On March 1, Felt Co. began construction of a small building. Payments of $320,000 were made monthly for three months beginning March 1. The building was completed and ready for occupancy on June 1. In determining the amount of interest cost to be capitalized, the weighted-average accumulated expenditures are

Question

Quizplus · Accepted Answer

To determine the weighted-average accumulated expenditures, we need to calculate the total amount of expenditures incurred during the construction period and then determine the weighted-average by multiplying each expenditure by the time it was outstanding.

Total amount of expenditures incurred during the construction period = $320,000 x 3 = $960,000

Weighted-average accumulated expenditures = (320,000 x 3/12) + (320,000 x 2/12) + (320,000 x 1/12) = $160,000

Therefore, the answer is choice B.