F3 #2 Flashcards
Legal fees for purchase contract and recoding ownership, title guarantee insurance are all?
Capitalized to the price of the land.
Hos are leasehold improvements treated?
They are capitalized and depreciated over the lessor of the life of the improvement or the lease term.
How do we treat debt issuance cost?
We do not capitalize this to the land value.
What expenditures do we capitalize?
Those that improve efficiency and extend the useful life/benefits several periods.
Equipment costs include?
Invoice price, freight in, and installation charges. (All costs required to get the asset ready for its intended use)
How do we treat appraisal costs?
Added to the lump sum amount paid for the asset.
What value do we give assets that payments are due past the current year?
Valuate them at PV of annuity due AKA future payments.
What happens when an asset is damaged?
Refurbishing costs (Costs to repair) are capitalized and a loss equal to the carrying amount of the damage proportion is recorded in the current period.
What is the formula for calculating weighted average interest?
[Loan 1/(loan1+loan2)loan1 interest rate ]
+ [(Lan 2/(loan1+loan2)loan2 interest rate]
How do we treat restoration costs?
We capitalize to the value of the asset.
Depletion base formula?
Cost to purchase
+Development costs
+Estimated restoration costs
-Residual (Salvage) value
Reversal of an asset’s previously booked impairment loss is?
Prohibited if it is considered in use
Allowed if it is held for disposal/sale (Only up to the amount previously taken as a loss, you cannot exceed that amount)
The sum of years digit formula?
Cost-residual value * (remaining useful life/Sum of year)
Sum of year = [(n(n+1)]/2 n=estimated useful life
