In: Accounting
Ventram, Inc. decided to open a new retail outlet in a
neighboring town. On January 1, 2019, Ventram took out a
$400,000 construction loan and purchased the land on January 15,
2019. Construction for the new store began on March 1,
2019. The company expected to complete construction in
early 2020. Information about 2019 construction
expenditures and details about Ventram’s debt structure are
included below.
Ventram Construction Expenditures - 2019 | ||
---|---|---|
Land purchase | Jan. 15, 2019 | $200,000 |
Payment for excavation and foundation work | Mar. 31, 2019 | 50,000 |
Payment for framing, electrical, plumbing, etc. | June 30, 2019 | 350,000 |
Payment for drywall, fixtures, etc. | Dec. 31, 2019 | 150,000 |
Ventram Debt Structure - 2019 | |||
---|---|---|---|
Contruction loan for retail building project | Jan. 1, 2019 | $400,000 | 6% |
Note payable | Mar. 31, 2018 | 350,000 | 8% |
Bond payable | Oct. 31, 2018 | 250,000 | 10% |
What was the total weighted average accumulated expenditure for the Ventram project? What was the weighted average interest rate on general debt (non-project specific)?
a. $379,167; 8.83%
b. $404,167; 9.00%
c. $404,167; 7.70%
d. $550,000: 8.83%
e. $379,167: 7.70%
Date | Expendtiure | Weight | Weight Average $ |
Constrcution Start Mar.1,2019 | 200,000 | 10/12 | 166,667 |
Mar.31,2019 | 50,000 | 9/12 | 37,500 |
June.30,2019 | 3,50,000 | 6/12 | 175,000 |
Dec.31,2019 | 1,50,000 | - | - |
Weighted average Expendiure | 379,167 | ||
A | B | A x B | |
Debt Amount | Interest rate | Interest Amount | |
Note payable | 350,000 | 8% | 28,000 |
Bond payable | 250,000 | 10% | 25,000 |
Total | 600,000 | 53,000 | |
Weighted average interest rate | 8.83% | (53,000 / 600,000 ) | |
Correct answer is option a. | |||