Deck15

Question 1

When can interest be capitalized for qualifying Assets?

Answer 1

When the interest was used to Construct the Asset. - Interest incurred when simply buying an Asset can NOT be capitalized.

Question 2

Interest can be capitalized on inventory and other routinely produced assets. T or F

Answer 2

False - only on Qualifying Assets, which are assets that are Individually constructed for sale or lease, or for use by the firm

Question 3

How much interest can be capitalized?

Answer 3

Actual interest cost or avoidable interest. Whichever is less.

Question 4

Define “Avoidable Interest”.

Answer 4

Interest that could been avoided if expenditures for the construction had not been made.

Question 5

When does interest stop being capitalized for construction of an asset:

Answer 5

After the completion of the construction.

Question 6

Can interest be capitalized on a an asset constructed for sale.

Answer 6

No - thought there are a few exceptions.