17RQ - Horngren'S Financial And Managerial Accounting

Question

What is the process by which businesses spread the allocation of an intangible asset’s cost over its useful life?

Step-by-Step Solution

Answer

The process by which businesses spread the allocation is known as the process of amortization.

Definition of Intangible Assets

An asset that does not possess any characteristics of tangible assets is known as intangible assets. Like patent goodwill etc.

Method of allocation of intangible assets cost

The process by which a business spread the allocation of an intangible asset’s cost over its useful life is known as the process of amortization. Amortization applies to the intangible asset similar to the depreciation applies to equipment and depletion of oil and timber.