Imperial Chemical Industries, a U.K. corporation, recorded interest incurred in

Question

Imperial Chemical Industries, a U.K. corporation, recorded interest incurred in constructing fixed assets as an expense of £128,000,000. When reconciling its financial statements to U.S. GAAP, what should be done with this interest?

a) It should be subtracted from the fixed asset account balance.

It should be added to the fixed asset account balance.

It should be deducted from retained earnings.

This amount should be charged to accumulated depreciation.

a) It should be subtracted from the fixed asset account balance.

It should be added to the fixed asset account balance.

It should be deducted from retained earnings.

This amount should be charged to accumulated depreciation.

Explanation / Answer

The interest should be added to the fixed asset account balance. Under U.S. GAAP interest incurred in constructing fixed assets is added to cost of asset. Option B is correct

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