Using the Straight-Line Method to Amortize Patents Is an Application

question 6

Multiple Choice

Using the straight-line method to amortize patents is an application of expense recognition using

• A)association of cause and effect
• B)a systematic and rational allocation method
• C)immediate recognition
• D)the percentage-of-completion method

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Definitions:

Full Capacity

The maximum level of output that a company can sustain over a long period without increasing its fixed costs.

Capital Intensity Ratio

A financial metric that measures the amount of capital needed per unit of output or the capital required to generate a dollar of revenue.

Operating Capacity

The maximum output that a company can produce under normal conditions.

Equity Multiplier

A financial leverage ratio that measures the portion of a company's assets that are financed by shareholder's equity.