Which of the Following Statements Is True Regarding Capitalization of Interest

question 162

Multiple Choice

Which of the following statements is true regarding capitalization of interest?

• A) Interest cost capitalized in connection with the purchase of land to be used as a building site should be debited to the land account and not to the building account.
• B) The amount of interest cost capitalized during the period should not exceed the actual interest cost incurred.
• C) When excess borrowed funds not immediately needed for construction are temporarily invested, any interest earned should be offset against interest cost incurred when determining the amount of interest cost to be capitalized.
• D) The minimum amount of interest to be capitalized is determined by multiplying a weighted average interest rate by the amount of average accumulated expenditures on qualifying assets during the period.

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Definitions:

Majority Shareholders

Individuals or entities that own more than 50% of a company's shares, giving them significant control over company decisions.

Voluntary Dissolution

It refers to the process by which a corporation's stakeholders decide to formally and legally end the corporation's existence.

Directors

Shareholders select individuals to monitor the management and decide on key issues for a corporation.

Shareholders

Individuals or entities that own share(s) in a corporation, granting them certain rights like receiving dividends and voting at shareholders' meetings.