When constructing assets,capitalized interest is based on
A)the amount allowed by the company's auditors.
B)the expenditures at the end of the of the period.
C)the expenditures at the beginning of the period.
D)the average accumulated expenditures.

Question

Quizplus · Accepted Answer

Capitalized interest is based on the average accumulated expenditures during the period, as this represents the actual amount of money that was borrowed and used to fund the construction of the asset. This method ensures that the interest expense is tied directly to the asset being constructed, rather than being allocated arbitrarily based on auditors' allowances or the timing of expenditures.

When Constructing Assets,capitalized Interest Is Based on