25-27 25. When computing the amount of interest cost to be capitalized, the concept of avoidable…

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25-27
25. When computing the amount of interest cost to be capitalized, the concept of avoidable interest refers to A) the total interest cost actually incurred. B) a cost of capital charge for stockholders equity. C) that portion of total interest cost which would not have been incurred if expenditures for asset construction had not been made. D) that portion of average accumulated expenditures on which no interest cost was incurred. 26. Which of the following statements is true regarding capitalization of interest? A) Interest cost capitalized in connection with the purchase of land to be used as a building site should be debited to the land account and not to the building account. B) The amount of interest cost capitalized during the period should not exceed the actual interest cost incurred. C) When excess borrowed funds not immediately needed for construction are temporarily invested, any interest earned should be offset against interest cost incurred when determining the amount of interest cost to be capitalized. D) The minimum amount of interest to be capitalized is determined by multiplying a weighted average interest rate by the amount of average accumulated expenditures on qualifying assets during the period. 27. Accounting recognition should be given to some or all of the gain realized on a nonmonetary exchange of plant assets except when the exchange has A) no commercial substance and additional cash is paid. B) no commercial substance and additional cash is received. C) commercial substance and additional cash is paid. D) commercial substance and additional cash is received.
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When Computing the amount of interest cost to be capitalized, the concept of “avoidable interest refers to the total interest cost actually incurred. a cost of capital charge for stockholders’ equity. that portion of total interest cost which would not have been incurred if expenditures for asset construction had not been made. that portion of average accumulated expenditures on which no interest cost was incurred. Which of the following statements is true regarding capitalization of interest? Interest cost capitalized in connection with the purchase of land to be used as a building site should be debited to the land account and not to the building account. The amount of interest cost capitalized during the period should not exceed the actual interest cost incurred. When excess borrowed funds not immediately needed for construction are temporarily invested. any interest earned should be offset against interest cost incurred when determining the amount of interest cost to be capitalized. The minimum amount of interest to be capitalized is determined by multiplying a weighted average interest rate by the amount of average accumulated expenditures on qualifying assets during the period. Accounting recognition should be given to some or all of the gain realized on a nonmonetary exchange of plant assets except when the exchange has no commercial substance and additional cash is paid. no commercial substance and additional cash is received. commercial substance and additional cash is paid. commercial substance and additional cash is received.

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