In the Brown Creek scenario, which amount is capitalized as part of the construction cost in government-wide statements?

• A. $25,000
• B. $0
• C. $925,000
• D. $900,000

Answer: (D)

Capitalization in government-wide statements includes all costs directly necessary to bring a construction project to the point of use. That means the costs that truly contribute to getting the asset ready for service are added to the asset's cost, while routine maintenance or unrelated overhead is expensed.

In Brown Creek, the construction costs that meet this criterion total 900,000. The remaining 25,000 does not directly contribute to bringing the asset to use (it would be considered non-capitalizable expense), so it’s not included in the asset’s cost. Therefore, 900,000 is the amount capitalized as part of the construction cost in government-wide statements. If the project were financed with debt, interest during construction would also be capitalized, but the scenario indicates only the 900,000 qualifies here.