Question

During 20X1, Sloan, Inc., began a project to construct new corporate headquarters. Sloan purchased land with an existing building for $750,000. The land was valued at $700,000 and the building at $50,000. Sloan planned to demolish the building and construct a new office building on the site. What is the appropriate accounting treatment for interest of $147,000 on construction financing incurred after completion of construction?A. Classify as land and do not depreciateB. Classify as building and depreciateC. Expense

Answer 1

Answer:

C. Expense

Explanation:

The interest during construction can be capitalized through the bulding and depreciate along with them.

In this case the interest occurs after the completion of construction so are considered expense of the period.

It should be considered interest expense.