If a company constructs an asset over a period of time and borrows money,the amount of interest incurred during construction on the borrowed money is
A)capitalized as part of the cost of the plant asset.
B)amortized over the construction period.
C)reported as interest expense on the income statement.
D)reported as depletion on the income statement.

Question

Quizplus · Accepted Answer

According to the capitalization of interest cost principle, interest incurred during construction on the borrowed money is capitalized as a part of the cost of the plant asset. This helps to reflect the true cost of construction in the financial statements. Amortization or reporting as interest expense on the income statement is not appropriate in this scenario. Depletion is not relevant to the current query as it's related to natural resources.

If a Company Constructs an Asset Over a Period of Time