Question

Interest revenue earned on specific borrowings for qualifying assets

a. reduces the cost of the qualifying asset.
b. reduces interest expense reported on the income statement.
c. increases equity in the period earned.
d. None of these answer choices are correct

Answer 1

Interest revenue earned on specific borrowings for qualifying assets increases equity in the period earned.

Step-by-step explanation:

Interest revenue earned on specific borrowings for qualifying assets does not reduce the cost of the qualifying asset, nor does it reduce interest expense reported on the income statement. Instead, it increases equity in the period earned.

For example, let's say a company borrows money to purchase a piece of equipment. The interest revenue earned on that borrowing would be recorded as interest income on the company's income statement, which in turn increases the company's equity.