When an Intangible Asset Becomes Worthless

question 48

Multiple Choice

When an intangible asset becomes worthless,

• A)it should remain on the books at its existing carrying value.
• B)its remaining carrying value should be written off immediately as a loss.
• C)prior years' accounting records should be adjusted retroactively.
• D)its remaining carrying value should be amortized over 20 years.

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Definitions:

Commercial Substance

A characteristic of a transaction indicating that it will result in a significant change in the economic circumstances of a business.

Future Cash Flows

The amount of money that is expected to be received or paid out by a business in the future.

Exchange of Assets

Transactions where businesses or individuals trade assets of similar value, such as property, equipment, or securities.

Units-Of-Production Method

A depreciation method allocating the cost of an asset over its useful life based on its level of activity or production.