Which Amortization Method Is Particularly Appropriate Where: (A) Obsolescence Is

question 23

Multiple Choice

Which amortization method is particularly appropriate where: (a) obsolescence is not the primary factor, (b) actual use can be accounted for, and (c) the service life in units of use can be estimated reliably?

• A) Sum-of-the-years'-digits
• B) Double-declining balance
• C) Productive output
• D) Straight-line

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Definitions:

Acquisition Differential

The difference between the acquisition cost of an entity and the fair value of its net identifiable assets at the time of acquisition.

Land Account

An account on a company's balance sheet that represents the cost of land owned by the company without any depreciation applied, since land is considered to have an unlimited useful life.

Investment Account

An account held at a financial institution for the purpose of managing securities, such as stocks and bonds, for investment purposes.

Equity Method

An accounting technique used to record investments in other companies, where the investment is initially recorded at cost and adjusted over time for the investor's share of the investee's net profits or losses.