F3 - Assets and related topics Flashcards
Beam paid $1k and traded inventory with a CV of $20k and FV of $21k. Other inventory in the same line of business was worth $22k. How much gain or loss should he record.
$0 - 1. This trade lacks commercial substance 2. the trade was made merely to facilitate sales to customers.
Amble exchanged a truck with CV of $12k and FV $20k for a truck and $4k of cash. The FV of the truck received was $16k. What should she record the new truck at?
$9,600
The realized gain is $8k and the boot paid of $4k is 20% of $20k (total consideration). So 20% of the $8k is recognized of $1,600 and $6,400 is unrecognized.
Cash $4k
New Truck $9.6(plug)
Gain $1.6
Old Truck $12k
When are losses recognized for nonmonetary assets exchanged for other nonmonetary assets?
A loss is recognized immediately, because assets received should not be valued at more than their cash equivalent price.
On June 30th year 1, Union purchased Goodwill for $125 when it acquired Ace. During year one, incurred additional costs that increased goodwill by training employees ($50k) and hiring additional employees ($25k). How much goodwill should Union report on Dec 31 Year 1?
$125k - Goodwill is capitalized at the cost it was acquired. The rest is expensed as internal development.
Which of the following would be considered R&D?
A. Periodic design changes to existing product
B. Engineering follow-up in an early phase of commercial production
C. Legal work in connection with a patent application
D. Testing in search of product or process alternatives
D.
In January, year 1, capitalized an asset of $100k over 5 years. The CV of the software on January, year 3, was $60k. As of Dec 31, year 3, the estimated gross future revenue to be generated from the sale is $25k with expenses of $8k at disposal. What amount should the company expense for December year 3?
60/3yrs left = 20k amortized
23rev-8ex=15 FV
60-20=40CV - 15FV = 25 Impairment loss
20amortization+25Impairment loss = 45k expensed.
Does GAAP or IFRS allow a reversal of an impairment loss?
IFRS - yes
GAAP - no it is prohibited unless it is held for sale
Which of the following is an intangible that is subject to the recoverability test of impairment? A. Patent B. Trademark with indefinite life C. Goodwill D. R&D cost for patent
A. patent - the recoverability test is only performed on assets with a limited useful life. It compares undiscounted future cash flows to CV. If CV is greater, FV test is performed.(CV-FV (not undiscounted CF)=Impairment)
A company has a long lived asset with a CV of $120k, undiscounted future cash flows of $130, present value of expected future cash flows of $100k and a FV less cost to sell of $105k. What amount of impairment would you record under GAAP and IFRS?
GAAP - CV is less then undisc future CF so $0
IFRS - CV is greater than the recoverable amount (whichever is greater PV of C/F vs FV less cost to sell).
100 > 105 –> use 105 -120=15 impairment loss.
Which of the following pair of values are compared to determine an assets impairment with an indefinite life? A. CV,BV B. FV, PV C. Future value, CV D. FV,CV
D.
