F3 - M4 - PP&E: Cost Basis Flashcards
________ are assets acquired for use in operations, possess physical substance, are long-term in nature, and are subject to depreciation.
Property, plant, and equipment
Under _________, fixed assets are valued at historical cost to acquire and put into use with few exceptions.
Under U.S. GAAP
Donated fixed assets are recorded at
Fair Value
Donated fixed assets are recorded at fair value and a gain or revenue is recognized equal to
That Value
Under IFRS, fixed assets are recorded upon acquisition at historical cost to acquire and put into use. Subsequently, fixed assets can be reported using either the _____ model or the _________ model:
cost model or revaluation model
_____ model were fixed assets are reported on the balance sheet at historical cost less accumulated depreciation and impairment.
Cost model
Using this ______ model, fixed assets are revalued to fair value at a specific point in time, only used by _____
Revaluation model, IFRS
For the revaluation model, The fixed assets are then reported on the balance sheet at _________ on the ________ date less
fair value on the revaluation date less subsequent accumulated depreciation and subsequent impairment.
US GAAP evaluates fixed assets on the ________
Historical Cost
______ measured by cash or cash equivalent price of obtaining the assets and brining it to the location delivery and condition necessary for its intended use
Historical Cost
What is the JE for donated Fixed Asset?
DR Fixed Assets (FMV) and CR - Gain on nonreciprocal transfer
Under IFRS, fixed assets ar initially recognized at __________ , subsequent to acquisition, they can be valued using _______ or _______ model
Cost, Cost or Revaluation Model
Under cost model, fixed assets are recorded at _______ adjusted for ________ and __________
Cost, Accumulated depreciation and impairment
________ model—fixed assets are revalued to fair value at a specific point in time.
Revaluation Model
The fixed assets are then reported on the balance sheet at fair value on the _______date less _______ ___________ and subsequent _________.
revaluation date less accumulated deprecation and impairment
When initially adjusting the fixed assets to fair value, revaluation losses are reported on the __________ and revaluation gains are reported in ________________ as revaluation surplus.
income statement, other comprehensive income
_________ should be recorded to reflect all the costs necessary to make the land ready for its intended use.
Land
__________ have finite lives and should be depreciated.
Land improvements
For the “basket purchase” of land and buildings, allocate the purchase price based on the ratio of __________ of individual items.
appraised value
___________ that maintain the equipment should be expensed.
Ordinary repairs
____________, such as overhauls or major replacements, should be capitalized.
Extraordinary repairs
Constructed fixed assets should include _______________ on weighted _________ during the construction period.
capitalized interest, weighted average expenditures incurred
When fixed asset are revalued, the revaluation losses (When Carrying value > Fair Value are reported _____________-
Income Statement
When fixed asset are revalued, the revaluation gains(When Carrying value < Fair Value are reported
Other comprehensive income
Revaluation gains can be reversed up to _________
to the extent they reverse a previously recognized a revaluation loss
If revaluate fixed assets subsequently become impaired, the impairment is recorded by the first reducing ______________
Any valuation surplus to zero
For impairments first offset any _______ and then surplus to ___________-
OCI then to I/S
Should you depreciate the cost of land
No
The cost of land includes purchase price, broker’s commission, title and recording fees, legal fees any cost of clearing of brush and trees, ______ development, Cost of _______ and Less
Site development, Cost of razing (tearing down) an old building and less proceeds from sale of existing building
_______ includes ; 1) Fences, 2) Water Systems 3) Sidewalks, 4) Paving, 5) Landscaping 6) Lighting
Are all land improvements
Plant/building includes the cost of ___________ forward
Cost of Excavation and digging forward
Filling in a hole or leveling is included in _______ cost
Land cost
Digging a hole for foundation is included in _______ cost
Building Cost
What are all the cost capitalized with Equipment?
1) Invoice price, 2) less cash discounts, 3) Freight in, Installation charges (testing a prep) cost to rearrange, 5) Sales and federal taxes, 6) Addition of construction period interest.
Wha tis the JE for recording additions increasing the quantity of fixed assets
Dr Asset Cr Cash/AP
There are two ways improvements or replacements are recorded (2)
1) If carrying value is known, remove it and recognize a gain or loss and capitalize the cost of improvement 2) if carrying value is unknown, debit accumulated deposits for the cost
For Improvements is known, remove it and ______________ and capitalize the cost of improvement
Gain or loss
For Improvements is unknown, the asset life is extended, and what is the JE
Dr Accumulated Deprecation, CR/ Cash/AP
In order to capitalize interest (3)
1) Expenditures for the assets have been made, 2) activities that are pessary to get asset ready for its intended use are in process (permit is filed) and 3) interest cost is being incurred
Intentional delays in construction does what to the capitalized interest
Stops it
Ordinary construction delays does what to the capitalized interest
Continues
What items have to be disclosed in the financial statements
1) Total interest cost incurred during the period, 2) Capitalized interest cost of the period, if any
When assets are purchased required fixed payments extending beyond a year, the asset should be valued at the ____________ of all future payments
Present value
What are the two rules for capitalized cost
1) Only capitalize interest on money actually spent 2) The amount o interest is lower of actual interest cost incurred and avoidable interest
The amount of interest capitalized is the lower of______
actual interest cost incurred or avoidable interest
