The Capitalization of Interest in the Acquisition Cost of Assets

question 109

Multiple Choice

The capitalization of interest in the acquisition cost of assets during construction

• A)reduces otherwise reportable interest expense.
• B)increases net income during periods of construction.
• C)results in higher depreciation charges, reducing net income.
• D)delays expense recognition from the times of borrowing to the times of using the asset.
• E)all of the above

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Definitions:

Limited Partnership

A business partnership with one or more general partners who manage the business and assume liability, and one or more limited partners who contribute capital and face limited liability.

General Partner

A type of owner in a partnership who has unlimited personal liability and who is actively involved in managing the business.

Tax Reasons

Considerations related to the management of tax liabilities and strategic financial planning to minimize taxes owed.

Limited Liability Company

An organizational model that integrates the tax treatment of a partnership or sole proprietorship with the benefit of limited liability offered by a corporation.