FINANCE questions

HINT: If you use the search feature of the codification, you might need to use to the term “capitalization of interest” rather than “capitalized interest” for some searches.  The Codification often uses the term “capitalization of interest.”

1. (5 points) Identify the accounting literature (FASB Codification Topic and Subtopic) that addresses capitalized interest. 

2. (10 points) What is (are) the objective(s) of the capitalization of interest, according to the FASB? You may cut and paste this answer from the codification. Please be sure to include the appropriate FASB Codification citations (e.g. FASB ASC topic – subtopic – section – paragraph).

3. (10 points) For what types of assets is interest capitalized? You may cut and paste this answer from the codification. Please be sure to include the appropriate FASB Codification citations (e.g. FASB ASC topic – subtopic – section – paragraph).

4. (10 points) One of your clients began capitalizing interest on a building the company was constructing for its new headquarters in January 202x. At that time, 

· Activities necessary to get the asset ready for its intended use were in progress (construction had started) and 

· Interest cost was being incurred. 

· However, no expenditures were made on the project until April 1, 202x due to an unusual arrangement with the contractor. 

Did your client make the correct accounting decision in beginning to capitalize interest in January 202x?

Please provide the FASB Codification citation (topic – subtopic – section – paragraph) that supports your answer.