AIS 301/701Case 2 Q&AFall 2011Question:Would you be able to explain to me what the first question means? Answer:The first question is asking whether the cost of the manufacturing facility that will be capitalized on the balance sheet should include the interest cost of financing the construction.Question:I am not sure what it means when it asks to "identify the primary authoritative guidance."Answer:Primary authoritative guidance refers to the accounting standards that make up US GAAP as found in the FASB codification. For this case, you should consult the FASB codification to identify the correct accounting treatment for capitalizing interest.Question:For number three, would you like the amount of interest and process for computing this for both the new manufacturing company and the purchase of the land (both questions one and two)? Answer:Yes, please address the process of capitalizing interest for the purchase of the land and the construction of the facility.
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