What Issues Need to Be Addressed to Determine How to Allocate

question 59

Multiple Choice

What issues need to be addressed to determine how to allocate the cost of an asset?

• A) The depreciation method, the probable future benefit and the years to obsolescence.
• B) The depreciable base, its useful life and the method of cost apportionment.
• C) The cost of the asset, its residual value and the method of cost apportionment.
• D) The probable future benefit, the depreciation method and the depreciable base.
• E) None of the given answers.

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Definitions:

Inventories

Assets held for sale in the ordinary course of business, or in the process of production for such sale, or in the form of materials or supplies to be consumed in the production process.

Cash Payment

Money that is paid out by a business, often documented by a cash disbursement journal.

Direct Method

An approach to reporting cash flows from operating activities which lists major classes of gross cash receipts and payments.

Cash Flow

The sum of funds moving into and out of a company, particularly influencing its liquidity.