The capitalization of interest associated with self-constructed assets w as discussed in this chapter. A recent annual report for Amerada Hess Corporation disclosed the following information concerning capitalization of interest:

The income statement for that year disclosed that interest expense was S224.2OO.0O0. A popular accounting ratio used by some analysts is the interest coverage ratio (Income 4- Interest Expense).
Required:
1 Explain why an analyst would calculate this ratio. 2. Did Amerada Hess include the $34,897,000 in the reported interest expense of $2:4.200.000? If not. should an analyst include it when calculating the interest coverage ratio? Explain.

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Interest costs related to certain long-term construction projects are capitalized to comply with FAS No. 34, "Capitalization of Interest Cost." Capitalized interest in the current year amounted to $34,897,000.