An asset is being constructed for an enterprise's own use.The asset has been financed with a specific new borrowing.The interest cost incurred during the construction period as a result of expenditures for the asset is
A) a part of the historical cost of acquiring the asset to be written off over the estimated useful life of the asset.
B) interest expense in the construction period.
C) recorded as a deferred charge and amortized over the term of the borrowing.
D) a part of the historical cost of acquiring the asset to be written off over the term of the borrowing used to finance the construction of the asset.

Question

Quizplus · Accepted Answer

Interest cost incurred during the construction period for an asset being constructed for an enterprise's own use is capitalized as part of the historical cost of the asset. This cost is then depreciated or amortized over the estimated useful life of the asset, reflecting its consumption or use over time.

An Asset Is Being Constructed for an Enterprise's Own Use