PPE-Interest Capitalization 1 Flashcards
1
Q
When is interest cost ever capitalized?
A
-Only DURING construction period
2
Q
What does capitalization of interest apply to?
A
-Assets constructed for enterprise’s own use or discreet projects
3
Q
What are the 3 conditions for interest capitalization?
A
- Qualifying expenditures have been made
- Construction is proceeding
- Actual (not imputed) interest being incurred
4
Q
What are the two steps in computing capitalized interest?
A
- Compute Average Accumulated Expenditures
- Apply Appropriate Interest Rate
5
Q
What’s the limitation on capitalized interest?
A
-Can’t exceed actual interest cost for period
6
Q
What are the two ways of computing total interest to be capitalized?
A
- Weighted Average Method
- Specific Method
