Sweet Knee Company is constructing a building.Construction began in 2008 and the building was completed 12/31/08.Sweet Knee made payments to the construction company of $1,000,000 on 7/1, $2,100,000 on 9/1, and $2,000,000 on 12/31.Average accumulated expenditures were

Question

Quizplus · Accepted Answer

The average accumulated expenditures are calculated by taking the total amount of money spent on the construction project during the period of construction and dividing it by the number of months in the construction period. In this case, the total amount spent is $5,100,000 ($1,000,000 + $2,100,000 + $2,000,000) and the construction period is 6 months (from 7/1/08 to 12/31/08). Therefore, the average accumulated expenditures are $850,000 per month ($5,100,000 ÷ 6) and the answer is B ($1,200,000) as it is the closest option to $850,000.

Sweet Knee Company Is Constructing a Building