--%>
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 : Cash coverage of growth A financial

    A financial analysis tools that measures the need for financing. The formula is the cash-flow from operating activities divided by the cash paid for long-term asset. Cash paid for long-term assets can be found on the statement of cash-flow, in the investing-activities

    		•
  • Q : What are Arrears What are Arrears ? And

    What are Arrears? And what are the conditions to make Arrears?

    		•
  • Q : Key areas which business objectives

    Write a short note on the key areas which business objectives want to achieve?

    		•
  • Q : What is Job Order Costing Job Order

    Job Order Costing: A technique of cost accounting which accrued costs for individual jobs or lots. A job might be a service or manufactured item, like the repair of tools or the treatment of a patient in the hospital.

    		•
  • Q : Relationship between risk and return

    Write a short note on the relationship between risk and return?

    		•
  • Q : Cash merger Business combination in

    Business combination in which the acquiring corporation buys all the assets of the target, recording them at fair market values. The target is absorbed into the acquiring corpora- tion, and has gains on the sales of the assets that appear on its last tax return. In ad

    		•
  • Q : Threats to business comprises Write a

    Write a brief note on the things which Threats to business comprises?

    		•
  • 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 : Explain Operating Budgets Operating

    Operating Budgets: It is a financial document which aids a business in making significant decisions regarding its actions. An operating budget does not contain instant impact on the actual state of the business and exhibits only future projections. Bu

    		•
  • Q : Influence of managers

    Write down a short note on the influence of manager’s behavior in management accounting information?

    		•