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Please comment on the capitalization cost associated with the new wing of True Star Electronics Company.

Please comment on the capitalization cost associated with the new wing of True Star Electronics Company.

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Answer #1

A capitalization cost shall be defined as the amount which is used to buy an asset for the purpose of the company.

The capitalization costs shall also include the expenses which are incurred for the installation of the asset at the production place.

The capilazation shall not be deducted directly from the revenues of the company but these costs are dediction in the form of amortization and depreciation of the asset through its use ful life.

In the present case the capitalization cost associated with the new wing of true star electronic company shall contains mechaniray or other fixed assets which shall be used for the production purposes.

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