From p.63, CFAI text vol2 EBIT decreases by the amount of depreciation from capitalized interest. This makes sense, because interest expenses are under EBIT, therefore capitalizing them should not increase EBIT at all. But a solution in a CFAI mock says the capitalization of interest costs increases EBIT. I think the mock must be wrong.
which q?
i explained this already here http://www.analystforum.com/phorums/read.php?12,1263715,1266053#msg-1266053
tiredofstudying – 2011AM Q39 prophets – yes that’s a mistake in the vignette; however, even if it was labelled correctly, capitalized interest should not increase EBIT at all, no matter how much was capitalized. That’s why I’m confused.
you are correct. it has no effect. i’m explaining to you how the stupid person who wrote the answer key got confused and wrote the wrong answer/explanation down.
That’s great. This year’s mock quality is below par. The errata already has a lot of red texts and it hasn’t captured all the errors.
glad i found this post bc i saw the same thing which confused me. Thanks CFA for giving me the wrong answer and wondering what I was doing wrong.
Still not on the errata. But so many other corrections. http://www.cfainstitute.org/mycfa/candidate/Resources/studyaids/practice/Documents/2011_mock_exam_errata.pdf Will this be the quality of the actual exam?