fixed asset

Question 1

what are qualifying assets for interest capitalization

Answer 1

assets that are constructed or other produced for an entity;s own use, all interests are capitalized instead of expensed. capitalization shall end when the asset is complete and ready for its intended use, machine for is own use.

Question 2

the sale of old warehouse and purchase of a new warehouse should be recorded separately.

Answer 2

The excess of the proceeds over the carrying amount of the warehouse sold should be reported as a part of continuing operation.

The gain on sale should be recorded as other income.

Question 3

what are the steps to test for an impairment loss

Answer 3

1. is the carrying greater than the undiscounted cash flows? if yes
2. subtract fair value from carrying value.

Question 4

donated land should be reported as

Answer 4

additional paid in capital. (increase in equity or net assets in excess of par or stated value)

Question 5

The price used to measure fair value should be adjusted for which transaction costs?

Answer 5

The costs, if any, that would be incurred to transport the asset or liability to (or from) its principal (or most advantageous) market

Question 6

impairment loss formula

Answer 6

carrying amount -FV (not discounted cash flow)

Question 7

On March 31, 20X1, the Winn company traded in an old machine that had a carrying amount of $16,800, and a fair value of $14,500. Winn paid a cash difference of $6,000 for a new machine having a total cash price of $20,500. The exchange should include recording:

Answer 7

$2,300 impairment loss.

carrying value over fair value ( 16800-14500=2300)

Question 8

proper treatment of the cost of equipment used in research and development activities that will have alternative future uses?

Answer 8

capitalized and depreciated over its estimated useful life, just like regular assets.

Question 9

quoted market prices on a stock exchange for an identical asset

Answer 9

best source of fair value, this is describes level 1 input

Question 10

market prices is the middle value of

Answer 10

1, replacement cost, 2 net realizable value, 3. nrv minus normal profit margin

Question 11

any cost involved in preparing land for its ultimate use is considered pat of the cost of land

Answer 11

including purchase price, legal fees, title insurance and net cost of demolition.

Question 12

if an exchange has commercial substance,

Answer 12

it should be valuated at fair value.

Question 13

non-monetary exchanges are usually recorded using the fair value of the assets exchanged.

Answer 13

Gains or loss is computed as follows:

FV of the asset given-book value of the asset= gain(loss)

Question 14

three exceptions exist to the fair value treatment

Answer 14

1. fv is not determinable.
   2, its an exchange transaction to facilatate sales to customers:
2. the transaction lacks commercial substance.

Question 15

commercial substance:

Answer 15

cash flows are different as a result of the exchange

Question 16

rules in recording nonmonetary exchanges

Answer 16

1, losses always recognized.

2. gains are recognized if the exchange is measure at fv.
3. if any of the three conditions for exception to fv treatment are met, use book value.

Question 17

if a transaction lacks commercial substance

Answer 17

a gain is not recognized and asset received is debited at the book value of the asset given.

Question 18

boot given is added to the value of asset given

Answer 18

boot received is deducted from the value of asset given.

Question 19

an exception to nonrecognition of gain for a transaction lacking commercial substance arises when boot is received in exchange

Answer 19

(boot received)/boot received+FV if asset received)*total gain=gain recognized. the acquired asset is recorded at book value of asset given plus the gain recognized less boot received.

Question 20

once a building is held of sale

Answer 20

it is no longer PPE and depreciated, nor record at historical costs. it will be held at net realizable value until sold.

Question 21

if the sum of estimated future cash flows is less than the carrying amount of asset,

Answer 21

an impairment loss is recognized

Question 22

if the sum of estimated future cash flows is greater than the carrying amount of asset

Answer 22

no impairment loss is recognized