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Financial Accounting 10th Edition

Financial Accounting (10th Edition)

Book Edition10th Edition
Author(s)Libby, Libby
ISBN9781259964947
PublisherMcGraw-Hill, Inc.
SubjectAccounting

Chapter 8, End of Chapter, Questions, Exercise 1

Page 435

Explanation

The assets are tangible or intangible resources owned by the company that has economic value to get future benefits and cover the obligations in favor of the company. Assets generally have a normal balance as debit balance and can be segregated as current or non-current assets. 

 

The asset that businesses need to possess for more than one accounting period is called a long-lived asset or non-current asset. It can be classified into two subcategories:

  • Tangible long-lived asset: Building and furniture.
  • Intangible long-lived asset: Goodwill, licenses, and copyrights.

 

A long-lived asset to a company's resources that have useful life more than an accounting period and also provide economic benefit to the company for more than an accounting period, which helps to generate revenues over a period of time, so it is considered a bundle of future services. For instance, machinery is a long-lived asset of an entity that generates revenue for the company for more than one accounting period. 

Verified Answer

A long-lived asset refers to a non-current asset that is not for sale and provides benefits beyond one year during the usual course of business. This includes land, plant and machinery, and intangible assets such as patents used in business.

 

They are considered a bundle of future services, as they are obtained to generate revenue by using them in the expected future.

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