Under U.S. GAAP, interest on loans secured to acquire fixed assets must be:
A) expensed in the period they are incurred.
B) capitalized as part of the fixed asset cost.
C) either expensed currently or capitalized as part of the fixed asset cost.
D) charged against revenue in the year the asset is put into service.

Question

Quizplus · Accepted Answer

Under U.S. GAAP, interest on loans secured to acquire fixed assets during the period of construction or development of the asset should be capitalized as part of the cost of the asset. This approach allows for the inclusion of interest as part of the asset's historical cost, which is then depreciated over the useful life of the asset.

Under US GAAP, Interest on Loans Secured to Acquire Fixed Assets