Depreciation Flashcards
Cost of Building
Architect fee
+ Construction cost of Building
Cost of Land
Purchase price + Delinquent Taxes on property + Demolition of existing building - Proceeds from sale of scrap materials+Real estate taxes in arrears+Clearing of trees and grading (leveling) + Surveying + Clearing, Grading and landscaping
The composite depreciation method _________
does not recognize gain or loss on the retirement of single assets in the group. (A> composite method is generally used for collection of somewhat dissimilar assets with different lives. B>The group method usually refers to a collection of similar assets with approx the same useful lives. C>Accelerated or SL methods can be used with the composite method.
USE FORMULA
DEPRECIABLE BASE= (COST - SALVAGE VALUE)
___________________________
ANNUAL DEPRECIATION
Donated non-monetary assets are recorded at the ____________
FV of the asset received
If Sum of undiscounted cash flows is less than the CV, then calculate Impairment
Impairment = CV-FV
FIFO follows LCNRV
Lower of Cost or NRV
Recording price of Land
County assessment for sewer lines + Title search fees + Cash paid for land with a building to be demolished + Removal of old building less salvage
(NOT TO BE CONSIDERED: Excavation for construction of basement)
Special revenue fund
It is used to account for specific revenues (e.g. gas tax for road maintenance) that come from earmarked sources and are restricted to financing designated activities. Both the principal and interest can be used for those activities.
When is company required to evaluate the asset for impairment?
When events or circumstances indicate the CV might not be recoverable.
Cost of Land
Purchase Price
+ Delinquent Taxes
+Surveying
+ Clearing, grading, landscaping
+ Costs of razing existing building on land
(- )Proceeds from the sale of scrap materials
When a firm is in liquidation, historical cost and entry values (replacement cost) are no longer relevant. The firm is no longer a going concern. The only amounts relevant are the amounts to be received on sale of the assets. NRV is the net value to be received, after the costs of getting the asset ready for sale are deducted.
NRV to be considered when firm is in liquidation (Balance Sheet)
Undiscounted cash flow < CV : Calculate Impairment
Impairment = CV - FV
Interest during construction period only can be (or if used for discrete manufacturing) _______
CAPITALIZED
New Truck (FMV) XXX
Accumulated Dep (AD) XXX
Old Truck XXX
Gain XXX
Cash paid to dealer XXX
Like-kind exchange
Double declining balance does not consider Salvage Value
True
Sum of Year Digits - e.g. 15 years depreciation (to be calculated for year 4)
Cost - Salvage Value *(No. of years remaining / sum of total number of years Denominator = (15+14+13+12+11+10+9+8+7+6+5+4+3+2+1)
$12,000 Liability insurance premium during the construction period
Classify as Building and Depreciate
Purchase of building
Classify as land and do not depreciate
Carrying Value
Cost - Accumulated Depreciation
Construction int cost capitalized int
Consider Weighted avg amount of ACCUMULATED EXPENDITURE if it is less than total interest incurred or the avoidable int
Excavation cost - treated as part of the cost of the building
depending on the question
Capitalized int is recognized on borrowed funds used to finance the weighted avg accumulated expense for a qualifying asset during the construction period.
True
Land
Cost of razing
Use Units of production method when
An asset’s Service potential DECLINES with use.
Capitalized int construction is allowed on Special order goods on hand for sale to customers and also allowed on real estate development projects if INTENDED FOR SALE.
Also allowed - During delays in obtaining permits to complete building construction.
Weighted avg interest rate %
(Int rate * Debt) + (Int Rate *Note)
___________________
Total Borrowing
Restoration costs of Mine
Add them into the depletion base of the mine.
Capitalize costs that improve the quality, efficiency or productive capacity of a fixed asset.
True (all 3)
Depletion amount per unit would be the same for every year unless additional expenditures were incurred
True (Per tonne)
No Accumulated Dep to be considered in
SUM OF YEAR DIGITS
Half year convention (e.g. total 6 year useful life) means use half of SL method in the first and the last year and __
SL for remaining years (e.g. year 2 to 5 - SL)
Years 1 and Year 6 - Half convention
A subsequent reveral of an impairment loss is prohibited under GAAP ___________________
unless it is held for disposal
SOYD - 120 degrees - slanting line (declines at a constant rate)
DDB - Curved one (at the highest point as compared to SL and SOYD)
True
Construction int cost will be expense if there has been an intentional delay
True
Total price of assets include Appraised cost
True
Property held for sale
All cost inclusive of Construction cost should be expensed
Impairment loss will be added to Accumulated Depreciation calculation
(if any) if impairment points are provided in the question
CAPITALIZED INTEREST cannot exceed that year’s________________
ACTUAL INTEREST COST
Int method
1) Weighted Avg Method (capitalized int goes to PPE account)
2) Specific Method (expense remaining portion)
100,000 spent EVENLY THROUGHOUT THE YEAR in year 1
it means 100000/2 = 50000 is the weighted avg accumulated expenditure during the year
Specific method is based on _________
Weighted avg accumulated expenditure e.g. 50k in above point #40
Non-Accelerated methods
SL and Units of Production
Accelerated methods used for Tax purposes to increase expense and this will cause _________________
Taxable income to be lower
COmposite
Dissimilar Assets
Group Dep
Similar Assets
Depletion , charge to Inventory
JE -
Inventory XX
Accumulation Depreciation XX
Depletion expense , Transferred from Inventory to COGS when ___________
SOLD
JE
Depletion Expense XX
Inventory XX
Natural resource and intangibles
Non-current Assets
Asset purchase price to be depreciated
Shipping (freight in), Purchasing, Installation, Taxes, Test runs (SPITT)
At the time of dispose off when no cash was received at the time of disposal
Accumulated Dep XX
Loss on Transaction (Cost - AD) XX
PP&E XX
Total Acquisition Costs and Get Ready Costs
Total Acquisition Cost - Cost allocated to land = Cost allocated to Building
Purchase price
Legal fees
Delinquent Taxes
Title Insurance
Transportation (freight in) + Transit insurance
Installation
Test runs
Sales taxes
