Confused with capitalizing interest

CFA Level I FRA
#1

Hi,

I was sure that capilizing interest was only allowed in the event of asset being constructed for firm’s own use. Therefore a bit puzzeled with the below question from analystnotes.com

Which of the below is true

A If firm is leveraged, capitalization of interest is required even if the debt is not directly related to the construction project

B caitalization of interest cost is limited to assets under construction for firm’s own use

C A firm cannot capitalize imputed interest cost if it is not leveraged.

Solution is C, though I would have guessed it’s B

Any ideas why C?

Thanks!

#2

you capitalize interest in the event asset being constructed for own use and in some cases for resale.

so answer B is incomplete.

C) says that interest on debt not related to the construction of an asset cannot be capitalized.