FAR 8 - Fixed Assets Flashcards

1
Q

How should Asset Retirement Obligations (AROs) be recorded?

A

Either at fair market value (amount the ARO could be settled for today), or the present value of future cash flows

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2
Q

Accretion expense for an ARO is recorded at what value?

A

Credit adjusted risk free interest rate.

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3
Q

Journal entry for Accretion Expenses

A

DR Accretion Expense, CR ARO Liability

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4
Q

Journal entry for initial ARO Liability

A

DR Land xxx, CR cash, CR ARO liability

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5
Q

At what point are assets held for sale depreciated?

A

They are never depreciated. They are written down to NRV - net realizable value.

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6
Q

Capitalized interest is computed at the lesser of either of which two values?

A

Either the weighted average accumulated expenditure times the interest rate or the actual interest expense.

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7
Q

How to compute IFRS cost model

A

Figure depreciation per year according to each separate component, then add to get yearly depreciation amount.

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8
Q

What are the 3 rules for nonmonetary exchanges with commercial substance?

A
  1. FMV given up + cash paid (-cash received)
  2. FMV of asset received
  3. BV (book value) given up + cash paid (-cash received)
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9
Q

What are the rules for nonmonetary exchanges without commercial substance?

A
  • Recognize all losses- item cannot be listed for more than what it is worth.
  • Defer all gains (if no commercial subdstance, no realization under GAAP) UNLESS BOOT IS RECEIVED
  • Record lowest of three values:(same 3 rules for Com Subst)
  1. FMV given up + cash paid (-cash received)
  2. FMV of asset received
  3. BV of asset given up +cash paid (-cash received)
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10
Q

What is formula for SYD depreciation method?

A

(Cost-Salvage value)*(# of years left in assets life) = depreciation

(sum of yearsin assets life )

Denominator = N(N+1)/2 where N= #years left in assets life.

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