F3 M5 PP&E Depr and Disposal

Question 1

What is the formula for sum-of-the-years digits?

Answer 1

(Cost-Salvage Value) x Remaining life of the asset/Sum-of-the-years digits

Question 2

For calculating depreciation expense be sure to ____ the salvage value. For calculating the carrying amount be sure to ____ the salvage value.

Answer 2

Deduct

Add back

Question 3

What is the formula for Units-of-Production?

Answer 3

(Cost-Salvage Value)/Estimated units or hours = Rate per unit or hour

Rate per unit (or hour) x number of units produced (or hours worked) = Depreciation expense

Question 4

Under declining balance depreciation, the salvage value is ignored in calculation of annual expense. The salvage value is the ____ on net book value.

Answer 4

Floor

Question 5

What is the formula for double declining balance?

Answer 5

2 x 1/N x (Cost-Accumulated Depr)

N = the useful life

Question 6

When an asset is placed in service during the year, the depreciation expense is taken only for ____.

Answer 6

The portion of the year that the asset is used.

Question 7

Which of the following uses the straight-line depreciation method?
Group Depreciation
Composite Depreciation
Both
Neither

Answer 7

Both are based on straight line depreciation

Question 8

What is the equation of cost depletion?

Answer 8

Unit depletion rate x Number of units extracted

Unit depletion rate = Depletion rate / estimated RECOVERABLE units

Question 9

What is the depletion base? What does it include?

Answer 9

Cost to purchase property + development costs + estimated restoration costs - residual value of land after the resources are extracted

Question 10

Depreciable assets should not depreciate below ____ under any depreciation method.

Answer 10

Salvage value

Question 11

IFRS requires component depreciation, under component depreciation the machinery, component, and inspection costs are ____.

Answer 11

Recognized and depreciated separately.

Question 12

What is the calculation for the depreciable base?

Answer 12

Cost minus salvage value

Question 13

How do you calculate the composite life/average useful life?

Answer 13

Total the depreciable cost for all of the assets in the class. Calculate the annual depreciation for all assets individually. Total the annual depreciation. Take the total depreciable costs divided by the total annual depreciation.

Question 14

Repairs on a an asset are ____ and are not used in calculating net book value (NBV)

Answer 14

Expensed

Question 15

If depreciation expense accidently gets left out of last year’s expenses, how do we account for it?

Answer 15

It is a prior period adjustment as a correction of an error. We would adjust beginning retained earnings net of tax.

Question 16

In all depreciation methods except declining balance, the salvage value is subtracted from the asset’s ____ in arriving at the ______.

Answer 16

Cost in arriving at the depreciation base

Question 17

Units of production depreciation method is most appropriate for when ____

Answer 17

An asset’s service potential declines with use