On January 2, 2012, Indian River Groves began construction of a new citrus proce

Question

On January 2, 2012, Indian River Groves began construction of a new citrus processing plant. The automated plant was finished and ready for use on September 30, 2013. Expenditures for the construction were as follows: January 2, 2012 $300,000 September 1, 2012 900,000 December 31, 2012 900,000 March 31, 2013 900,000 September 30, 2013 600,000 Indian River Groves borrowed $1,650,000 on a construction loan at 12% interest on January 2, 2012. This loan was outstanding during the construction period. The company also had $6,000,000 in 9% bonds outstanding in 2012 and 2013. What were the weighted-average accumulated expenditures for 2013 by the end of the construction period?

Explanation / Answer

January 2, 2012 $300,000

=$300,000 x1/12 = $ 300,000

September 1, 2012 900,000

=$900,000 x9/12 = $ 675,000

December 31, 2012 900,000

=$900,000 x0/12 = $ 0

March 31, 2013 900,000

=$900,000 x3/12 = $ 225,000

September 30, 2013 600,000

=$600,000 x0/12 = $ 000,000

300,000 +$ 675,000+225,000+0=1200000

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