--%>
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 : Define Cost Avoidance Cost Avoidance :

    Cost Avoidance: The action taken to decrease future costs, like replacing parts before they fail and cause harm to other portions. Cost avoidance might incur higher (or extra) costs in the short run however the final or life-cycle cost would be lower.

    		•
  • Q : Define Process and Process Costing

    Define Process and Process Costing: Process: The organized process of transforming inputs (that is, people, equipment, techniques, materials, and atmosphere), to outputs (that is, products or servi

    		•
  • Q : Define Expense Expense : The Outflow or

    Expense: The Outflow or other using up of resources or acquiring liabilities (or a combination of both), the advantages from which exert to an entity's operations for the present accounting period, however they do not expand to future

    		•
  • Q : Benefit of economic in accounting

    Write down a short note on the benefit of economic in accounting management information?

    		•
  • Q : Understandability-Accounting information

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

    		•
  • Q : Key performance indicators or KPI What

    What do you mean by the term key performance indicators or KPI? Explain in brief?

    		•
  • Q : Accumulated adjustments account Normal

    Normal 0

  • Q : Management accounting and financial

    What does the difference between management accounting and financial accounting suggest?

    		•
  • Q : Define Avoidable Cost Avoidable Cost :

    Avoidable Cost: The cost related with an activity which would not be acquired if the activity were not executed.

    		•
  • Q : Comparative-Advantage Approach to

    We study optimal government debt maturity in a model where investors derive monetary servicesfrom holding riskless short-term securities. In a simple setting where the government is the onlyissuer of such riskless paper, it trades off the monetary premium associated w

    		•