When may a company include interest cost as part of the cost of the asset?
A)When they buy a piece of equipment and finance its acquisition by a bank loan.
B)When they must borrow money to finance the manufacture of their inventory items.
C)When they are self-constructing a piece of equipment they will use to manufacture their products,but only during the period of construction.
D)Interest is never allowed to be capitalized.

Question

Quizplus · Accepted Answer

Interest cost can be capitalized as part of the cost of a self-constructed asset during the period of construction, as it is considered part of the cost necessary to bring the asset to its intended use.

When May a Company Include Interest Cost as Part of the Cost