Homework SourseXYZ Inc begins construction of an asset on January 1 2017 an
XYZ Inc. begins construction of an asset on January 1, 2017, and completes construction on December 31, 2017. XYZ Inc. pays the following amounts related to construction:
Calculate the average accumulated expenditures for the purpose of capitalizing interest.
Do not round intermediate calculations. If required, round your final answer to the nearest dollar.
| $900,000 | January 1 | |
| $2,000,000 | July 1 | |
| $1,000,000 | December 1 |
Solution
Solution:
Average accumulated expenditures = $1,983,333 (rounded to nearest dollar).
| Date | Amount paid | capitalization period | Average Accumulated Expenditure |
| 1-Jan | $900,000.00 | 12/12 | $900,000.00 |
| 1-Jul | $2,000,000.00 | 6/12 | $1,000,000.00 |
| 1-Dec | $1,000,000.00 | 1/12 | $83,333.33 |
| Total | $3,900,000.00 | $1,983,333.33 |
