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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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A company purchased a patent 4 years ago, and was amortizing that patent over a 10-year useful life. In the current year, the company determined the patent had become worthless. The write-off of the patent asset in the current year is an example of which of the following expense recognition principles?

  1. a. associating cause and effect
  2. b. immediate consumption
  3. c. systematic and rational allocation
  4. d. objectivity

To determine

Identify the option that is set an example for the expense recognition principle.

Explanation

Accounting principle:

These are the guidelines which are to be applied while preparing the accounting books through financial data. It contains the suggestions and rules which have been applied at various points by various entities in order to provide standardized accepted rule-based financial information

According to the expense recognition principle, the cost incurred is to be recognized as an expense when the assets or liabilities are used for the purpose to generate revenues in the particular period, irrespective of when cash paid. The expenses are most likely to incur when services are received or when assets are consumed...

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