Your client is in the planning phase for a major plant expansion, which will involve the construction of a new warehouse. The assistant controller does not believe that interest cost can be included in the cost of the warehouse, because it is a financing expense. Others on the planning team believe that some interest cost can be included in the cost of the warehouse, but no one could identify the specific authoritative guidance for this issue. Your supervisor asks you to research this issue.

Instructions;

Log into the FASB codification and prepare responses to the following. Provide Codification references for your responses. For example, start the answer to each question like this: According to FASB ASC 835-xx-xx-x, then your answer.

a. Is it permissible to capitalize interest into the cost of assets? Provide authoritative support for your answer.

b. What are the objectives for capitalizing interest?

c. Discuss which assets qualify for interest capitalization.

d. Is there a limit to the amount of interest that may be capitalized in a period?

e. If interest capitalization is allowed, what disclosures are required?