Interest Is Capitalized When Incurred in Connection with the Construction

question 28

Multiple Choice

Interest is capitalized when incurred in connection with the construction of plant assets because

• A)interest is considered a part of the acquisition cost of the related plant asset.
• B)the decision to purchase a plant asset is a business decision separate from the financing decision.
• C)many plant assets last longer than 20 years.
• D)interest is considered an expense of the period.

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Definitions:

Real Estate Deals

Transactions or agreements involving the purchase, sale, or lease of land and the buildings on it.

Business Ventures

Entrepreneurial endeavors or commercial enterprises typically initiated for profit and growth purposes.

Secondhand Car

A vehicle that has been previously owned and is available for purchase by a new owner.

Fraudulent Misrepresentation

A false statement of fact made with knowledge of its falsity, intended to induce another to act, resulting in harm.