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Exam 11: Property, plant, and Equipment and Intangible Assets: Utilization and Impairment

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Question 41

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Recognition of impairment for property,plant,and equipment is required if book value exceeds:

A) Fair value.
B) Present value of expected cash flows.
C) Undiscounted expected cash flows.
D) Accumulated depreciation.

E) A) and B)
F) A) and D)

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Question 42

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Statutory depletion is the maximum amount of depletion that may be reported in financial statements prepared according to GAAP.

A) True
B) False

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Question 43

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According to International Financial Reporting Standards (IFRS),the costs to successfully defend an intangible right normally are capitalized and amortized.

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the correct term.

A major expenditure increased a truck's life beyond the original estimate of life.GAAP permits the expenditure to be debited to:

Belotti would record depletion in 2016 of:

On September 30,2016,Morgan,Inc.acquired all of the outstanding common stock of Pathways,Inc. ,for $100 million.In addition to tangible assets,Morgan recorded the following assets as a result of the acquisition: Morgan's policy is to amortize intangible assets using the straight-line method,no residual value,and a six-year useful life. Required: What is the total amount of expenses that would appear in Morgan's income statement for the year ended December 31,2016,related to these items?

According to International Financial Reporting Standards (IFRS),property,plant,and equipment must be valued at cost less accumulated depreciation.

The overriding principle for all depreciation methods is that the method must be:

International Financial Reporting Standards (IFRS)require goodwill to be tested for impairment at least annually.

Briefly discuss the factors that determine the service life of a depreciable asset.

Changes in the estimates involved in depreciation,depletion,and amortization require retroactive restatement of financial statements.

Using the double-declining balance method,depreciation for 2016 and book value at December 31,2016,would be:

Depreciation (to the nearest dollar) for 2016,using sum-of-the-years' digits,would be:

Briefly differentiate between activity-based and time-based allocation methods.

Nanki Corporation purchased equipment on January 1,2014,for $650,000.In 2014 and 2015,Nanki depreciated the asset on a straight-line basis with an estimated useful life of eight years and a $10,000 residual value.In 2016,due to changes in technology,Nanki revised the useful life to a total of six years with no residual value.What depreciation would Nanki record for the year 2016 on this equipment?

Briefly explain the differences between the terms depreciation,depletion,and amortization.

MACRS (modified accelerated cost recovery system)depreciation is equivalent to sum-of-the-years' digits depreciation.

The table below contains data on depreciation for machinery. Required: Fill in the missing data in the table.

In December of 2016,XL Computer's internal auditors discovered that office equipment costing $800,000 was charged to expense in 2014.The asset had an expected life of 10 years with no residual value.XL would have recorded a half year of depreciation in 2014. Required: Prepare the necessary correcting entry that would be made in 2016 (ignore income taxes),and the entry to record depreciation for 2016.