For companies in an expansion phase, capitalization of interest may result in a gain in earnings over an extended period because:
|
A) |
the amount of interest amortization will not catch up with the amount of interest capitalized in the current period. |
|
|
B) |
the average projected expenditures for the period exceed specific borrowings. |
|
|
C) |
the cost of financing project debt exceeds the cost of equity financing. |
|
|
D) |
earnings are greater under capitalization than under the expense method over the life of the qualifying asset. |
|
The correct answer was A.
Interest expense is decreased by the amount of capitalized interest in the current period. Therefore if a company is continually expanding and incurring new capitalized interest costs interest expense will continue to be lower than if the capitalized interest was not present. The lower interest expense will overstate net income in the current period. | 
发表于 2006-4-27 16:41
| 
