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2. Using an example explain the difference between the following a. Depreciation v. amortization b. Book and market value of an asset. c. Basic and
2. Using an example explain the difference between the following a. Depreciation v. amortization b. Book and market value of an asset. c. Basic and diluted EPS. a. Depreciation is an annual charge against income that reflects the estimated dollar cost of the capital equipment and other tangible assets that were depleted in the production process. Amortization amounts to the same thing except that it represents the decline in value of intangible assets such as patents, copyrights, trademarks, and goodwill. An example of depreciation is a company buying a machine for $5,000 with a lifetime of 3 years and the depreciation expense is $1,000 a year. After 3 years, the machine will be valued at $2,000. An example of amortization can be just like the one above but this time, it is the trademark of their company name that is worth $100,000 with the lifetime of 10 -years. Their amortization expense recorded will be $10,000 a year. b. F c. F
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