Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

FAR > Fixed Assets > Flashcards

Fixed Assets Flashcards

1
Q

How are Research and Development costs recorded?

A

They are expensed in the period incurred and are not capitalized.

Equipment purchased for current & future periods should have the depreciation for the current period captured as R&D Expense.

DM & DL for prototypes are expensed and not capitalized.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Which expenditures are included in the cost of a building?

A

All expenditures to get the building into working condition are ready for use

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Which expenditures are included in the cost of land?

A

All expenditures to get the land ready for its intended use:

Title & County Fees

Clearing of Land - Dirt work etc.

Demolition and removal of old buildings (minus any scrap or salvage)

Note: capitalized land costs are not depreciated

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

How is donated property recorded by the donee?

A

Recorded at Fair Value + costs associated with getting the property into working condition for its designed purpose

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

How is donation of property recorded by the donor?

A

Recorded at Fair Value of asset given up.

Gain or Loss is recorded.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

How are legal fees to defend a patent amortized?

A

If the patent is SUCCESSFULLY defended the legal fees are amortized over the patent’s economic life.

If unsuccessful they are expensed immediately.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Generally, what costs are capitalized for tangible property?

A

All costs necessary to get the asset to the work site and to prepare it for use

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is capitalized for a self-constructed fixed asset?

A

Direct materials, direct labor, variable overhead, and fixed overhead

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

How are assets received through donation valued?

A

At fair value unless fair value cannot be determined, then book value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is required to capitalize interest costs?

A

A period of time for the asset to be prepared to be used.

Interest is only accrued until the asset is placed in use.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Why is it very important to capitalize costs associated with land?

A

Because land nor the costs associated with land are depreciated

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What two values are typically given for interest and which one should be taken?

A

Average and Actual.

The lower of the two should be taken due to the Conservatism Principle.

Remember to only consider the interest accumulated on the expended portion of the loan. Interest on the un-expended portion of the loan must not be capitalized.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

How do you calculate Average Interest?

A

(Beginning Year Cost + Ending Year Cost)/2 = Weighted Average Accumulated Expenditures

Weighted Avg Accum Exp/Rate = Average Interest

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are the three exception criteria for non-monetary asset exchange?

A
  1. Fair value of asset received and asset given up are both unknown
  2. The exchange transaction is done to facilitate sales
  3. The transaction lacks commercial substance because:
    a. Cash flows do NOT change in their risk, timing and amount
    b. Do not include tax effects when considering the cash flows
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

If the non-monetary exchange does not meet any of the exception criteria, what happens?

A
  1. Use the Fair Value Method
  2. Calculate the realized gain/loss:
    FV of assets Given up vs CV of Assets given up
    (if you do knot know the FV of assets given up, then use the FV of the assets received)
  3. Recognize realized loss because of conservatism
    Recognize realized gain because the exception criteria are not met
4. Asset Rec'd (FV)    DR
    Loss (Calculated)   DR
    Accum Dep             DR
               Asset Given (HC)   CR
               Gain (Calc)            CR
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

If the non-monetary exchange meets exception criteria (1), what happens?

A
  1. Use the CV Method
  2. Do not calculate realized gain/loss
  3. No gain or loss is recognized as everything is done at CV
  4. Asset Rec’d (PLUG) DR
    Accum Dep DR
    Asset Given (HC) CR
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

If the non-monetary exchange meets exception (2) or (3), and no boot is paid/received?

A
  1. Calculate the realized Gain/Loss
    FV of Assets Given Up vs CV of Assets Given Up
    (If you do not know the FV of the assets given up, use the FV of the assets rec’d)
  2. Recognize the realized Loss
    Do not recognize realized gain
  3. Asset Rec’d (Plug) DR
    Loss (Calc) DR
    Accum Dep DR
    Asset Given (HC) CR
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

If the non-monetary exchange meets exception (2) or (3), and Boot is Paid?

A
  1. Calculate the realized Gain/Loss
    FV of Assets Given Up vs CV of Assets Given Up
    (If you do not know the FV of assets given up, use FV of assets rec’d)
  2. Recognize realized loss
    Do not recognize realized gain
3. Asset Rec'd (Plug)      DR
    Loss (Calc)                 DR
    Accum Dep                 DR
             Asset Given (HC)         CR
             Cash                            CR
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

If the non-monetary exchange meets exception (2) or (3), and Boot is received?

A
  1. Calculate the realized gain/loss
    FV of Assets Given up vs CV of Assets Given Up
    (If you do not know the FV of assets given u, use the FV of the assets received)
  2. Recognize realized loss
    Recognize some realized gain pro-rata =
    Realized Gain x (FV of Boot/FV of Boot + Asset Rec’d)
3. Cash                            DR
    Asset Rec'd (Plug)       DR
    Loss (Calc)                  DR
    Accum Dep                  DR
               Asset Given (HC)       CR
               Gain (Calc)                CR
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

When does a non-monetary exchange become a monetary exchange?

A

When the Boot is 25% or more of the FV of the exchange

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

For a non-monetary exchange, if exception (3) is met, what happens to the non-recognized gain?

A

It is recognized though lower depreciation expense over the life of the Asset Rec’d because the un-recognized gain offsets the Asset Value of the Asset Rec’d

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What are the three types of Capital Expenditures?

A
  1. Addition
  2. Betterment
  3. Major Repairs
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Of the Capital Expenditures, Addition is?

A

An addition to a capitalized asset

Asset DR
Cash CR

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Of the Capital Expenditures, Betterment is?

A
  1. Something that makes a capitalized asset more productive, more efficient but does not extend the useful life of the asset

Asset DR
Cash CR

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Of the Capital Expenditures, Major Repairs is?

A

Something that extends the life of a capitalized asset

Accum Dep DR
Cash CR

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

How is the double declining balance method figured?

A

1/Life x 2 = DDB% (Double Declining Balance)

DDB% * (HC-AD) = Depr for that year

*NOTE: Do not take into account Salvage Value when calculating this

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Can the Decling Balance Method be another factor other than 2?

A

Yes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

How is the Sum of the Years Digit (SYD) Method figured?

A
  1. Take the sum of the years of the useful life and add them together
    EX: An asset with 5 years of useful life would be 5+4+3+2+1 = 15
2. Year 1 - Take 5/15 x (HC - SV)
    Year 2 - Take 4/15 x (HC - SV)
    Year 3 - Take 3/15 x (HC - SV)
    Year 2 - Take 2/15 x (HC - SV)
    Year 1 - Take 1/15 x (HC - SV)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

What capital expenditures are treated like revenue expenditures?

A

Ones that are immaterial

EX: Less than $50

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Must depreciation be allocated in a systematic & rational manner?

A

Yes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

When are the accelerated methods of depreciation acceptable?

A
  1. Increased productivity when the asset is new
  2. Increasing maintenance charges with age
  3. Risk of obsolescence
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

How is Physical Use Depreciation calculated?

A

Depreciation base is usually based on machine hours or output

(Current Activity/Output/Total Expected Activity/Output) x Depreciation Base

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

How is composite or group depreciation calculated?

A

It averages the service life of a number of property units and depreciates the group as if they were a single unit

Sum of Annual SL Depreciation of the individual assets/Total Asset Cost

EX: UPS depreciating a fleet of delivery trucks

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Homogeneous or Group means?

A

Similar

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Heterogeneous or Composite means?

A

Dissimilar

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

How is a Disposal recorded for a Group/Composite depreciated asset?

A

HC = 5
Cash Rec’d = 3

Cash 3
A/D 2
Asset 5

The Gain/Loss is recorded in the A/D account

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

What are the three Methods of Fractional Year Depreciation?

A
  1. A Whole year’s Depr in the year of acquisition and none in the year of disposal
  2. One-half year’s depreciation in the year of acquisition and year of disposal
  3. Depreciation to nearest whole month in both year of acquisition & year of disposal

*NOTE: Exam will usually specify which method

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

Where & How is disposal recorded for a normal asset?

A
  1. Income from Continuing Operations
Cash         DR
A/D           DR
Loss         DR
        Old Asset (HC)    CR
        Gain                     CR
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

Would an asset bought with the intention of holding for sale be depreciated?

A

No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

Can losses on fixed assets held for sale be recovered?

A

Yes, but only to the amount of the original carrying value

41
Q

How are Impairment Losses recorded?

A

Impairment Loss DR

Accumulated Depr CR

42
Q

When determining Fair Value, do you use In-Use or In-Exchange?

A

Whichever is higher

43
Q

When do you assume SL method?

A

When no method is given in the question

44
Q

What factors may indicate impairment?

A
  1. Decline in demand/ability to keep up with technology/competition
  2. Decline in Fair Value or change in the way the asset is used
  3. Current or projected net operating loss or negative cash flows
  4. Unfavorable changes in the regulatory, legal or business environment
45
Q

What is the Held for Use Test for Impairment for Tangible Assets?

A

If the Carrying Value > Nondiscounted future cash flows?

46
Q

How is a Held for Use asset measured for an Impairment loss?

A

Carrying Value vs Fair Value

Loss goes into Operating Expenses for SEC Registerants
Loss goes into Other Expenses/Losses for Private companies

47
Q

Can Asset be written-up at a later date if Impairment no longer applies?

A

No - unless it is a held for sale fixed asset

48
Q

Is there an Impairment Test for Held for Sale assets?

A

No

49
Q

How is the Impairment Loss measured on a Held for Sale asset?

A

Carrying Value vs NRV (Fair Value - Selling Costs)

Loss goes into Discontinued Items for material discontinued items
Loss goes into I for immaterial items

50
Q

What is the Impairment Test for Intangible Assets (Excluding Goodwill) with a Finite Life?

A

If Carrying Value > Nondiscounted future Cash Flows

51
Q

What is the Measurement for Impairment Loss for Intangibles (excluding Goodwill) with a Finite Life?

A

Carrying Value vs Fair Value

Loss goes into D for material items
Loss goes into I for all others

*NOTE: Cannot write up again

52
Q

What is the Impairment Test for Intangible Assets (Excluding Goodwill) with a infinite Life?

A

Carrying Value vs Fair Value

53
Q

What is the Measurement for Impairment Loss for Intangibles (excluding Goodwill) with a Infinite Life?

A

Carrying Value vs Fair Value

Loss goes into D for material items
Loss goes into I for all others

Don’t AMORTIZE as no amortization was done to begin with

Cannot write up again

54
Q

Is Goodwill amortized or can GW be written up?

A

No

55
Q

What is Goodwill as it is recognized in the accounting records?

A

The excess of the acquisition cost of what you bought over the fair market value of the net identifiable assets

56
Q

How is the Test for Impairment for Goodwill calculated?

A

Step 1 - If CV of Reporting Unit with GW > ZERO and CV of RU > FV of RU
Then GW may be imparied - got to 2

Step 2 - If CV of GW alone > Implied FV of GW alone, then GW is impaired

Measure the Impairment Loss as the difference between CV of GW alone and Implied FV of GW alone

57
Q

How is Implied FV of Goodwill calculated?

A

FV of entire unit - FV of all items except GW

58
Q

Non Research & Development Terms

A

Commercial, Seasonal, & Routine

59
Q

Does US GAAP have biological assets?

A

No

60
Q

How does IFRS require depreciation to be calculated for PPE if the parts have separate useful lifes?

A

Each separate part much be depreciated

61
Q

How is Goodwill Qualitatively measured?

A

If it is more likely than not (>50%) that the FV is less than it’s Carrying Value

62
Q

How are start-up (including organization) costs recorded?

A

As period costs

63
Q

How is Net Realizable Value (NRV) calculated?

A

Fair Value (Selling Price) - Selling Costs

64
Q

What costs are capitalized for Software Developed for Sale or Lease?

A

All costs after Tech Feasability but before Market Feasability & General Release

65
Q

What costs are capitalized for Software Developed for Internal Use?

A

Costs during the Development State which occurs:

  1. After completion is probably
  2. After Management Commits Funds
66
Q

How is a Development Staged Enterprise defined?

A
  1. Principle operations have not commenced

2. Principal operations have commenced but there has been no significant revenue

67
Q

How should a Development Stage Enterprise do reporting?

A

Balance Sheet - Show cumulative losses since inception under SHE

Income & Cash Flow Statment - Should include both period and cumulative amounts since inception

FS must be identified as Development Stage Enterprise

The first fiscal year after the developmental stage, a disclosure is required stating that the pror period was a developmental stage

68
Q

IFRS Depreciation Methods?

A
  1. Straight Line
  2. Declining Balance
  3. Units of Production/Activity
69
Q

Two models for valuing PPE & Intangible Assets under IFRS?

A
  1. Cost Model
  2. Revaluation Model

NOTE: Investment Property can be valued using Cost or Fair Value models

70
Q

How is value under the Cost Model calculated under IFRS?

A

Cost - AD - Accum Impairment = Carrying Value

71
Q

How is value under the Revaluation Model calculated under IFRS?

A

Fair Value @ Revaluation Date - AD after Revaluation - Accum Impairment after Revaluation = Carrying Value

Revaluation JE
Asset or AD DR
Revalution Surplus CR

72
Q

Where is Revlaution Surplus located under IFRS?

A

Other Comprehensive Income

73
Q

Where is Gain/Loss on Disposal and the Revaluation Surplus closed to under IFRS?

A

Gain/Loss on Disposal -> Profit

Revaluation Surplus -> RE

74
Q

Is there a rule regarding the frequency or date of Revaluation under IFRS?

A

No

75
Q

What does Class of Assets have to do with valuation Model under IFRS?

A

Different valuation models can be used for different classes of assets, but not different assets within the same class

76
Q

IFRS examples of Identifieable Intangible Assets

A 
Patents
Copyrights
Brand names
Customer Lists
Trade Names
Computer Software
Formulae
Licenses
Franchises
77
Q

IFRS examples of Unidentifiable Intangible Assets

A

Goodwill

78
Q

Under IFRS, how are Intangible items recorded?

A
  1. If Acquired & Identifiable = Cost
  2. If Acquired in a business combination & Identifiable, then FV separate from GW
  3. If Acquired in a business combination & Unidentifiable, then Plug GW
  4. If internally developed & Identifiable, then cost of development (not R&D)
79
Q

Under IFRS, how is Intangible Asset carrying value calculated under the Cost Model?

A
  1. Finite: Cost - Accum Amort - Accum Impairment = CV

Indefinite: Cost - Accum Impairment = CV
*Indefinite life must be tested annually for impairment at reporting date

80
Q

Under IFRS, how is Intangible Asset value calculated under the Revaluation Model?

A

FINITE: FV from active market @ Revaluation Date - Accum Amort after Revaluation - Accum Impairment after Revaluation = CV

INDEFINITE: FV from active market @ Revaluation Date - Accum Impairment after Revaluation = CV

81
Q

What is IFRS Investment Property?

A
  1. Property held to earn rentals

2. Property held to earn capital appreciation

82
Q

What cannot be done with IFRS Investment Property?

A

Cannot be used in production, supply, administrative, or ordinary sales

83
Q

IFRS Investment Property is recorded how?

A

At cost

84
Q

How is IFRS Investment Property value calculated under the Cost Model?

A

Cost - AD - Accum Impairment = CV

*Must disclose FV

85
Q

How is IFRS Investment Property value calculated under the Fair Value Model?

A

Cost Model or FV Model
Fair Value = Carrying Value
*No Depreciation is recorded
*Gains/Losses in changing FV are recorded in Profit/Loss

85
Q

If cash is received on the disposal of an asset, what amount is the asset account reduced by?

A

The amount of cash received minus any gains

86
Q

Under IFRS, how may development costs be capitalized?

A

Under restrictive conditions - must meet six criteria

87
Q

Under IFRS, recoverable amount is defined as?

A

The greater of net selling price or value in use

88
Q

If Land & Building are purchased together, the value of each must be based on what?

A

Relative Market Value

EX: Use of property valuation percentage x price paid

89
Q

Capital Leases must be recorded how?

A

Present Value of the lease payment.

However, the leased assets cannot be recorded at an amount greater than the FMV

The Leased payment should be discounted at the lessor of the Lessee’s incremental borrowing rate or the Lessor’s Implicit rate (if known by the Lessee)

90
Q

Which depreciation method is computed the same as depletion?

A

Productive-Output Method

91
Q

Future Cash Flows from an Asset when determining Impairment include?

A

Future Incoming Cash Flows
Future Outgoing Cash Flows
Future Incoming Cash Flows expected from sale of Asset

92
Q

Start up costs include?

A
  1. Onetime activities related to opening a facility
  2. Introducing a new product/service
  3. Conducting business in a new territory
93
Q

Are patents amortized over legal or useful life?

A

Legal or useful life - whichever is shorter.

94
Q

How are leasehold improvements capitalized?

A

Over the course of the Lease Life or Useful life - whichever is shorter.

95
Q

If a note payable is incurred while acquiring a capitalized asset, what cost is capitalized?

A

The present value of the note payable plus any down payments.

96
Q

The test for recoverability of operational assets under ASC 360 uses:

A

Undiscounted cash flows less related outflows

97
Q

The test for recoverability of operational assets under ASC 360 uses:

A

Undiscounted cash flows less related outflows

98
Q

Can Goodwill be increased above it’s carrying value?

A

No

FAR (28 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions