Which of the following statements is correct concerning interest expenditures incurred during the period of construction of capital projects?

Missing options:

a )Interest expenditures may not be capitalized as part of the cost of general capital assets reported in governmental activities.

b) Interest expenditures may be capitalized as part of the cost of general capital assets reported in the governmental activities accounts at the government-wide level.

c) Interest expenditures must be capitalized as part of the cost of general capital assets reported in the capital projects fund.

d) The capitalization of interest expenditures as part of the cost of general capital assets reported in the capital projects fund is optional.

a) Interest expenditures may not be capitalized as part of the cost of general capital assets reported in governmental activities.

Explanation:

General capital assets are long-lived assets used by activities reported in

governmental funds, they are distinguished from capital assets that are

specifically associated with activities reported in proprietary and fiduciary funds.

Speaking of accounting of the general capital assets, these are capitalized  in the governmental activities accounts at the government-wide level and also most of the time depreciated at the government wide level. In other terms they can be debited to Expenditures in the appropriate governmental fund.

Interest costs are reported as interest expenses at the government-wide level and as interest expenditures at the fund level.

The interest received by investors on most bonds issued by state and local governments is exempt from federal taxes. As a result, investors are willing to accept a much lower interest rate on these bonds