WOOO II Flashcards
WHEN would an exchange of non-monetary assets surrendered be measured on the basis of reported amounts?
WHEN the transaction lacks commercial substance
IT would be generally recorded at book value
i.e. No Substance = transaction is measured on the basis of reported amounts
Under what circumstance would an exchange of nonmonetary assets surrendered be measured from amounts or timing of future cash flows?
WHEN the transaction has commercial substance
WHAT happens when a transaction lacks commercial substance but involves monetary consideration that is equal to 25% of the total consideration?
IT will be treated as a monetary transaction
i.e. it is reported by recognizing a gain or loss if item exchanged at fair value
WHAT would be considered associated “costs” when handling a Land transaction?
- Legal fees incurred in negotiating and documenting the purchase
- Demolition
- Engineering fees
i. e. Any costs necessary to prepare the land for construction or intended use
WHEN is a Long-lived Asset Impaired?
WHEN its carrying value exceeds its fair value
NOTE: A threat of obsolescence also reduces the value of the asset
Fill in the Blank.
An impairment of goodwill by the business segment in which the asset is used is an __A___ that the business segment is not as __B___ as anticipated
A. indication
B. profitable
True or False.
If an added purchase did not increase the life of a piece of equipment but it did make it more efficient it should NOT be added.
False.
As long as these additional purchases were necessary to prepare the equipment for its “intended use,” it SHOULD be added to the cost
WHAT happens to the reporting of an Property Asset when;
- IT is actively marketed for sale, and the entity expects to complete the sale in less than a year?
(1) It will be reclassified as an asset held for sale
(2) It will be classified as a current asset
(3) It will no longer be depreciated
WHAT happens when an asset is over-stated because the entity failed to record the depreciation expense for a period (i.e. annual depreciation)?
THE Normal amount of depreciation would be recorded in the following year; and
- The overstatement would be reversed in this year to correct the error
WHEN is an entity required to evaluate an Asset for Impairment?
ONLY when event or circumstances indicate that the carrying value will NOT be recovered during the asset’s remaining life
HOW are purchase prices allocated among assets when the assets are acquired in a lump sum purchase?
According to the assets relative Fair Market Values
e.g. Purchase price is $200,000; Total asset Fair Value is $250,000; the Relative F.V. = $200,000 divided by $250,000 = 80%
You would take 80% F.V. of all of the Assets purchased
WHAT is the Interest that may be capitalized on a qualifying asset?
THE avoidable interest, which is the interest that could have been avoided if the qualifying asset had not been acquired
WHAT is the maximum amount of interest that may be capitalized under GAAP?
THE weighted average cumulative expenditures for the year
HOW do you calculate the Weighted Average Accumulated Expenditure?
Take your Expenditure Amount(s) and Multiply it by the portion of the year outstanding (e.g. Bought asset in January, then you would just use all of the year – 12 out of 12 months)
HOW would you calculate your Capitalized Interest?
Multiply the appropriate interest rate times the weighted average accumulated
NOTE: The amount of interest capitalized cannot be greater than actual interest
