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true or false: When plant assets are purchased on an installment plan, the future interest charges...

true or false: When plant assets are purchased on an installment plan, the future interest charges are included in the cost of the asset.
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Answer #1

Answer:

FALSE

Explanation:

When a long term asset is purchased on loans/installment plans, the interest cost is NOT added to the cost of the asset and is therefore NOT capitalized, and expensed off.

In case of construction of a plant asset (example, building), capitalization of interest costs is considered for the period til the asset is put to use. The interest for the period beyond that is expensed off in the Income statement.

Hence, the given statement in the question is false.

In case of any doubt, please feel free to comment.

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