Gutierrez Company is constructing a building. Construction began in 2014 and the building was completed 12/31/14. Gutierrez made payments to the construction company of $2,500,000 on 7/1, $5,500,000 on 9/1, and $5,000,000 on 12/31. Weighted-average accumulated expenditures were
A) $2,625,000.
B) $3,083,333.
C) $8,000,000.
D) $13,000,000.

Question

Quizplus · Accepted Answer

Weighted-average accumulated expenditures are calculated by multiplying the amount of expenditures by the portion of the year that they were outstanding. 
So, the calculation is:

(6/12 x $2,500,000) + (4/12 x $5,500,000) + (3/12 x $5,000,000) = $1,250,000 + $1,833,333 + $1,250,000 = $4,333,333

Therefore, the weighted-average accumulated expenditures for Gutierrez Company are $3,083,333.

Gutierrez Company Is Constructing a Building