business and finance question

timer Asked: Jul 13th, 2014
account_balance_wallet $5

Question Description

think of an example of an asset that might result in this outcome?  What's the accounting treatment when this occurs?

Tutor Answer

Alex Z
School: UT Austin

Example, if a business buys a car that it will use to deliver its products, and it is expected that the car will be used for the next 10 years to do so, then it wouldn't make sense to recognize the entire expense of the car upon purchase (as it will be used to deliver product - thus generate revenue - for the next 10 years).  In this example, the car should be "capitalized" and then depreciated over its useful life.  That is, we should recognize it on the balance sheet (as a fixed asset) then depreciate a portion of its value periodically (i.e., recognize a depreciation expense on the income statement).

Please feel free to approach me directly with questions in the future.  Also please select my answer as best.  Thanks.

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Tutor went the extra mile to help me with this essay. Citations were a bit shaky but I appreciated how well he handled APA styles and how ok he was to change them even though I didnt specify. Got a B+ which is believable and acceptable.

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