CA 10-4 - CA 10-4 To: Dee Pettepiece, President From: Good...

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CA 10-4 To: Dee Pettepiece, President From: Good Student, Manager of Accounting Date: January 15, 2006 Subject: Capitalization of avoidable interest on the warehouse construction project I am writing in response to your questions about the capitalized interest costs for the warehouse construction project. This brief explanation of my calculations should facilitate your understanding of these costs. Generally, the accounting profession does not allow accrued interest to be capitalized along with an asset’s cost. However, the FASB made an exception for interest costs incurred during construction. In order to qualify for this treatment, the constructed asset must require a period of time to become ready for its intended use. Because interest capitalization is allowed in special circumstances only, the company must be especially careful to capitalize only that interest which is associated with the construction itself. Thus, the FASB issued a standard indicating how much interest may be associated with the con
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This note was uploaded on 06/06/2010 for the course ACCOUNTING ac505 taught by Professor Khan during the Spring '10 term at DeVry Fremont.

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CA 10-4 - CA 10-4 To: Dee Pettepiece, President From: Good...

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