The physical life sets the maximum limit of service

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The physical life sets the maximum limit of service life. The economic usefulness to the business may be less. AACSB: Reflective Thinking AICPA BB: Critical Thinking Blooms: Understand Difficulty: 2 Medium Learning Objective: 11-01 Explain the concept of cost allocation as it pertains to property; plant; and equipment and intangible assets. Spiceland - Chapter 11 #140 Topic: Explain the concept of cost allocation as it pertains to PP & E and intangible assets
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141. Briefly explain the differences between the terms depreciation, depletion, and amortization . The terms refer to different types of long-term assets used in the business. Depreciation: Plant and equipment Depletion: Natural resources Amortization: Intangible assets AACSB: Reflective Thinking AICPA BB: Critical Thinking Blooms: Understand Difficulty: 2 Medium Learning Objective: 11-01 Explain the concept of cost allocation as it pertains to property; plant; and equipment and intangible assets. Spiceland - Chapter 11 #141 Topic: Explain the concept of cost allocation as it pertains to PP & E and intangible assets 142. Briefly explain the disclosures that are required relative to depreciable assets. The note presenting the summary of significant accounting policies should disclose the depreciation method(s) in use. A separate note usually details the components of fixed assets, including their ranges of useful life. Any liens against fixed assets, such as mortgages, should be disclosed in the debt disclosure note. AACSB: Reflective Thinking AICPA BB: Critical Thinking Blooms: Remember Difficulty: 2 Medium Learning Objective: 11-01 Explain the concept of cost allocation as it pertains to property; plant; and equipment and intangible assets. Spiceland - Chapter 11 #142 Topic: Explain the concept of cost allocation as it pertains to PP & E and intangible assets
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143. Briefly differentiate between activity-based and time-based allocation methods. Time-based methods allocate an asset's cost based on the passage of time, while activity- based methods allocate cost based on an asset's productivity. Not all assets lend themselves to activity-based methods. Even if they do, there may be little benefit in tracking use and linking it to depreciation. AACSB: Reflective Thinking AICPA BB: Critical Thinking Blooms: Understand Difficulty: 2 Medium Learning Objective: 11-02 Determine periodic depreciation using both time-based and activity-based methods. Spiceland - Chapter 11 #143 Topic: Determine periodic depreciation using both time-based and activity-based methods 144. Briefly discuss why straight-line is the most common depreciation method used in practice. Straight-line depreciation is the easiest method to understand and apply, thus it is probably the most cost-effective method. It also helps to smooth earnings. AACSB: Reflective Thinking AICPA FN: Decision Making Blooms: Understand Difficulty: 2 Medium Learning Objective: 11-02 Determine periodic depreciation using both time-based and activity-based methods.
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