1. Why would the "avoidable interest" be included in the cost of the building?

2. Why can't the company use all the interest on all the loans when computing the avoidable interest?

3. What are the financial statement effect if the company capitalizes all the interest on all the loans?

Please provided FASB codification if possible.

Illustration: Interest Capitalization On January 1, 2017, the Mills Conveying Equipment Company began construction of a building to be used as its office headquarters. The building was completed on December 31, 2017. Expenditures on the project, mainly payments to subcontractors, were as follows: January 1, 2017 600,000 March 31, 2017 800,000 1,200,000 September 30, 2017 ecember 31, 2017 200,0 Accumulated expenditures at December 31, 2017 2,800,000 On January 1, 2017, the company obtained a $1 million construction loan with an 8% interest rate. The loan was outstanding during the entire construction period. The company's other interest-bearing debt included two long-term notes of $2,000,000 and $4,000,000 with interest rates of 6% and 12%, respectively. Both notes were outstanding during the entire construction period