Question

Interest is eligible to be capitalized as part of an asset's cost, rather than being expensed immediately, when: _________.A. The asset is self-constructed, rather than acquired. B. The interest is incurred during the construction period of the asset. C. The asset is a discrete construction project for sale or lease. D. All of these answer choices are correct.

Answer 1

Answer:

The correct answer is letter "D": All of these answer choices are correct.

Explanation:

Capitalized interest is associated with debt used to make or construct the depreciable assets. For instance, a company that is constructing its own production facility and has to borrow funds to pay for it can capitalize on the interest paid on those funds. As a result, the interest can be capitalized as part of the asset's costs if the interest is incurred during the construction period, if the asset is constructed not acquired, and if the asset is an acceptable construction project that later could be leased or sold.