Fixed Assets

Question 1

non-monetary exchange

Answer 1

recorded at fair value (unless exception exists), recognize gain and loss

if exception exists, recorded at book value, recognize loss, recognize portion gain* only if boot is received

gain = boot/(boot + FV of asset received) x total gain

asset recorded at FV - deferred gain

exceptions to FV measurement: (1) if FV is not determinable, (2) it is an exchange transaction to facilitate sales to customers, (3) transaction lacks commercial substance

Question 2

Depreciation methods

Answer 2

Straight Line = (cost - salvage) / # of years

Double-Declining balance = (cost - accum dep) x (2/# of years)

Sum-of-the-years digits = (cost - salvage) x (year/sum of years calc*) * n x (n+1)/2

Units of production = (cost - salvage) x (units produced/total estimated units)

Question 3

Interest Capitalization

Answer 3

Capitalized portion = Average accumulated expenditures during construction x interest rate x construction period to date