In this video on Capitalized Interest, we are going to learn definition, steps to calculate capitalized Interest and features.
𝐖𝐡𝐚𝐭 𝐢𝐬 𝐂𝐚𝐩𝐢𝐭𝐚𝐥𝐢𝐳𝐞𝐝 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭?
---------------------------------------------------
Capitalized Interest is interest earned during the development of long - term assets and is included on on the balance sheet as the initial cost of assets rather than being charged off as interest expenditures on income statement.
𝐒𝐭𝐞𝐩𝐬 𝐟𝐨𝐫 𝐜𝐚𝐥𝐜𝐮𝐥𝐚𝐭𝐢𝐨𝐧 𝐨𝐟 𝐂𝐚𝐩𝐢𝐭𝐚𝐥𝐢𝐳𝐞𝐝 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭
-----------------------------------------------------------------------------
Step 1 - Find the period of capitalization.
Step 2 - Calculate accumulated weighted average spending.
Step 3 - Evaluate the interest from the general funds on the particular borrowings.
Step 4 - Calculate Avoidable Interest.
Steps 5 - Calculate actual loan interest.
Step 6 - Select the lower of Actual Interest and Avoidable Interest as Capitalized Interest.
𝐅𝐞𝐚𝐭𝐮𝐫𝐞𝐬 𝐨𝐟 𝐂𝐚𝐩𝐢𝐭𝐚𝐥𝐢𝐳𝐞𝐝 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭
-----------------------------------------------------------
#1 - If there is a material impact on the financial statements of a firm, capitalized interest may be scheduled; otherwise, capitalized interest is not required.
#2 - Capitalizing interest enables user of financial statements to have good allocation of costs to income from viewpoint of accrual accounting in periods when an acquired asset is used and to acquire an accurate measure of an asset's acquisition cost.
To know more about 𝐂𝐚𝐩𝐢𝐭𝐚𝐥𝐢𝐳𝐞𝐝 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭, you can go to this 𝐥𝐢𝐧𝐤 𝐡𝐞𝐫𝐞:- [ Ссылка ]
Subscribe to our channel to get new updated videos. Click the button above to subscribe or click on the link below to subscribe - [ Ссылка ]
