Question

1.Class, please state some examples of intangibles and state their useful lives. Can the cost of intangibles be spread over their useful lives?

2. Tangible long-lived assets are depreciable with the exception of Land as many of you mentioned in your posts. Land with natural resources such as oil or minerals can be depleted.

Depreciation is a cost allocation concept rather than a measure of value.

the three depreciation methods

• Straight-line method
• Units-of-production method
• Double-Declining balance method

Which of these methods is the best at tracking true and wear of an asset? Which of these methods is the best for reducing taxes in the short-term?

Answer 1

Answer 1

Examples of  intangible assets include goodwill, brand recognition, copyrights, patents, trademarks and  trade names.Their useful life mostly exceeds one year and can go up to 10 years . Their cost can be spread over their useful lives only if their true useful life is ascertainable with certainty .The most common method of cost allocation of intangible assets is straight line depreciation method

ANSWER 2

Each method of depreciation is unique and useful in its own way thus an enterprise should determine or choose the method based on its convenience. A company may use the straight-line method for an asset it uses consistently each accounting period, such as a building. Double-declining balance may be appropriate for an asset that generates a higher quality of output in its earlier years than in its later years. The units-of-production method may work well for an asset that produces a measurable output, such as pages from a printer.

Double-Declining balance method is best in reducing the tax liability in short run as in this method their is grater cost allocation or depreciation than in later years as a  company's depreciation expense reduces the amount of earnings on which taxes are based, thus reducing the amount of taxes owed. The larger the depreciation expense, the lower the taxable income and the lower a company's tax bill thus Double-Declining balance method can be used .