Part 1
a. What assets are subject to interest cost capitalization under the standards? Provide specific paragraphs from the ASC in your answer. What is the rationale for interest cost capitalization? What are the advantages of this approach? What disadvantages result from this? b. Why would companies choose to use any accelerated cost methods in depreciating long-term assets for financial reporting purposes when it results in reduced income?
Part 2
Companies record purchases of inventory on account having terms that allow cash discounts under either the net method or the gross method. The net method is generally considered theoretically sounder than the gross method.