Question

Rented space that has been renovated and will be amortized in 10 years will be classified under:

a) Fixed assets
b) Intangible assets
c) Current assets
d) Operating expenses

Answer 1

The amortized cost of a renovated rented space is classified as an intangible asset on the balance sheet and is amortized as an expense over its useful life on the income statement.

Step-by-step explanation:

When a company renovates a rented space for its operations and plans to amortize the cost over 10 years, the expense becomes an intangible asset. This is because the improvement is a long-term investment that cannot be physically touched or seen, similar to assets like patents or copyrights. The improvement adds value to the space and benefits the business for the duration of the amortization period. As such, the correct classification for the amortized renovation of the rented space is under intangible assets, not as a fixed asset, current asset, or as part of operating expenses. It will be reported on the balance sheet as a non-current asset and amortized as an expense over its useful life on the income statement.