Question

Which of the following is not a condition that must be satisfied before interest capitalization can begin on a qualifying asset?

a. Interest cost is being incurred.
b. Expenditures for the assets have been made.
c. The interest rate is equal to or greater than the company's cost of capital.
d. Activities that are necessary to get the asset ready for its intended use are in progress.

Answer 1

The condition that is not necessary for interest capitalization on a qualifying asset is the interest rate equal to or greater than the company's cost of capital.

Step-by-step explanation:

The condition that is not necessary for interest capitalization on a qualifying asset is option c. Interest capitalization occurs when a company incurs interest costs during the construction or production of a qualifying asset.

The other conditions that must be satisfied for interest capitalization to begin are: a. Interest cost is being incurred, b. Expenditures for the assets have been made, and d. Activities that are necessary to get the asset ready for its intended use are in progress.