Which of the Following Statements Is True Regarding Capitalization of Interest

question 41

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 recorded as interest revenue.
• 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:

Strategic Situations

Scenarios in which individuals or organizations must make decisions that consider the actions and responses of other participants.

Product Differentiation

A marketing strategy where a company makes its product distinguishable from others in the market through design, brand, or quality.

Game Theory

A branch of mathematics and economics that studies strategic interactions where participants' outcomes depend on the choices of all parties involved.

Alternative Outcomes

Different possible results or consequences that may arise from a given action or decision.