The capitalization of interest associated with self-constructed assets was discussed in this chapter. A recent annual report for Hess Corporation disclosed the following information concerning capitalization of interest:

Interest costs related to certain long-term construction projects are capitalized to comply with FAS No. 34, “Capitalization of Interest Cost.” Capitalized interest in the current year amounted to $34,897,000.

The income statement for that year disclosed that interest expense was $224,200,000. A popular accounting ratio used by some analysts is the interest coverage ratio (Income ÷ Interest Expense).

Required:

1. Explain why an analyst would calculate the interest coverage ratio.

2. Did Hess include the $34,897,000 in the reported interest expense of $224,200,000? If not, should an analyst include it when calculating the interest coverage ratio? Explain.