A Company Is Constructing an Asset for Its Own Use

question 4

Multiple Choice

A company is constructing an asset for its own use. Construction began in 2020. The asset is being financed entirely with a specific new borrowing. Construction expenditures were made in 2020 and 2021 at the end of each quarter. The total amount of interest cost capitalized in 2021 should be determined by applying the interest rate on the specific new borrowing to the

• A) total accumulated expenditures for the asset in 2020 and 2021.
• B) weighted-average accumulated expenditures for the asset in 2020 and 2021.
• C) weighted-average expenditures for the asset in 2021.
• D) total expenditures for the asset in 2021.

---

Definitions:

Indians

People native to or citizens of India; also used historically to refer to Native Americans due to Columbus’s initial misidentification.

Colonization

The process by which a country establishes control over a foreign territory, subjecting it to its rule and often settling it with its own populace, impacting the indigenous culture and society.

Land Ownership

The legal or rightful ownership of land, involving the rights to use, control, and transfer land as property.

John Winthrop

An English Puritan lawyer and one of the leading figures in founding the Massachusetts Bay Colony, the second major settlement in New England following Plymouth Colony.