Mattox company is building a new plant that will take three years to construct.

Question

Mattox company is building a new plant that will take three years to construct. THe construction will be financed in part by funds borrows during the construction period. There are significant architect fees, excavation fees, and building permit fees. Which statement is true?

a.excavation fees are capitalized but building permit fees are not
b. architect fees are capitalized but building permit fees are not
c. interest is capitalized during the construction as part of the cost of the building
d. the capialized cost is equal to the contract price to build the plant less any interest on borrowed funds

Explanation / Answer

c. interest is capitalized during the construction as part of the cost of the building

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