Focus Company decided to construct its own manufacturing building.Focus Company should capitalize which of the following interest costs?
A)Building interest costs incurred prior to construction while occupying another building.
B)Building interest costs incurred during construction.
C)Building interest costs incurred after construction.
D)All interest costs incurred.
E)No interest costs incurred.

Question

Quizplus · Accepted Answer

Only the building interest costs incurred during construction should be capitalized. Interest costs incurred prior to construction while occupying another building (option A) and interest costs incurred after construction (option C) should be expensed. All interest costs incurred (option D) would result in overcapitalization, and no interest costs (option E) would result in understatement of the building cost.

Focus Company Decided to Construct Its Own Manufacturing Building