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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Explain how a company determines the amount of interest to capitalize when it constructs an asset.

To determine

Explain the manner in which company ascertains the amount of interest to capitalize when it constructs an asset.

Explanation

Capitalized interest:

Interest Cost incurred to finance the construction of a long-term construction projects are known as capitalized interest.

Cost of self-constructed assets:

Company sometimes constructs an item of “property, plant and equipment” which is used in the business operations and these are known as self-constructed assets. The cost of self-constructed assets comprises of expenses that are required to build an asset and put it in operating condition...

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