The Period of Time During Which Interest Must Be Capitalized

question 11

Multiple Choice

The period of time during which interest must be capitalized ends when

• A) the asset is substantially complete and ready for its intended use.
• B) no further interest cost is being incurred.
• C) the asset is fully depreciated.
• D) the activities that are necessary to get the asset ready for its intended use have begun.

---

Definitions:

Mixed Cost

A cost composed of a fixed and a variable component and changes in total in response to activity level changes.

Variable Cost

Financial obligations that shift depending on production or sales levels, notably materials and workforce expenses.

Fixed Cost

Costs that do not vary with the level of production or sales.

Period Cost

Expenses not directly tied to production activity, such as administrative and selling expenses, that are expensed in the accounting period in which they are incurred.