The board of directors of Chipman Developments is reviewing the 2023 annual report. A new board member,

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The board of directors of Chipman Developments is reviewing the 2023 annual report. A new board member, a dermatologist with little business experience, questions the company accountant about the amortization amounts. The dermatologist wonders why amortization expense has decreased from $250,000 in 2021, to $230,000 in 2022, to $215,000 in 2023. He states that he could understand the decreasing annual amounts if the company had been disposing of properties each year, but that has not occurred. Further, he notes that growth in the city is increasing the values of company properties. Why is the company recording amortization when the property values are increasing?


Required

Write a short response to explain the concept of amortization to the dermatologist and to answer his questions.

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Related Book For  book-img-for-question

Horngrens Accounting Volume 1

ISBN: 9780135359709

11th Canadian Edition

Authors: Tracie Miller Nobles, Brenda Mattison, Ella Mae Matsumura, Carol Meissner, JoAnn Johnston, Peter Norwood

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