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:

Accounts Payable

Liabilities of a company representing money owed to creditors for goods and services purchased on credit.

Cash

The most liquid form of financial assets, readily available for transactions or any immediate need.

Common Stock

A type of financial security that represents ownership in a corporation, giving holders a share of the firm's profits and voting rights.

Accounts Payable

Accounts payable are liabilities or amounts owed by a company to its creditors for goods and services purchased on credit.