A finn presented the following income statement, which complies with the 1 standards under which it must report: Sales 20535 Cost of goods sold 14525 Operating expenses 2530 Operating income 3480 Income taxes1220 Income from continuing operations 2260 Extraordinary items, net of tax (525) Net income1735 In the next year the firm borrows $10 million to finance construction of a capital asset. Based on the differences between U.S. GAAP and International Financial Reporting Standards, this firm :（）
A. must capitalize the construction interest.
B. must not capitalize the construction interest.
C. may choose to capitalize the construction interest.
参考答案：A
解析：
Construction interest must be capitalized under U.S. GAAP, while under IFRS the firm canchoose to capitalize construction interest. Thus, A and C are the two possible correet answers.To choose between them you need to determine whether this firm prepares its financial statements under U. S. GAAP or IFRS. The income statement shows an extraordinary item, which is ermitted under U. S. GAAP but not under IFRS. From this we can conclude that the firm reports under U. S. GAAP, and therefore must capitalize construction interest.
