Which of the following is the recommended approach to handling interest incurred in financing the construction of property, plant and equipment?
A) Capitalize only the actual interest costs incurred during construction.
B) Charge construction with all costs of funds employed, whether identifiable or not.
C) Capitalize no interest during construction.
D) Capitalize interest costs equal to the prime interest rate times the estimated cost of the asset being constructed.

Question

Quizplus · Accepted Answer

The recommended approach is to capitalize only the actual interest costs incurred during construction. This means that only the interest on any debt specifically taken out for the construction project can be capitalized, and not any other borrowing costs or general interest expenses. This approach is consistent with accounting standards and ensures that the cost of the asset being constructed is accurately reflected in the company's financial statements.

Which of the Following Is the Recommended Approach to Handling