Accounting Chapter 11 depletion and amortization

When is the only case where an intangible asset must be amortized?

If the intangible asset has a limited useful life.

What is the method that we use to calculate amortization?

Basically we use the straight-line method.

Depletion formula?

Cost less residual value or salvage value divided by estimated total amount to be extracted.

What is the journal entry to record depletion?

Debit to depletion expense and a credit to whatever natural resource asset you have such as a copper mine or oil feild.

What does it mean to record a change in accounting estimate prospectively?

Do not go back and restate prior financial statements. Just move forward with the new accounting in the current and future period.

Which of the intangible assets are never amortized?

Goodwill and tradenames

How are changes in accounting estimates recorded?

Prospectively

What is the most common method of depletion?

Units of production

What are some examples of accounting estimates?

Warranties and depreciation

What do we use for service life years when we change the accounting estimate for depreciation?

We use the number of service years we have left for the asset.

Is it true that for depreciation estimate that companies can change the amount of the estimate about the inputs such as service life and residual value and also the depreciation method completely ?

Yes

What is the journal entry for amortization adjustments at the end of the year?

You debit amortization expense and credit the intangible asset such as a copy right.

What is amortization

allocating costs to intangible assets