Amount	Period	Weighted average expenditure
January 1,2018	3,16,000	12/12	3,16,000
September 1,2018	4,62,000	4/12	1,54,000
December 31,2018	4,62,000	0	-
	12,40,000		4,70,000
Average accumulated expenditures for 2018 was $470,000
Interest Exp for 2018 = $470,000 *14% = $65,800
Date	Amount	Period	Weighted average expenditure
January 1,2019(12,40,000+65,800)	13,05,800	9/ 9	13,05,800
mar31,2019	4,62,000	6/9	6,93,000
Sept 30. 2019	3,16,000	0	-
	20,83,800		19,98,800
Average accumulated expenditures for 2019 was $19,98,800