Judgment Case 10-4 Interest capitalization

GAAP provides guidelines for the inclusion of od interest in the initial cost of a self-constructed asset.

Required:

1. What assets qualify for interest capitalization? What assets do not qualify for interest capitalizations?
2. Over what period should interest be capitalized?
3. Explain average accumulated expenditures?
4. Explain the two methods that could be used to determine the appropriate interest rate (s) to be used in capitalizing interest?
5. Describe the three steps used to determine the amount of interest capitalized during a reported period.

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