1. The limit or ceiling on the amount of interest that can be capitalized on an

Question

1. The limit or ceiling on the amount of interest that can be capitalized on an operational asset under construction is based on the: (a) (b) (c) (d) Total amount of actual interest cost incurred by the entity during the construction period plus all dividends declared during that period. Entity's total interest cost if it borrowed at the prime interest rate during the construction period. Total amount of interest cost incurred by the entity during the construction period. Total amount of actual interest cost incurred by the entity during the construction period plus any dividends paid on all cumulative preferred shares.

Explanation / Answer

THE ANSWER IS

(C) TOTAL AMOUNT OF INTEREST COST INCURRED BY THE ENTITY DURING THE CONSTRUCTION PERIOD.

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