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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