Sale + Impairment of PP+E

Question 1

If the proceeds from a sale of PPE are greater than the book value of the asset, then it is considered a _____.

Answer 1

gain

Question 2

If the proceeds from a sale of PPE are less than the book value of the asset, then it is considered a _____.

Answer 2

loss

Question 3

What are the steps to record a sale of PPE?

Answer 3

1. Update your depreciation to the date of the sale.
2. Record the sale or disposal.
   - record any cash collected at the sale
   - cancel out the accumulated depreciation and the original price of the asset
   - record any loss or gain

Question 4

As a rule of thumb, when recording, treat a gain like a _______.

Answer 4

revenue

Question 5

As a rule of thumb, when recording, treat a loss like an _______.

Answer 5

expense

Question 6

How to calculate the gain or loss from a sale of PPE?

Answer 6

proceeds from the sale - book value

Question 7

If there is impairment, the company recognizes ______ on assets.

Answer 7

losses

Question 8

After an impairment write-down, depreciation charges are ________.

Answer 8

reduced

Question 9

When recording an asset impairment, the asset is reduced by the amount of the ______.

Answer 9

loss

Question 10

What accounts are impacted by an impairment, and how? (think journal entry)

Answer 10

credit non cash assets (decrease)
debit expenses (increase)
net income decreases
retained earnings decrease

Question 11

Under US GAAP, can you write up again after performing a write down?

Answer 11

NOPE

Question 12

Material asset impairments must be described in the ___________.

Answer 12

footnotes