
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, 8th Edition
- PLEASE HELParrow_forwardOne company might depreciate a new computer over three years while another company might depreciate the same model computer over five years...and both companies are right. True Falsearrow_forwardno chatgpAccumulated Depreciation will appear as a deduction within the section of the balance sheet labeled as Property, Plant and Equipment. True Falsearrow_forward
- No ai Depreciation Expense is shown on the income statement in order to achieve accounting's matching principle. True Falsearrow_forwardno aiOne company might depreciate a new computer over three years while another company might depreciate the same model computer over five years...and both companies are right. True Falsearrow_forwardno ai An asset's useful life is the same as its physical life? True Falsearrow_forward
- no ai Depreciation Expense reflects an allocation of an asset's original cost rather than an allocation based on the economic value that is being consumed. True Falsearrow_forwardThe purpose of depreciation is to have the balance sheet report the current value of an asset. True Falsearrow_forwardDepreciation Expense shown on a company's income statement must be the same amount as the depreciation expense on the company's income tax return. True Falsearrow_forward
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
