Which of the following statements is TRUE regarding capitalization of interest? O Interest cost capitalized in connection with the purchase of land to be used as a building site should be debited to the land account and not the building account. The amount of interest cost capitalized during the period should not exceed the actual interest costs incurred. When excess borrowed funds not immediately needed for construction are temporarily invested, any interest carned should be offset against interest cost incurred when determining the amount of interest cost to be capitalized. The minimum amount of interest to be capitalized is determined by multiplying a weighted average interest rate by the amount of average accumulated expenditures on qualifying assets during the period.
Which of the following statements is TRUE regarding capitalization of interest? O Interest cost capitalized in connection with the purchase of land to be used as a building site should be debited to the land account and not the building account. The amount of interest cost capitalized during the period should not exceed the actual interest costs incurred. When excess borrowed funds not immediately needed for construction are temporarily invested, any interest carned should be offset against interest cost incurred when determining the amount of interest cost to be capitalized. The minimum amount of interest to be capitalized is determined by multiplying a weighted average interest rate by the amount of average accumulated expenditures on qualifying assets during the period.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Which of the following statements is TRUE regarding capitalization of interest?
O Interest cost capitalized in connection with the purchase of land to be used as a
building site should be debited to the land account and not the building account.
The amount of interest cost capitalized during the period should not exceed the
actual interest costs incurred.
When excess borrowed funds not immediately needed for construction are
temporarily invested, any interest carned should be offset against interest cost
incurred when determining the amount of interest cost to be capitalized.
The minimum amount of interest to be capitalized is determined by multiplying a
weighted average interest rate by the amount of average accumulated expenditures
on qualifying assets during the period.
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