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

Question

Quizplus · Accepted Answer

Avoidable interest refers to the portion of total interest cost that would not have been incurred if expenditures for asset construction had not been made. This concept is used to determine the amount of interest cost that can be capitalized, or added to the cost of the asset, rather than expensed immediately. By capitalizing interest, the cost of the asset is more accurately reflected in the financial statements over its useful life.

When Computing the Amount of Interest Cost to Be Capitalized