--%>
Assignment Help - homework help

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 : Fixed capital of partners Explain the

    Explain the term fixed capital of partners? Answer: Partners' capital is state to be fixed if the capital of Partners remains unchanged except in the situation where

    		•
  • Q : Understandability-Accounting information

    What do you mean by the term Understandability which is accounting information?

    		•
  • Q : Management accounting as an information

    Explain Management accounting as an information system in brief?

    		•
  • Q : Relevance-accounting information What

    What do you mean by the term relevance which is accounting information?

    		•
  • Q : Budget surplus Select the right answer

    Select the right answer of the question. If the economy has a standardized budget surplus, it means that: A) the public sector is exerting an expansionary impact on the economy. B) tax revenues would exceed government expenditures if full employment were achieved. C)

    		•
  • Q : Federal budget Choose the right answer

    Choose the right answer from following. Which one did not contribute to the large Federal budget deficits in the year of 2002 and 2003? A) spending on the wars in Afghanistan and Iraq. B) low interest rates. C) Federal tax cuts. D) the recession of 2001 and its afterm

    		•
  • 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 : Define Responsibility Center

    Responsibility Center: It is an organizational unit headed by the manager or a group of managers who are responsible for its actions. The responsibility centers can be measured as revenue centers (that is responsible for revenue or sa

    		•
  • Q : What are the steps involved in Process

    ACCOUNTING PROCESS:  The process of Accounting involves the following steps:

    Q : Define Cost Object Cost Object (also

    Cost Object (also referred to as Cost Objective): It is an activity, item, or output whose cost is to be computed. In a wide sense, a cost object can be an organizational division, task, a function, product, service, or a customer.

    		•