Which of the following is true when a company constructs an asset for its own use?
A)Labor and material expenses for construction will increase.
B)Capitalized interest on construction loans will increase interest expense.
C)Assets will increase for labor,material,and interest costs paid for constructing the asset.
D)Net income will be decreased for capitalized costs of construction.

Question

Quizplus · Accepted Answer

When a company constructs an asset for its own use, it incurs labor and material expenses for construction, which will increase its assets for labor, material, and interest costs paid for constructing the asset. However, capitalized interest on construction loans will increase the cost of the asset, but not interest expense. The net income will not be affected until the asset is put into service and depreciation begins to be recognized.

Which of the Following Is True When a Company Constructs