FAR 3 Module 5 Flashcards
What is the 200 percent declining balance depreciation method?
Is given salvage value used?
How would you calculate the deprecation expense for the following?
N: Number of Years
In 200% declining balance method, the salvage value is not directly used
DDB: Used when asset has rapid obsolescence
What is the formulas for:
Calculation of Depletion & Unit Depletion rate
Can a company restore a previously recognized impairment loss if the fair value of a long-lived asset increases?
Crater, Inc. purchased equipment with a 10-year life and a 20% salvage value. After 5 years, it was sold for 50% of its original cost, resulting in a loss. Which depreciation method did Crater use?
A. Sum-of-the-years’-digits.
B. Composite.
C. Double-declining balance.
D. Straight-line.
Straight Line
What is the half year convention?
What if its used with Straight line depreciation?
Under the half-year convention:
With straight line:
Multiple first and last yr by 0.5
When is the units-of-production method of depreciation most appropriate?
Machinery, vehicles
What is the Sum-of-the years digits Deprecation?
Formula?
Provides higher expenses in early years and lower expenses in the later years
ex. 5 years useful life
Y1: 5 remaining life on asset
Y2: 4 remaining life on asset
Y3: 3 remaining life on asset
What is the units-of-production depreciation formula?
What happens when an asset is classified as held for sale, and how is it reported?
A. It will be valued at historical cost.
B. It will be classified as a current asset.
C. It will be reclassified as an asset held for sale.
D. It will no longer be depreciated.
When a company sells an asset and uses the proceeds to acquire a new asset,
how should the excess of the proceeds over the carrying amount of the asset sold be reported?
Should be reported part of continuing operations.
This gain is related to regular business activities and ongoing operations.
How should restoration costs related to a coal mine be accounted for?
What are 2 steps for the impairment test?
When should a long-lived asset be tested for recoverability?
Under U.S. GAAP, when should a long-lived asset be considered impaired?
How should impairment be recorded?
Impairment loss = Carrying Value (book value) - Fair value
What happens to the book value when a permanent impairment occurs
The book value is reduced with a credit to Accumulated depreciation
