Mattox Company is building a new plant that will take three years to construct.The construction will be financed in part by funds borrowed during the construction period.There are significant architect fees, excavation fees, and building permit fees.Which of the following statements is true?

Question

Quizplus · Accepted Answer

According to generally accepted accounting principles (GAAP), interest on funds borrowed for construction should be capitalized as part of the cost of the asset being constructed. Excavation and architect fees are also considered to be part of the cost of construction and are therefore capitalized, but building permit fees are typically expensed as incurred. Therefore, option A and B are incorrect. Option D is also incorrect as it does not account for the capitalization of interest during the construction period.

Mattox Company Is Building a New Plant That Will Take