Question

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%

Answer 1

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.