Capitalized interest refers to interest costs we add to the asset account rather than recording as interest expense.

Question

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Capitalized interest is interest cost that is added to the asset account as part of the cost of acquiring or constructing a long-term asset, rather than being recorded as interest expense on the income statement. This is done because the interest cost is considered to be a necessary part of acquiring or constructing the asset and increasing its future economic benefits.

Capitalized Interest Refers to Interest Costs We Add to the Asset