Define long-lived assets. Why are they considered to be a “bundle of future services”?
Describe the term long-lived assets and the reason behind considering them to be a “bundle of future services’.
Explanation of Solution
Long-lived assets:
Long-lived assets refer to the fixed assets, having a useful life of more than a year that is acquired by a company to be used in its business activities, for generating revenue. Some of the examples of long-lived assets are plant and equipment, land in use, natural resources, and intangible assets such as patent.
Reason behind considering the long-lived assets to be a “bundle of future services”:
Long-lived assets are acquired in expectance of the future revenues they would bring for the company in the future period. It is for this reason that the long-lived assets are considered to be a “bundle of future services”. The cost of the asset is matched as an expense with the revenues generated by the asset from one period to another period throughout the useful life of the asset.
Want to see more full solutions like this?
Chapter 8 Solutions
Financial Accounting
- Explain how long-lived assets are reported and analyzed.arrow_forwardWhich of the following is typically recorded at its present value? a. long-term investments b. long-term liabilities c. intangible assets d. contigent liabilitiesarrow_forwardWhy certain long-lived assets are depreciated (amortized)?arrow_forward
- Classify each of the following costs associated with long-lived assets as one of the following:arrow_forwardAs a result of the transaction, what is the effect on the profit or loss? what is the cost of the new asset acquired? with computationsarrow_forwardGive example of personal assets that eventually become an expense after utilization.arrow_forward
- Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College