On March 1, Mocl Co. began construction of a small building. The following expenditures were incurred for construction:

March 1 $ 75,000 April 1 $ 74,000

May 1 180,000 June 1 270,000

July 1 100,000

The building was completed and occupied on July 1. To help pay for construction $50,000 was borrowed on March 1 on a 12%, three-year note payable. The only other debt outstanding during the year was a $500,000, 10% note issued two years ago.

Instructions

(a) Calculate the weighted-average accumulated expenditures.

(b) Calculate avoidable interest.

Solution

(a) Capitalization Weighted-Average

Date Expenditures Period Accum. Expend.

March 1 $ 75,000 4/12 $25,000

April 1 74,000 3/12 18,500

May 1 180,000 2/12 30,000

June 1 270,000 1/12 22,500

July 1 100,000 0 0

$96,000

(b) Weighted-Average Avoidable

Accum. Expend. Rate Interest

$50,000 .12 $ 6,000

46,000 .10 4,600

$96,000 $10,600

I need help understanding how to get the bolded numbers.