Interest Cost That Is Capitalized Should

question 88

Multiple Choice

Interest cost that is capitalized should

• A)be written off over the remaining term of the debt.
• B)be accumulated in a separate deferred charge account and written off equally over a 40-year period.
• C)not be written off until the related asset is fully depreciated or disposed of.
• D)none of these.

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Definitions:

Unused Capacity

Represents the difference between a company's actual production levels and its maximum potential output, indicating resources that are not being fully utilized.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision.

Differential Profit

The difference in profit from one business alternative compared to another, used to make decisions between various options.

Alternative Use

The potential for a resource or asset to be used in a different manner or for another purpose to generate value.