Depreciation and Amortization Study Guide With Actual Questions And Correct Answers.
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Course
AMORTIZATION
Institution
AMORTIZATION
Accounting for The Use of Non-Current Assets - correct answer Non-current assets are purchased or sometimes leased for use in the ordinary activities of the business in order to generate sales revenue. Businesses must take into account the fact thar their non-cu...
Depreciation and Amortization
Accounting for The Use of Non-Current Assets - correct answer Non-current assets
are purchased or sometimes leased for use in the ordinary activities of the business in order to generate
sales revenue. Businesses must take into account the fact thar their non-current assets are gradually
being used up, and so part of the original cost of the asset must be taken into account when calculating
the expenses for an accounting period
How to Calculate Depreciation - correct answer Cost of Van
Expected proceeds of sale in January 2015
Value of Van used up over 3 years
The Straight Line Method - correct answer A way of spreading depreciation is to
split the the total figure equally over the accounting periods that benefit from the use of the non-
current asset. This approach would produce as annual figure for depreciation.
Impact of Depreciation on the Financial Statements - correct answer Depreciation is
shown as an expense in the income statement. Depreciation also has an impact on the value of non-
current assets shown in the statement of financial position. Over time, the value of non-current assets is
depleted as they are used up in the course of the business.
How to Show Depreciation - correct answer 1. It is conventional to show the original
cost value of non-current assets, less a deduction for depreciation
2. Cost less depreciation is described as the "carrying amount" of the non-current asset
3. If the business owns several assets then the cost and depreciation of this particular asset will be
included in an overall total
4. The carrying amount of a non-current asset
Amortization - correct answer It works in the same way as depreciation, but is
applied to intangible non-current assets, rather. than tangible non-current assets
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