Skip to ContentGo to accessibility page
OpenStax Logo
Principles of Accounting, Volume 1: Financial Accounting

Chapter 11

Principles of Accounting, Volume 1: Financial AccountingChapter 11

Chapter 11

Multiple Choice

1.

C

3.

C

5.

A

7.

B

9.

D

11.

D

13.

D

15.

A

Questions

1.

The main difference between tangible and intangible assets is that tangible assets have a physical substance to them. This means they can be touched and have some physical form.

3.

A patent is a contract that provides a company with exclusive rights to produce and sell a unique product. It is granted by the federal government and provides exclusivity from competition for twenty years. A copyright provides the exclusive right to reproduce and sell artistic, literary, or musical compositions for a period of seventy years beyond the death of the original author.

5.

A. capitalized. B. expense. C. capitalized. D. capitalized. E. expense. F. expense. G. capitalized.

7.

In measuring and reporting long-term assets, the expense recognition (“matching”) principle is applied. Under the expense recognition or “matching” principle, the acquisition cost of the asset must be allocated to the periods in which it is used to earn revenue. In this way, the cost of the asset is matched, as an expense, with the revenues that are earned from period to period through the use of the asset.

9.

Depreciation is the process of allocating the cost of using a long-term asset over its anticipated economic (useful) life, whereas depletion is the process of expensing the cost of natural resources over the life of the asset, typically using a unit-consumed method. Amortization is specifically for intangible assets and typically is calculated using straight-line with no salvage value.

11.

Goodwill is internally generated, but it is not recorded as an asset unless (and only when) one company acquires another company at a price greater than the total value of the net assets being purchased. The purchaser will record goodwill for the difference between the fair value of net assets acquired and the purchase price. Goodwill is not amortized and will be tested annually for impairment.

13.

Obsolescence refers to the reduction in value and/or use of an asset. It may refer to the actual physical deterioration of the asset, which is known as physical obsolescence, or to the loss of value from causes other than physical deterioration, which is functional obsolescence. Functional obsolescence is specific to the organization and the usefulness the asset has for the company going forward. This type of obsolescence could be the result of simply not needing the asset any longer.

PreviousNext
Order a print copy
Citation/Attribution
Reuse and redistribution of this content in digital or print format:
  • This book may not be used in the training of large language models or otherwise be ingested into large language models or generative AI offerings without OpenStax's prior written permission.
  • This book uses the Creative Commons Attribution-NonCommercial-ShareAlike License, which means that you can reuse and modify the material only for noncommercial purposes, must attribute OpenStax, and must distribute any derivative works under the same license.
  • Any commercial printing of this textbook, including using a local or custom printer, must be approved by OpenStax, and proper citation provided.
  • OpenStax-copyrighted images, activities, assessments, and similar components of this book are subject to the same licensing – CC-BY-NC-SA. They can be used for noncommercial purposes with attribution. Commercial use requires permission.
  • Permission requests: Anyone who intends to incorporate this content (including text, images, and other components) into large language models, use it in AI offerings, use it commercially (including in print), and/or has questions about another use case is welcome to complete our reuse request form.
Attribution information
  • If you are redistributing all or part of this book in a noncommercial print format, then you must include on every physical page the following attribution:

    Access for free at https://openstax.org/books/principles-financial-accounting/pages/1-why-it-matters

  • If you are redistributing all or part of this book in a noncommercial digital format, then for every page that includes OpenStax content, you must license the derivative work under the same CC-BY-NC-SA license as the original, and include on every digital page view the following attribution:

    Access for free at https://openstax.org/books/principles-financial-accounting/pages/1-why-it-matters

Citation information

The information below includes the information needed to generate citations in most major styles (APA, MLA, etc.); you must reformat and organize the information as needed to fit the requirements of the style. Use the information below to generate a citation. We recommend using a citation tool such as this one.

© Apr 23, 2026 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike License. The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo, and Rice University name, and Rice University logo trademarks, or wordmarks are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.