Concepts of Microeconomics

Good Essays
Topics: Depreciation
CHAPTER 11 QUESTIONS

1. Distinguish among depreciation, depletion, and amortization expenses.

Depreciation refers to the cost allocation of tangible long-term assets; depletion refers to the cost allocation of natural resources; and amortization refers to the cost allocation of intangible assets. All three terms have similar underlying principles governing their use.

2. What factors must be considered in determining the periodic deprecation charges that should be made for a company’s depreciable assets?

Four separate factors must be considered in determining the periodic depreciation charges that should be made for a company’s assets. They are (1) asset cost, (2) residual or salvage value, (3) useful life, and (4) pattern of use. These factors, when considered together, help determine which of the common methods are most appropriate for the circumstances.

3. What role does residual, or salvage, and value play in the various methods of time-factor deprecation?

Residual or salvage value is included in the formulas for all time-factor depreciation methods except for the declining-balance methods. In practice, residual value is often ignored if it is the practice of a company to retain assets for most of their useful lives. In the case of declining-balance methods, although residual value is not included in the formulas, it is considered when an asset is near the end of its useful life. Generally, the book value should not be reduced below its expected residual value.

4. Distinguish between the functional and physical factors affecting the useful life of an tangible noncurrent operating assets.

Functional factors include inadequacy and obsolescence that reduce the usefulness of the asset. Physical factors include wear and tear, deterioration and decay, and damage or destruction reducing the usefulness of the asset.

5. Distinguish between time-factor and use-factor methods of depreciation.

Time-factor methods of depreciation base cost

You May Also Find These Documents Helpful

  • Satisfactory Essays

    microeconomic concept

    • 251 Words
    • 2 Pages

    APPLICATION OF MICROECONOMIC CONCEPTS TO THE ECONOMY BACKGROUND Project Description: In this project, you will apply the theories studied in class to analyze the microeconomic forces affecting a business. Each and every data/graph/table should have the Source with it. The contents of your presentation must incorporate concepts from the course. RESEARCH OUTLINE Choose your industry and your company - Brief background of the company. Explain the circular flow diagram and concentrate on each…

    • 251 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    Microeconomic Concepts

    • 1246 Words
    • 5 Pages

    Title Page Microeconomic Concepts Charlie Edwards Contents Page Page Title page 1 Contents page 2 1.0 Summary 3 2.0 Introduction 3 3.0 Over view of Qantas group 3 4.0 Products and Services 4 4.1 Economy and Economy plus 4 4.2 Business Class 5 4.3 First 5 5.0 Internal and external factors 5 5.1 Internal factors 6 5…

    • 1246 Words
    • 5 Pages
    Powerful Essays
  • Satisfactory Essays

    with Micro Economic Concepts used in Decision Making. 2. To develop application and analytical skills by using these concepts to make managers effective in economic decision making. Module: 1 (10 Hours) Introduction to Economics - Introduction to Managerial Economics- concept, Nature, Scope, & significance. Role of Managerial Economist in Decision making -Decision Making Process in Managerial Economics, Difference between Micro and Macro Economics, Fundamental Concepts- Opportunity Costs,…

    • 2566 Words
    • 11 Pages
    Satisfactory Essays
  • Powerful Essays

    Microeconomics

    • 1432 Words
    • 6 Pages

    Question 1) With examples give 5 reasons why the study of microeconomics is important. Microeconomics is a field of economic study that focuses on how an individual 's behaviour and decisions affect the supply and demand for goods and services. For the purpose of microeconomics, the actions of individuals, households and businesses are crucial, unlike the study of macroeconomics, which focuses on national and international economic trends. Despite the differences between the two fields, however…

    • 1432 Words
    • 6 Pages
    Powerful Essays
  • Good Essays

    Microeconomics

    • 699 Words
    • 3 Pages

    Microeconomics (from Greek prefix mikro- meaning "small" and economics) is a branch of economics that studies the behavior of individuals and small impacting players in making decisions on the allocation of limited resources (see scarcity).[1] Typically, it applies to markets where goods or services are bought and sold. Microeconomics examines how these decisions and behaviors affect the supply and demand for goods and services, which determines prices, and how prices, in turn, determine the quantity…

    • 699 Words
    • 3 Pages
    Good Essays
  • Satisfactory Essays

    Microeconomics

    • 338 Words
    • 2 Pages

    --------------------- References: Grading Rubric Microeconomics: Unit 2 Assignment: PPF and Opportunity Costs | Content | Points Possible | Points Earned | Draw production possibility frontier (PPF) | 3 | | Analyze feasible/infeasible production | 2 | | Compute opportunity cost of increasing annual products | 6 | | Explain the slope of the production possibility frontier | 2 | | Analysis | | | Work demonstrates synthesis of concepts, research, and experience | 3 | | Work demonstrates…

    • 338 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    Microeconomic

    • 1531 Words
    • 7 Pages

    whether each of the following statements applies to microeconomics or macroeconomics, and why: 12 Marks Total a. The unemployment rate in Canada was 7.0 percent in January 2010 Answer: This is the macroeconomic statement because it describes the unemployment rate of the whole country. b. A Canadian software firm discharged 15 workers last month and transferred the work to India. Answer: This is the microeconomic statement because it focuses in an individual Canadian…

    • 1531 Words
    • 7 Pages
    Good Essays
  • Satisfactory Essays

    Microeconomics

    • 6504 Words
    • 27 Pages

    IB/AP Economics Unit 1 Introduction to Economics Introduction to Economics AP and IB Economics Unit 1 Definitions of social science and economics Definitions of microeconomics and macroeconomics Definitions of growth, development and sustainable development Positive and normative concepts Ceteris paribus Scarcity • factors of production: land, labor, capital and management/entrepreneurship • payments to factors of production: rent, wages, interest, profit Choice Utility: basic definition Opportunity…

    • 6504 Words
    • 27 Pages
    Satisfactory Essays
  • Good Essays

    Microeconomics

    • 1285 Words
    • 6 Pages

    EC 3101: Microeconomic Analysis II A/P Indranil A/P Indranil Chakraborty All relevant details on EC3101 are in the syllabus The morning office hours on Tuesday will start from the third week of lectures t tf th thi d k fl t Important Highlights Important Highlights • Text book: Intermediate Microeconomics: A modern h approach by Hal R. Varian (8th edition) One midterm and one final exam Please do not email material, lecture or exam related questions. Post your questions precisely on IVLE Forum or ask…

    • 1285 Words
    • 6 Pages
    Good Essays
  • Powerful Essays

    Microeconomics

    • 2420 Words
    • 10 Pages

    Section A a. Explain the concept of dominant strategy equilibrium. 1. http://tuvalu.santafe.edu/~jkchoi/game4.pdf 2. http://econweb.umd.edu/~borowitz/dominant_strategy_equilibrium.pdf b. Discuss the concept of Nash equilibrium. 1.http://www.economics.utoronto.ca/osborne/igt/nash.pdf 2. http://www.columbia.edu/~rs328/NashEquilibrium.pdf c. Is every dominant strategy equilibrium a Nash equilibrium? 1. http://economics.fundamentalfinance.com/game-theory/nash-equilibrium…

    • 2420 Words
    • 10 Pages
    Powerful Essays