Capitalized Costs

Question 1

What does capitalized mean?

Answer 1

It means that it is recorded on the balance sheet rather than an expense to the income statement

Question 2

What costs can be capitalized

Answer 2

1) Cost to get the asset ready for use (sales tax, cost to set-up/test, attorney fees, building and construction)
2) Costs that extend the useful life or improve productivity
3) Demolition costs can be capitalized
4) Improvements (additions, significant replacements, rearrangements)

• You do not include any debt issuance costs (that’s a financing charge)