Interest May Be Capitalized

question 147

Multiple Choice

Interest may be capitalized:

• A) On routinely manufactured goods as well as self-constructed assets.
• B) On self-constructed assets from the date an entity formally adopts a plan to build a discrete project.
• C) Whether or not there is specific borrowing for the construction.
• D) Whether or not there are actual interest costs incurred.

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Definitions:

Standard Costing System

An accounting system that uses standard costs for cost control and decision-making purposes.

Direct Labour Hours

The number of hours worked by employees who are directly involved in the production of goods or services.

Standard Costing Systems

A cost accounting system that estimates the cost of products or services by assigning expected costs for materials, labor, and overhead to the actual production volumes.

Variances

The difference between expected and actual performance, costs, or revenues, often analyzed in budgeting and accounting to manage and improve financial performance.