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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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Which of the following is expensed under the principle of systematic and rational allocation?

  1. a. salespeople’s monthly salaries
  2. b. insurance premiums
  3. c. transportation to customers
  4. d. electricity to light office building

To determine

Identify the correct option for the given statement.

Explanation

Systematic and rational allocation:

In systematic and rational allocation, some of the expenses are recognized during a particular accounting period in which benefits are provided. There are many assets that provide benefits for several periods. From each of these assets, a percentage of the cost is rationally recognized as an expense each period. The allocation system should be based on the consumption of the resource and the expected service life. Examples: Amortization of intangible assets, Depreciation of fixed assets, and the allocation of prepaid costs...

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