Assume that on November 1, 2016, ABC Company contracted DEF Construction Co. to
ID: 2595181 • Letter: A
Question
Assume that on November 1, 2016, ABC Company contracted DEF Construction Co. to construct a building for $1,400,000 on land costing $100,000 (purchased from the contractor and included in the first payment). ABC made the following payments to the construction company during 2017:
January 1 March 1 May 1 December 31 Total
$210,000 $300,000 $540,000 $450,000 $1,500,000
DEF Construction completed the building, ready for occupancy, on December 31, 2017. ABC had the following debt outstanding at December 31, 2017.
Specific Construction Debt:
15%, 3-year note to finance purchase of land and construction of the building, dated December 31, 2016, with interest payable annually on December 31
$750,000
Other Debt:
10%, 5-year note payable, dated December 31, 2013, with interest payable annually on December 31
$550,000
12%, 10-year bonds issued December 31, 2012, with interest payable annually on December 31
$600,000
The weighted-average accumulated expenditures of ABC Company during 2017 is (choose the closest answer):
$820,000
$857,500
$795,000
$830,000
15%, 3-year note to finance purchase of land and construction of the building, dated December 31, 2016, with interest payable annually on December 31
$750,000
Other Debt:
10%, 5-year note payable, dated December 31, 2013, with interest payable annually on December 31
$550,000
12%, 10-year bonds issued December 31, 2012, with interest payable annually on December 31
$600,000
Explanation / Answer
Date Amount Period Weighted average amount Jan-01 210000 12/12 210000 Mar-01 300000 10/12 250000 May-01 540000 8/12 360000 Dec-31 450000 0/12 0 Total 1500000 820000 Option A is corrrect