Which of the following statements most appropriately describes the purpose of amortization of a long-lived tangible asset?
A)To indicate how the asset has physically deteriorated.
B)To show that the asset will eventually and gradually become obsolete.
C)To record that the asset's market value declines over time.
D)To match the cost of the asset to the period in which it generates revenue.

Question

Quizplus · Accepted Answer

Amortization is the process of allocating the cost of a long-lived tangible asset over its useful life. The purpose of this is to match the cost of the asset to the period in which it generates revenue. This is a way of recognizing the expense of the asset over time, rather than all at once. Amortization has nothing to do with the physical condition or market value of the asset.

Which of the Following Statements Most Appropriately Describes the Purpose