Imperial Chemical Industries, a U.K.corporation, recorded interest incurred in constructing fixed assets as an expense of £128,000,000.When reconciling its financial statements to U.S.GAAP, what should be done with this interest?

Question

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According to U.S. GAAP, interest incurred during the construction of fixed assets should be capitalized instead of being expensed. Therefore, the interest expense of £128,000,000 should be added to the cost of the fixed assets being constructed. This will result in a higher fixed asset account balance, reflecting the additional cost of financing the construction.