When Computing the Amount of Interest Cost to Be Capitalized

question 138

Multiple Choice

When computing the amount of interest cost to be capitalized, the concept of "avoidable interest" refers to ________.

• A) that portion of average accumulated expenditures on which no interest cost was incurred
• B) that portion of total interest cost which would not have been incurred if expenditures for asset construction had not been made
• C) the amount of interest cost actually incurred on financing undertaken specifically for the acquisition of the asset
• D) a cost of capital charge for equity restricted to the acquisition of the specific asset

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Definitions:

Shareholders

Individuals or entities that own one or more shares of stock in a corporation, making them owners of a portion of the corporation.

Unaffiliated Directors

Board members who do not have a direct or substantial interest in the company, ensuring independence from the company’s management.

Outside Directors

Members of a company's board of directors who are not part of the company's management team and are theoretically independent of the company.

Business Contacts

Refers to the network of individuals and organizations with which a company maintains professional relationships to support its operations and growth.