Question

Montgomery Industries spent $530,000 in 2015 on a construction project to build a library. Montgomery also capitalized $26,500 of interest on the project in 2015. Montgomery financed 100% of the construction with a 8% construction loan. The project was completed on September 30, 2016. Additional expenditures in 2016 were as follows: Feb. 28 Apr. 30 Jul. 1 Sept. 30 $ 83,700 173,700 29,700 57,700 Required: Determine the completed cost of the library. (Do not round intermediate calculations.) Completed cost of the library

Answer 1

first we need to find out average accumulated expenditures for 2003.

expenditures
accumulated expenditures of 2015 (530,000+26,500)	556,500*9 months / 9 months	556,500
expenditure incurred on feb 28	83,700*7 months / 9 months	65,100
expenditure incurred on apr 30	173,700*5 months / 9 months	96,500
expenditure incurred on july 1	29,700 * 3 months /9 months	9,900
expenditure incurred on sept 30	57,700*0/9 months	0
average accumulated expenditure		728,000

interest capitalised in 2016 = 728,000*8%*9/12

=>$43,680.

Completed cost of library => 530,000+26,500+83,700+173,700+29,700+57,700+43,680

=>$944,980.