Jarvis, Inc

Multiple Choice

Jarvis, Inc.manufactures cruise ships for sale.Each ship costs approximately $25,000,000 to build and takes 3 years to fully construct.During the time it takes to construct one cruise ship, Jarvis incurs $2,400,000 in interest cost related to the construction.The interest cost is incurred evenly throughout the construction period.During the first year of construction, Jarvis builds a shell that can be customized for any purchaser according to specifications; construction during the final 2 years is all based on client specification.The International Accounting Standards Board requires that Jarvis account for this interest cost as

A) $2,400,000 is recorded as interest expense as incurred.
B) $2,400,000 is capitalized to the cruise ship.
C) $800,000 incurred in 1^t year is expensed as incurred; the remaining amount is capitalized to the cruise ship.
D) $800,000 is capitalized to the cruise ship; the remaining amount is expensed as incurred.