Doggy Co. began construction of a new cutter for the U.S. Coast Guard on January 1, 2014 and completed construction of the ship on October 31, 2015. To finance construction, Doggy took out an $8,000,000, 2-year, 6% construction loan on February 1, 2014. Interest on the loan was to be paid annually on the anniversary date of the loan. Doggy has no other outstanding interest-bearing debt. Doggy made the following expenditures in conjunction with this construction project:
$$\begin{array} { r r }
\text { Date } & \text { Amount } \
2 / 1 / 2014 & \$ 1,050,000 \
3 / 31 / 2014 & 900,000 \
6 / 1 / 2014 & 750,000 \
10 / 1 / 2014 & 1,000,000 \
12 / 31 / 2014 & 600,000 \
3 / 1 / 2015 & 900,000 \
9 / 1 / 2015 & 250,000
\end{array}$$
-What would be the amount of Doggy's cumulative weighted average expenditure during 2014 related to the cutter project?

Question

Doggy Co. began construction of a new cutter for the U.S. Coast Guard on January 1, 2014 and completed construction of the ship on October 31, 2015. To finance construction, Doggy took out an $8,000,000, 2-year, 6% construction loan on February 1, 2014. Interest on the loan was to be paid annually on the anniversary date of the loan. Doggy has no other outstanding interest-bearing debt. Doggy made the following expenditures in conjunction with this construction project:
$$\begin{array} { r r } 
\text { Date } & \text { Amount } \
2 / 1 / 2014 & \$ 1,050,000 \
3 / 31 / 2014 & 900,000 \
6 / 1 / 2014 & 750,000 \
10 / 1 / 2014 & 1,000,000 \
12 / 31 / 2014 & 600,000 \
3 / 1 / 2015 & 900,000 \
9 / 1 / 2015 & 250,000
\end{array}$$
-What would be the amount of Doggy's cumulative weighted average expenditure during 2014 related to the cutter project?

Quizplus · Accepted Answer

To calculate the cumulative weighted average expenditure for 2014, we add up the expenditures made during 2014 and ignore the expenditures made in 2015 since the question specifically asks for the cumulative expenditure in 2014. The expenditures in 2014 are as follows: $1,050,000 on 2/1/2014, $900,000 on 3/31/2014, $750,000 on 6/1/2014, $1,000,000 on 10/1/2014, and $600,000 on 12/31/2014. Adding these amounts gives us $1,050,000 + $900,000 + $750,000 + $1,000,000 + $600,000 = $4,300,000.

Doggy Co Began Construction of a New Cutter for the U