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Unformatted text preview: Depreciation and Amortization: A Letter to Lucy Dear Lucy, While you were sleeping, our professor explained the concepts of depreciation and amortization. Here are some notes to get you caught up. If you have any further questions regarding these concepts, then feel free to contact me. I will try my best to help you understand. The first thing that our professor discussed was the difference between depreciation and amortization. She stated that although both are used in prorating the cost of an asset to its life, depreciation prorates the cost of tangible assets, while amortization prorates that of tangible assets. Bear in mind that tangible assets include buildings, company vehicles, and equipment. Intangible assets include patents and trademarks. Depreciation is the concept of a tangible asset decreasing in value over a period of time. When calculating depreciation, one must know the assets starting value, its expected useful life, and any possible salvage value. For instance, if a company purchases a new company vehicle for $30,000 (starting possible salvage value....
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This note was uploaded on 12/30/2009 for the course ACG 230 ACG230-090 taught by Professor Kimberlyriley during the Spring '09 term at AIU Online.
- Spring '09