How do you calculate capitalized interest?

Capitalized interest is calculated the same way as any other type of interest. The prevailing rate of interest is multiplied by the prevailing principal balance of debt for a given period, and considerations are made for the number of days outstanding.

What is capitalized interest?

Capitalized interest is the cost of borrowing incurred by the company to acquire or construct the long term asset to be used in the business and is added to the value of the asset to be shown in the balance sheet of the company instead of showing it as an interest expense in the company’s income statement.

How does capitalized interest show up on a company's income statement?

Capitalized interest shows up in installments on a company's income statement through periodic depreciation expense recorded on the associated long-term asset over its useful life. Capitalized interest is the cost of borrowing to obtain a long-term asset.