--%>

Avoidable interest

 

The amount of interest that an organization would have avoided if it had not made the expenditures for an asset. Avoidable interest is calculated when an entity is self- constructing an asset. The cost of the asset can include material, labor, and overhead plus some interest. The company is allowed to capitalize lesser of the actual interest on borrowings for the project or the avoidable interests. The business calculates avoid- able interest based on  weighted-average  expenditures for  the project and on a rate. For the amount up to the actual borrowing, the entity usage the actual borrowing rate, and for the remainder it usage a weighted-average rate. Interest cannot be capitalized if the entity takes on debt to purchase the completed asset; it can only be capitalized in the case of self-constructed asset. The Financial Accounting Standards Board allows this because a contractor would borrow to build the project, adding the interest into the cost of project, so a purchased asset includes the builder's interest cost.

 

 

 

 

 

   Related Questions in Managerial Accounting

  • Q : Actual costing A function of measuring

    A function of measuring and assigning production costs to determine the unit cost. Actual revenue assigns the real cost of materials, labor, and overhead to ma

  • Q : Management accounting-scope Write down

    Write down the scope of Management accounting?

  • Q : Management Accounting Project Please

    Please let me know the cost of getting this assignment completed?

  • Q : Define Employee Stock Ownership

    Employee Stock Ownership: It is a qualified, defined contribution, employee benefit (that is, ERISA) plan designed to invest mainly in the stock of sponsoring employer. ESOPs are "qualified" in the logic that the ESOP's sponsoring company, the selling

  • Q : Define partnership A partnership is

    A partnership is stated as ‘the relationship which subsists among persons carrying on business in common with a view togain or profit’

  • Q : Explain Full-Absorption Costing

    Full-Absorption Costing: It is a technique of costing that assigns (or absorbs) all labor, material, and service or manufacturing facilities and support costs to products or another cost objects. The costs assigned comprise those which do and do not d

  • Q : Functions explain how the provision of

    explain how the provision of management accounting information can assist the management of a company with planning, controlling, decision making and communicating

  • Q : Fundamentals of Accounting Assignment

    Assignment 1: A adjusted Trial balance table given below: Southwest Business School

    Discover Q & A

    Leading Solution Library
    Avail More Than 1452423 Solved problems, classrooms assignments, textbook's solutions, for quick Downloads
    No hassle, Instant Access
    Start Discovering

    18,76,764

    1955585
    Asked

    3,689

    Active Tutors

    1452423

    Questions
    Answered

    Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!

    Submit Assignment

    ©TutorsGlobe All rights reserved 2022-2023.