F3 - M5 PPE DEP

Question 1

Impairment loss on assets THAT ARE NOT held for sale

Answer 1

We do not recognize a readjustment in value if impairment is recovered. Once impaired always impaired.

Question 2

What happens to DEP expense if there is an appreciation to fair value

Answer 2

Recorded DEP will not change.

Question 3

How is impairment tested?

Answer 3

Expected future cash flow is less than the carry value of the equipment. If carry value is less than we have an impairment

Question 4

Carry Value

Question 5

200 % Declining balance formula

Answer 5

1) Take 100% divided by useful life gives a percent. 2) Take that percent and multiply it by 2. 3) Take NRV of asset times that multuplied percent.

Question 6

Depletion formula

Answer 6

1) depletion basis (Cost + development + restoration- salvage (/) residual value)
2) Take basis (/) “x” Per ton
3) Per ton (x) CY depletions

Question 7

Exchanging asset for note Gain or Loss calc

Answer 7

1) Determine selling price of note ( Note x PV of annuity)
2) Carry value of asset
3) Selling price - carry value= G/L

Question 8

Salvage value on deprecation

Answer 8

Depreciable assets dont go below salvage value therefore accum dep will never be 0

Question 9

Sum Year Digits formula

Answer 9

1)Take tota years going from Last year to Beg year. (5+4+3+2+1=15)
2)Make a chart based on total years left
Year 1 5
Year 2 4
Year 3 3
3) Take total years left divided by total life
Year 1 5 5/15
Year 2 4 9/15
Year 3 3 12/15

Question 10

Composite life

Answer 10

Depreciable cost which includes (-) salvage life (/) annual dep

Question 11

Salvage value

Answer 11

Salvage value is removed from all methods expect for double declining

Question 12

Where is dep method on F/S

Answer 12

Dep method should be on notes

Question 13

What is the straight line dep basis

Answer 13

FMV of asset or cash paid

Question 14

What happens to DEP expense if there is an impairment to fair value

Answer 14

The impairment is added into accum dep balance

Question 15

Impairment on asset. What is the new remaining carry amount. (Regarding DEP)

Answer 15

The new carry value is the reasonable estimate left, however this is depreciated over remaining life left.

Question 16

When do you test for impairment on long lived assets

Answer 16

When circumstances indicate that carry amount may not be recovered

Question 17

Difference on impairment test and what the impairment amount is

Answer 17

Carry value minus future value is to test for impairment. The actual impairment loss will be carry amount minus fair value.

Question 18

DONT FORGET WEIGHTED AVERAGE MONTHS ON DEP EXPENSE IF ASSET IS NOT PURCHASED IN JANURARY.