Interest is eligible to be capitalized as part of an asset's cost, rather than being expensed immediately, when:
A)The interest is incurred during the construction period of the asset.
B)The asset is a discrete construction project for sale or lease.
C)The asset is self-constructed, rather than acquired.
D)All of these are correct.

Question

Quizplus · Accepted Answer

All three options listed are situations where interest can be capitalized. Interest incurred during the construction period of an asset can be capitalized as part of the asset's cost. Similarly, interest on borrowed funds used to finance the construction of an asset that is a discrete project for sale or lease can also be capitalized. Additionally, interest incurred during the period when an asset is self-constructed can be capitalized.

Interest Is Eligible to Be Capitalized as Part of an Asset's