GAAP provides guidelines for the inclusion of interest in the initial cost of a self-constructed asset.

Required:

1. What assets qualify for interest capitalization? What assets do not qualify for interest capitalization?

2. Over what period should interest be capitalized?

3. Explain average accumulated expenditures.

4. Explain the two methods that could be used to determine the appropriate interest rate(s) to be used in capitalizing interest.

5. Describe the three steps used to determine the amount of interest capitalized during a reporting period.