Deck 12 Flashcards
Salvage value rule for Double declining balance
Ignore; the asset should not be depreciated below the estimated salvage value
Under US GAAP, long-lived assets that are impaired can only have their carrying value restored if they are:
Held for disposal (not held for use)
Gains and losses on fixed assets are always recorded at what value?
Net book value
Calculation for liability/asset in construction contracts =
Construction in progress - progress billings
Negative book balance is considered:
A current liability (not cash)
Example of a monetary exchange:
Exchanging equipment for a $200,000 noninterest bearing note (recorded using the fair value of the asset)
Short-term debt that is expected to be refinanced is classified as:
Long-term liability (anything paid prior to refinancing is considered current)
Sales tax that is refundable in 5 years is considered:
A noncurrent asset
Deposits received by customers is considered:
A current liability
Capitalized interest equals the smaller of:
The avoidable interest and total interest incurred
Only the interest related to _____ expenditures is capitalized
Construction expenditures (not total expenditures)
First step to calculate the amount of interest which should be capitalized is:
Calculate the weighted average accumulated expenditures
Do temporary market declines in inventory need to be recognized at interim?
No if a turn-around can reasonably be expected to occur before the end of the fiscal year
Cost recovery method
No profit is recognized until cash collections exceed the cost of sales
Will a reversal be allowed under GAAP for an impairment?
No; unless it is held for disposal
Change from the installment method to the cost recovery method:
A change in accounting principle inseparable from a change in accounting estimate
The carrying amount of stock is equal to the:
Fair value of the stock
The carrying amount of a bond is equal to the:
Cost + amortization
Normal present value formula is:
Present value = future amount x present value factor
Ordinary annuity vs. annuity due
Ordinary annuity: payments are made at the end of the year; annuity due: payments made at beginning of year
