Chapter 9 Long Lived Assets

Question 0

When is a long lived asset considered impaired?

Answer 0

When carrying value > asset’s recoverable amount

Question 1

Units of production method of depreciation

Answer 1

1.(Cost of resource - Residual value) / Est. Units of production =Depreciable amount per unit
2.Depreciable amt per unit X Units of production during the year
= Annual depreciation expense

Question 2

Amount of impairment loss

Answer 2

Carrying amount - Recoverable amount

Question 3

3 methods of depreciation

Answer 3

1. Straight line
2. Diminishing balance
3. Units-of-production

Question 4

Steps in recording disposal of PPE

Answer 4

1. Update depreciation
2. Calculate carrying amount (Cost - Acc. Dep.)
3. Calculate gain or loss (Proceeds - carrying amount)
4. Record disposal

Question 5

Entry to record disposal

Answer 5

Dr.Cash (or other)
Dr.Acc. Dep.
Dr.Loss on disposal (or Cr. Gain on disposal)
Cr. PPE

Question 6

What are intangible assets + 3 examples

Answer 6

Intangible long lived assets provide future benefits

E.g. patents, copyright, contracts, trademarks, goodwill

Question 7

Double diminishing balance of depreciation

Answer 7

Carrying amount at beginning X (Straight line rate x2)

Question 8

Return on assets ratio

Answer 8

Profit / total average assets

Question 9

Asset turnover

Answer 9

net sales / average total assets