Financial Act Chpt 9 Notes

Matching principle capitalized interest cost that is

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Unformatted text preview: expenses are incurred. (Matching principle) Capitalized Interest: Cost that is capitalized if a company decides to construct its own asset. All costs associated with building the project (including any interest incurred on money borrowed to fund the project). Interest is capitalized when the interest is PAID! Example: Cainas Cookies expands and decides to purchase land and build its own commercial kitchen space to run its operations. Purchase price for the land was $100,000. Cainas hired a builder and built a commercial kitchen with warehouse space at a total cost of $500,000. Once it was built, she hired a specialty kitchen distributor to add specialized vents in the kitchen, (to help regulate the temperature when the cookies are baking) at a cost of $5,000. She paved a portion of the land for a parking lot, and installed lighting around the lot for a cost of $10,000. During the first year of operations, she had the warehouse doors serviced because they were difficult to open at clos...
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This note was uploaded on 01/23/2014 for the course ACG 2021 taught by Professor Linkovich during the Spring '08 term at University of South Florida.

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