Concepts CH 8

Question 1

PPE

Answer 1

Initial Recognized at Historical Cost

Question 2

Land initial Cost

Answer 2

Transaction Cost
Site Prep Cost
Perm Improve
Special Assessemnt
Razing Building (or this an ADJ upon Sale)

Question 3

Building Initial Cost

Answer 3

Purchase Price (including leins)
Renovation & Prep of structure
Excavating
Construction Costs
Interest Costs

Question 4

Equipment

Answer 4

Purchase (sales tax)
Freight-in, Handling, Ins, Storage
Prep, Install, Start-up Costs (testing)

Question 5

Asset Impairment

Answer 5

if Carrying amount is > UDCF it is not recoverable

Question 6

Non-Monetary Exchange

Answer 6

Carrying amount of asset given up unless boot received no gain

Question 7

Effect of Boot paid Carrying amount

Answer 7

old carrying amount + boot

Question 8

Gain due to boot >/= 25%

Answer 8

If boot is at least 25% of FV of exchanged asset both parties should treat as monetary exchange

Question 9

Boot gain is < 25%

Answer 9

Potential gain test

Question 10

When a nonmonetary transaction lack commercial substance

Answer 10

The transaction should be based on mount of assets given up

Question 11

A nonmonetary transaction should be based on carrying amount of asset given up when

Answer 11

1) In which neither FV of asset relinquished or asset received is determinible within limits
2) Inventory to be sold in the same line of business that is undertaken to facilitate sales to customers
3) Lacks commericial substance
Under either method loss must be recognized in full regardless of receipt of boot

Question 12

Non-monetary transaction that has commercial substance and FV of both assets is determinable

Answer 12

The transaction is measured at FV of asset given up and any gain recognized immediately

Question 13

Interest should be capitalized when

Answer 13

1) asset constructed for own use
2) Assets intended for sale or lease are constructed as discrete projects
3) Certain equity investments

Question 14

An asset constructed for interest capitalization if

Answer 14

1) relevant expenditures have been made
2) Activities to prepare asset for intended use are in progress
3) Interest is being incurred

Question 15

AAE < Specified Borrowing

Answer 15

Used specified borrowing rate

Question 16

AAE > Specified Borrowing

Answer 16

Used weighted avg of other borrowings on amount of AAE in excess of specific borrowings

Question 17

Interest capitalized is

Answer 17

the lessor of actual or avoidable interest

Question 18

Avoidable interest

Answer 18

Is based on AAE (AAE - Specific borrowing) x Other Borrow rate. Total avoidable interest is (AAE Interest + Other Borrow Interest). If avoidable interest is less than total interest it is capitalized

Question 19

Under IFRS Depreiation

Answer 19

Each part item with significant cost must be depreciated separately

Question 20

Depletion base

Answer 20

Purchase Price - Residual Value + Additional prep costs

Question 21

IFRS Impairment Test 1 step

Answer 21

Requires one step The carrying amount is compared with the recoverable amount

Question 22

GAAP impairment test 2 steps

Answer 22

Carrying amount compared with UDCF if UDCF > no impariment. If UDCF < Carrying amount go to step 2
Step 2

Question 23

Recoverable amount IFRS

Answer 23

The greater of
Selling price minus selling cost or
PV of cash flows (value in use)

Question 24

Impairment Loss GAAP

Answer 24

Carrying amount - FV

Question 25

Assets held for disposal should be accounted forby

Answer 25

Adjusting only a long-lived asset for write-downs to fair value minus cost to sell or the reversal of such an adjustment.

Question 26

IFRS Revaluation

Answer 26

Recognized as revaluation surplus when about original carrying amount

Question 27

The units-of-production depreciation method allocates asset cost based on

Answer 27

he level of production. As production varies, so will the credit to accumulated depreciation. Consequently, when an asset’s service potential declines with use, the units-of-production method is the most appropriate method.

Question 28

Under U.S. GAAP, a previously recognized impairment loss on a long-lived asset to be held and used must not be

Answer 28

Reversed. The carrying amount of the long-lived asset adjusted for an impairment loss is its new cost basis. However, if the long-lived asset is held for sale, a gain is recognized for a subsequent increase in fair value minus cost to sell. But the gain is limited to the extent of prior write-downs.