Test 4 Flashcards
Is Property, Plant, and Equipment tangible?
Yes
What is the acquisition cost of PP&E recorded at?
Historical cost
What are some of the costs to get an asset ready for use?
Installation, invoice price, lettering
What are NOT costs to get an asset ready for use?
Licensing, insurance, sales tax
What should be done if there is Commercial Substance?
Recognize gains/losses immediately
What should be done if there is a lack of Commercial Substance?
Recognize losses immediately
No Cash received? Defer gain - not recognized
Some cash? Recognize partial gain
What are the three methods for Depreciation?
Activity (units of production)
Straight-line “time”
Decreasing charge (sum-of-the-years digits, double-declining)
T/F Double-declining balance ignores salvage value
True (cannot depreciate beyond depreciable base)
What is the formula for Straight-line?
(Cost - Residual Value) / Useful Life
What is the formula for Units-of-Production?
(Cost - Residual Value) / Est. Total Production
= $ rate
$ rate x Actual production = Depr. Exp
What is the formula for Double-Declining Balance?
(Cost - Accumulated Depr.) x 2 / Useful Life
What is Accumulated Depreciation?
Sum of all depreciation expense per year added together (Yr 1 + Yr 2 + etc)
What is Net Book Value (NBV)?
Original acquisition cost - accumulated depreciation
What is the Recoverability Test?
Future Net Cash Flows > Carrying Amount (NBV) = no impairment
Future Net Cash Flows > Carrying Amount (NBV) = impairment
After the Recoverability Test, what happens if there is an Impairment?
Write-off from NBV to fair value
Dr. Loss on Impairment
Cr. Accumulated Depreciation
