When computing the amount of interest cost to be capitalized, the concept of "avoidable interest" refers to ________.
A) that portion of average accumulated expenditures on which no interest cost was incurred
B) that portion of total interest cost which would not have been incurred if expenditures for asset construction had not been made
C) the amount of interest cost actually incurred on financing undertaken specifically for the acquisition of the asset
D) a cost of capital charge for equity restricted to the acquisition of the specific asset

Question

Quizplus · Accepted Answer

Avoidable interest is the portion of total interest cost that would not have been incurred if the expenditures for asset construction had not been made. It represents the interest that could have been avoided if the construction project had not been undertaken.

When Computing the Amount of Interest Cost to Be Capitalized