2. To prepare for the construction of its new headquarters, ABC company purchased a 500-acre plot of land on July 12, 2016. ABC company purchased the land using 25% cash and financed the balance using 9% loan from XYZ bank. The company began preparation of the land for the construction of the building on January 15, 2017. Which section of the FASB ASC explicitly states whether the 2016 interest on the bank loan qualifies for capitalization? (The citation must follow xxx-xx-xx-xx or xxx-xx-xx-x format)
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
2. To prepare for the construction of its new headquarters, ABC company purchased a 500-acre plot of land on July 12, 2016. ABC company purchased the land using 25% cash and financed the balance using 9% loan from XYZ bank. The company began preparation of the land for the construction of the building on January 15, 2017. Which section of the FASB ASC explicitly states whether the 2016 interest on the bank loan qualifies for capitalization? (The citation must follow xxx-xx-xx-xx or xxx-xx-xx-x format)
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