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 weighted-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 is directly related to the construction of an asset and would not have been incurred if the expenditures for asset construction had not been made. This amount can be capitalized as part of the cost of the asset. Therefore, option C is the correct answer.

When Computing the Amount of Interest Cost to Be Capitalized