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Question 3

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Intermediate Accounting (Kieso)
Found in: Page 637

Short Answer

Intangibles have either a limited useful life or an indefinite useful life. How should these two different types of intangibles be amortized?

Intangibles have either a limited useful life or an indefinite useful life. Intangibles with limited life can be amortized, but intangibles with an endless life cannot be amortized.

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Step by Step Solution

Meaning of Amortization

Amortization is a strategy used in accounting to reduce the book value of a loan or intangible asset over a predetermined period.

Amortization of Intangibles

The limited-life intangibles should be amortized over their useful life by systematic charges to expenditure.

It is not possible to amortize an intangible asset with endless life.

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