INTANGIBLE ASSETS

Hi, I’m happy to answer the question but you need to have attempted the question first so that I can then point out where you are going wrong. I don not just answer questions outright so if you can show an attempt then I’ll gladly help you out. Thanks

Hi, If we are using historical cost as opposed to current value then the assets will always be held at a lower amount than current value as they'd have been recorded at cost and depreciated, when the current value is likely to have increased due to the growing economy. Given this then the capital employed (think of it as total assets plus current liabilities) will be lowed under historical cost accounting as opposed to under current value accounting. So 2 is a correct answer. The historical cost profits will be over stated as the asset's depreciation will be be based on its original cost and so the annual depreciation will be lower under this method than under current value where we would see a higher depreciation charge as the amount being depreciated is going to be higher. So 3 is a correct answer. Thanks