Interest may be capitalized: Multiple Choice On self-constructed assets from the date an entity formally adopts a plan to build a discrete project. On routinely manufactured goods as well as self-constructed assets. Whether or not there are actual interest costs incurred. Whether or not there is specific borrowing for the construction.

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6 September, 09:47

Interest may be capitalized: Multiple Choice On self-constructed assets from the date an entity formally adopts a plan to build a discrete project. On routinely manufactured goods as well as self-constructed assets. Whether or not there are actual interest costs incurred. Whether or not there is specific borrowing for the construction.

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Gerardo Sloan · Answer 1

On self-constructed assets from the date an entity formally adopts a plan to build a discrete project.

Explanation:

Capitalized interest is an accounting practice required under the accrual basis of accounting. Capitalized interest is an interest that is added to the total cost of a long-term asset or loan balance. This makes it so the interest is not recognized in the current period as an interest expense.

Capitalization is the addition of unpaid interest to the principal balance of your loan. The principal balance of a loan increases when payments are postponed during periods of deferment or forbearance and unpaid interest is capitalized.