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Your client is in the planning phase for a major plant expansion, which will involve the construction of a new warehouse. The assistant controller does not believe that interest cost can be included in the cost of the warehouse, because it is a financing ­expense. Others on the planning team believe that some interest cost can be included in the cost of the warehouse, but no one could identify the specific authoritative guidance for this issue. Your supervisor asks you to ­research this issue. Instructions If your school has a subscription to the FASB Codification, log in and prepare responses to the following. Provide Codification references for your responses. a.    Is it permissible to capitalize interest into the cost of assets? Provide authoritative support for your answer. b.    What are the objectives for capitalizing interest? c.    Discuss which assets qualify for interest capitalization. d.    Is there a limit to the amount of interest that may be capitalized in a period? e.    If interest capitalization is allowed, what disclosures are required?

Your client is in the planning phase for a major plant expansion, which will involve the construction of a new warehouse. The assistant controller does not believe that interest cost can be included in the cost of the warehouse, because it is a financing ­expense. Others on the planning team believe that some interest cost can be included in the cost of the warehouse, but no one could identify the specific authoritative guidance for this issue. Your supervisor asks you to ­research this issue. Instructions If your school has a subscription to the FASB Codification, log in and prepare responses to the following. Provide Codification references for your responses. a.    Is it permissible to capitalize interest into the cost of assets? Provide authoritative support for your answer. b.    What are the objectives for capitalizing interest? c.    Discuss which assets qualify for interest capitalization. d.    Is there a limit to the amount of interest that may be capitalized in a period? e.    If interest capitalization is allowed, what disclosures are required?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Your client is in the planning phase for a major plant expansion, which will involve the construction of a new warehouse. The assistant controller does not believe that interest cost can be included in the cost of the warehouse, because it is a financing ­expense. Others on the planning team believe that some interest cost can be included in the cost of the warehouse, but no one could identify the specific authoritative guidance for this issue. Your supervisor asks you to ­research this issue.

Instructions

If your school has a subscription to the FASB Codification, log in and prepare responses to the following. Provide Codification references for your responses.

a.    Is it permissible to capitalize interest into the cost of assets? Provide authoritative support for your answer.

b.    What are the objectives for capitalizing interest?

c.    Discuss which assets qualify for interest capitalization.

d.    Is there a limit to the amount of interest that may be capitalized in a period?

e.    If interest capitalization is allowed, what disclosures are required?

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