WK2, DQ1 - Depletion – the allocation of the cost of...

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What are the differences among valuation, depreciation, amortization, and depletion? Valuation – Management’s assertion that each asset and liability is recorded at its correct carrying value. Depreciation – means to prorate a tangible asset’s cost over the life of the asset. For example, a copying machine can be depreciated over a five-year period in equal amounts, per period, of the cost. Amortization – refers to spreading intangible assets costs over their useful lives. An example of an intangible asset can be a patent.
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Unformatted text preview: Depletion – the allocation of the cost of natural resources over a period of time, normally the natural resources’ useful lives. Is it appropriate to calculate depreciation using two different methods? Explain why or why not. An organization is allowed to use different depreciation methods for tax purposes and for its financial statements. Straight-line depreciation is widely used for financial reporting, for this method results in more consistent earnings and is more widely accepted....
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