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1Financial Reporting > Module 11 > Flashcards

Module 11 Flashcards

1
Q

What is a Fixed Asset?

A

The capitilized amount of expenditures made to acqurire tangible propery which will be used for a period of more than 1 year.

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2
Q

What is Tangible Property?

A

“Land, Buildings, equipment, or other property that physically exists

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3
Q

What are some of the costs that you include with the capitilized assets?

A

“Invoice Price, sales taxes, freight/handling, permits, installation equipment, labor/materials in install the asset. Testing.”

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4
Q

What are some of the charges you capitilized with self-constructed assets?

A

direct material, direct labor, variable overhead, and a fair share of fixed overhead.”

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5
Q

How should assets received through donation be recorded?

A

“They are recorded at fair value with a corresponding credit to revenue”

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6
Q

Can you capitalize interest that you pay for certain assets?

A

No, unless the period of time it takes to prepare the asset is significant.”

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7
Q

What is a nonmonetary exchange?

A

“A reciprocal transfer wherein the transferror has no substantial continuing involvement in the asset, and the risks and rewards of ownership are transferred”

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8
Q

How are nonmonetary exchanges typically recorded?

A

Typically at fair value of the asset exchanged.

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9
Q

How do you calculate the realized gain/loss with the FV Method?

A

you compare the FV of assets given up with the CV of Assets given up.

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10
Q

Do you calculate the loss on a nonmonetary exchange?

A

Yes, because of conservatism.”

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11
Q

When do you recognize a gain in a nonmonetary transaction?

A

“1) When you use the FV Method 2) when Boot is received you recognize a portion”

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12
Q

What is 1 of the 3 criteria that must be used to use the carrying value in a nonmonetary exchange.

A

“1)FV of both assets are unknown, 2) The exchange is done to facilitate sales, 3)the transaction lacks commercial substance.”

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13
Q

What is commercial substance?

A

“1) cash flow do not change in their risk timing and amount AND 2) do not include tax effects when considering the cash flows.

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14
Q

If the FV of the asset given, and received, is unknown. How do you record the asset?

A

You would not recognize or realize any gain/loss. . The JE is Dr. Asset Recd. Dr. A/D. Cr. Asset Given up.

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15
Q

Do you recognize a gain if there is no boot, or boot is paid in a monetary Exchange?

A

No.

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16
Q

What is the JE for a nonmonetary exchange where no boot is received?

A

Dr. Asset Recd (plug). Dr. Loss (calculated). Dr. A/D. Cr. Asset given up (HC)

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17
Q

What is the JE for a nonmonetary exchange where boot is paid?

A

Dr. Asset Recd (plug). Dr. Loss (calculateD). Dr. A/D. Cr. Asset given (HC) Cr. Cash”

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18
Q

How do you calculate the gain for a nonmonetary exchange where boot is received?

A

realized gain * (FV of Boot / (FV of Boot and Asset Received))

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19
Q

What is the JE for a nonmonetary exchange where boot is received? “

A

Dr. Cash Dr. Asset Recd (plug). Dr. Loss (calculated). Dr. A/D. Cr. Asset given (HC) Cr. Gain.”

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20
Q

What is the major exception for when boot is received?

A

If boot is 25% or more of the FV of the exchange you recognize the entire gain.

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21
Q

What is a basket purchase?

A

It is where you recognize a group of assets as a single asset

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22
Q

How do you allocate costs in a basket purchase?

A

costs of all assets acquired * (Market vlaue of 1 / market value of all assets acquired)

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23
Q

What are capital expenditures? “

A

not normal, recurring expenses, they benefit the operations of more than one period. “

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24
Q

What are Revenue expendires?

A

“normal recurring expenditures. However some expenditures that meet the test for capital expenditures are expensedbecause they are immaterial”

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25
Q

What are the 3 types of capital expenditures?

A

Additions, betterments, or major repairs

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26
Q

What in a addition?

A

“Extensions, enlargements, or expansions made to an existing asset”

27
Q

How do you treat an addition?

A

Dr. Asset

28
Q

What is a betterment?

A

“repairs done to make an asset more productive, efficient; however it does not extend useful life?”

29
Q

What is the JE for a betterment?sh

A

Dr. Asset. Dr. Ca

30
Q

What is a Major repair?

A

Non reoccuring large expenditure that extends the life of an asset.

31
Q

What is the JE for a Major repair?

A

Dr. A/D Credit Cash

32
Q

How do you treat a revenue expenditure?

A

Expense as incurred.

33
Q

What is Depreciation?

A

The annual charge to Income for assets during the period, non-cash expense

34
Q

What is the object of depreciation?

A

To match costs with revenues.

35
Q

What is the depreciation base?

A

The cost less the salvage value. This is the max amount of depreciation you can take.

36
Q

What typle of depreciation ignores the salvage value?

A

Declining Balance

37
Q

What are some of the depreciation methods?

A

Strait-line, declining balance, sum of yrs digits,

38
Q

How do you calculate straight-line depreciation?

A

(HC-SV) / useful life

39
Q

How do you calculate decling balance?

A

(1/life) / (HC-AD)

40
Q

How do you calculate Double decling blance?

A

((1/life) *2) / (HC-AD)

41
Q

What is Composite (group) depreciation?

A

You average the service life of a number of property units and depreciates the group as if it were a single unit.

42
Q

What is a Homogeneous Group?

A

a group of similar assets.

43
Q

What is a Heterogeneous Group?

A

a group of dissimilar assets.

44
Q

Are gains/losses recognized in composite depreciation?

A

No gain/loss is recognized in composite depreciatioin.

45
Q

How is a change in depreciation treated for accounting purposes?

A

It is a change in accounting estimates.

46
Q

What is fractional year depreciation?

A

Stipulates that there are many conventions for depreciating midyear asset acquisitions. Whole years (full depreciation in year 1, none at disposal) 1/2 years. (1/2 year at 1st and last year) or depreciate to nearest whole month.

47
Q

How can you tell if an asset needs to be impared for a Tangible asset held for use?

A

If the CV is greater than the nondiscounted future Cash Flows.

48
Q

How can you measure the impairment loss for a tangible asset held for use?

A

Compare the CV to the FV and then Dr. Impairment loss, Cr. A/D. You cannot write-up again if it recovers.

49
Q

How can you tell if an asset needs to be impared for a Tangible asset held for sale?

A

You write down the asset as a loss

50
Q

How can you measure the impairment loss for a tangible asset held for sale?

A

You compare the CV to the FV-costs to sell. You can write the asset back-up if it recoveres to the CV.

51
Q

How can you tell if an asset needs to be impared for an intangible asset for a finite life?

A

You amoritize and check if the CV is greater than the nondiscounted future CV’s

52
Q

How can you measure the impairment for an intangible asset for a finite or indefinite life asset?

A

Compare the CV to the FV.

53
Q

Do you amoritize intangible assets that have an indefinite life?

A

No, no amortization is allowed.

54
Q

Can you write-up an intangible asset that has an indefinite life?

A

No.

55
Q

What is the 2 step test for determining if you have an impairment for goodwill

A

1st. Make sure the CV is greater than zero and the CV is greater than the FV then do step 2. Step 2. test the CV of goodwill alone, and see if it is greater than the FV GW alone.. If it passes it is impaired

56
Q

How do you determine the amount of the impairment?

A

You compare the Implied FV of GW to the FV of entire unit - (FV of unit - Goodwill)

57
Q

What are treated as capitalizeble costs for Software developed for sale?

A

The costs incurred from Tech Feasibility to market feasiblity

58
Q

What are treated as capitalizable costs for software developed for internal use?

A

Costs incurred from probable completion to implementation.

59
Q

What costs do you capitilize in a patent filing?

A

filing fees, attorneys to help file’s fees, sucessful defense of a patent challenge.

60
Q

What types of R & D costs do you capitilize?

A

New technoligies, new Knowledges, Application of new research findings, Reformation of a process, and the prototype of model.

61
Q

Items that are not R & D are items such like?

A

commercial property, commercial productions, seasonal, routine.

62
Q

At what amount should software be valued on the balance sheet?

A

It should be valued at the lower of its unamoritized cost or its net realizable value

62
Q

Did not study IFRS. Need to catch this up/

A

Study, Study, Study

1Financial Reporting (21 decks)

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