Chapter 7 Long-Lived Assets

Question 1

What sorts of expenditures are to be capitalized?

Answer 1

all necessary costs in acquiring the long-lived asset, placing it in operational settings and preparing it for use.

Question 2

Examples of expenditures that should be capitalized

Answer 2

• Non-refundable taxes
• Legal fees
• Transportation costs
• Installation costs

Question 3

What does it mean when an expenditure is capitalized?

Answer 3

It is recorded as part of the total cost of the asset and not recorded as expenses in current period.
**any interest charges are recorded as expenses.

Question 4

Measuring and recording acquisition cost as a basket purchase

Answer 4

Market Value / Total Market Value
Then multiply the % (for the building for example) by the cash paid by the company to get the amount that should be recorded.

Question 5

Straight Line Depreciation Method

Answer 5

When an asset’s usage is the same each period

Cost - Residual Value x 1/Useful life = Depreciation expense

Question 6

Carrying Amount

Answer 6

Cost - Accumulated Depreciation

Question 7

Units-of-Production Method

Answer 7

( Cost - Residual Value / Estimated total production ) x Actual production = Depreciation expense

Question 8

Accounting Standards for Private Enterprises

Answer 8

IFRS and ASPE

*picture on page 409