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In accounting, amortization is a method of obtaining the expenses incurred by an intangible asset arising from a decline in value as a result of use or the passage of time. Amortization is the acquisition cost minus the residual value of an asset, calculated in a systematic manner over an asset's useful economic life.
a company acquires an asset in year 1 for $100; the asset is still held at the end of year 1, when its market value is $120; the company sells the asset in year 2 for $115; At the end year 1 the asset is recorded in the balance sheet at cost of $100. No account is taken of the increase in value from $100 to $120 in year 1.
(Private companies in the United States may elect to amortize goodwill over a period of ten years or less under an accounting alternative from the Private Company Council of the FASB.) Instead, management is responsible for valuing goodwill every year and to determine if an impairment is required. If the fair market value goes below historical ...
(182*1.06 / (0.15–0.06)) × 0.229 = 491. (Given that this is far bigger than the value for the first 5 years, it is suggested that the initial forecast period of 5 years is not long enough, and more time will be required for the company to reach maturity; although see discussion in article.)
The goal is to determine whether a stock is overvalued (if the market price is higher than the intrinsic value) or undervalued (if the market price is lower than the intrinsic value).
Unpaid period costs are recorded as accrued expenses (liabilities) to ensure these costs do not falsely offset period revenues and create a fictitious profit. For example, if a sales representative earns a commission at the time of sale (or delivery) but is compensated in the following week, in the next accounting period, the company recognizes ...
Buying undervalued property and rehabbing, selling for more and repeating, 1031 tax-free exchanges. 4. Buy a REIT. Unlike prior options, the next two ways to invest in real estate really are passive.
The accounting equation plays a significant role as the foundation of the double-entry bookkeeping system. The primary aim of the double-entry system is to keep track of debits and credits and ensure that the sum of these always matches up to the company assets, a calculation carried out by the accounting equation.