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Unformatted text preview: AIS 301/701 – Case Study #2 M/W Sections Due Date: November 2, 2011 T/Th Sections Due Date: November 1, 2011 Total Points: 20 (10 writing, 10 Accounting) Background: You are a manager at a large public accounting firm. One of your clients is planning a major expansion including the construction of a new manufacturing facility. Your client’s CFO and Controller have been discussing some of the accounting implications of this expansion and have had some disagreements regarding the interest costs associated with financing the construction. The CFO does not believe that interest costs can be included in the capitalized cost of the facility because it is a financing expense. The Controller believes that some interest cost can be included in the capitalized cost of the facility, but could not locate the specific authoritative guidance for this issue. The Controller has asked you to research the issue. Specifically, the Controller has asked you to prepare a memo to the CFO, Mr. Joseph Becker, addressing the questions listed below. The Controller would also like you to cite specific guidance used in each answer so that the CFO does not question the conclusions. Note: questions may be answered in any order. 1. Is the company required to capitalize interest into the cost of the new manufacturing facility? If the company hires another company to do the actual construction, does that impact how to handle the interest capitalization?...
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This note was uploaded on 01/23/2012 for the course ACCOUNTING 301 at University of Wisconsin.
- Fall '11