6 and 7 The Smith Company has constructed an office for its own use. The constru

Question

6 and 7 The Smith Company has constructed an office for its own use. The construction period was from January 1, 2016 through September 30, 2016 Expenditures were as follows: 2/1/2016 300,000.00 6/30/2016 600,000.00 8/1/2016 600,000.00 9/30/2016 600,000.00 Smith borrowed $1,000,000 to help finance the project. The interest rate was 6% Smith had other debt totaling $5,000,000 with an interest rate of 8% 6. What were the average accumulated expenditures for 2016? 7. What is the total cost of the project to Smith upon completion, 9/30/16?

Explanation / Answer

COMPUTATION OF AVERAGE ACCUMULATION EXPENDITURE DATE EXPENDITURE NUMBER OF MONTS AVERAGE ACCUMULATED 01-02-2016 300000 11 300000*11/12 275000 30-06-2016 600000 6 600000*6/12 300000 01-08-2016 600000 5 600000*5/12 250000 30-09-2016 600000 3 600000*3/12 150000 975000 COMPUTATION OF AVERAGE ACCUMULATION EXPENDITURE DATE EXPENDITURE NUMBER OF MONTS INTEREST INTEREST AMOUNT TOTAL COST 01-02-2016 300000 8 300000*6%*8/9 16000 316000 30-06-2016 600000 3 600000*6%*3/9 12000 612000 01-08-2016 200000 2 200000*6%* 2/9 2666.667 202666.6667 01-08-2016 400000 2 400000*8%* 2/9 5333.333 405333.3333 30-09-2016 600000 0 0 600000 36000 2136000

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