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  1. The answer is:

    $105,000 (B)


    The weighted average accumulated expenditure (WAAE) is the average depth that is incurred during a business year. It is a combination of the amount spent in asset construction purposes and if loans were taken, the interest rate that accumulated within that same time period.

    Next, you have to know what interest capitalization is; Interest capitalization is the accumulated interest on on borrowed amount for construction assets that are for future use.

    Next, we nee to know what Capitalization period is; it is the period during which interest costs are incurred on amounts spent to construct an asset in progress. Interests are capitalized during construction until the asset is ready for its intended use. For the purpose of calculation, it is represented as the period of time for which the depth will be incurred over the construction year. for example for a year starting in January 1 to December 31, if $200,000 was borrowed, the capitalization period will be represented as "12/12" meaning that the incurred debt was owed for 12 out of 12 monts, if the same amount was borrowed in May, capitalization period will be represented as "8/12"meaning that the interest was owed for 8 out of 12 months. Now, for our example, the construction year began on April 1 and ended on December 31 (8 months), hence the capitalization periods for the amount taken in April one is "8/8", for July 1 is "5/8" and October 1 is "2/8", meaning that in October the debt was incurred for 2 out of 8 months.

    So to calculate the weighted average accumulated expenditure, we need to know; the date of the transaction, the expenditures made, and the capitalization period.

    Hence the WAAE is calculated as Actual Expenditure ×  Capitalization Period which is written thus:


    Date          Actual Expenditure          Capitalization period        WAAE

    April 1         $30,000                                   8/8                            $30,000

    July 1          $60,000                                   5/8                            $37,500

    October 1   $ 150,000                                 2/8                           $37,500

    Total                                                                                              $105,000

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