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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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