Exam 9: Reporting and Interpreting Liabilities

A company purchased equipment for $800,000 and has depreciated it for the past 5 years when its original life was estimated to be 10 years with a $200,000 residual value. The equipment's utility to the company has declined because they expect it to generate a net cash flow over the remaining years of $200,000 from its operation. If the asset has been impaired, how much will be recorded as a loss in the current year?

All of the following are examples of intangible assets except:

When using the declining-balance method of depreciation, a declining percentage is applied to a constant book value.

The cost allocation method utilized affects the amount of net property, plant, and equipment that is used in the computation of the fixed asset turnover ratio.

When assets are disposed of through sale or abandonment, we record additional depreciation since the last adjustment was made.

When may a company include interest costs as part of the cost of the asset?

Which of the following would not be included in the acquisition cost of a building?

Jeffers Inc. purchased a warehouse and the land upon which it was located. The total price was $450,000. The land was appraised for $180,000 while the warehouse was appraised for $360,000. What account balances should Jeffers show in its general ledger?

Ordinary repairs and maintenance of operational assets should be capitalized and depreciated over the remaining useful life of the related asset.

A loss on disposal of an asset is reported in the financial statements

Bangor Industries purchased a car for $22,000 on January 1, 20A. The car had an estimated useful life of 80,000 kilometres and an estimated residual value of $4,000. In the second year of ownership (20B), the car was driven 25,000 kilometres. Using the units-of-production method, what was the amount of depreciation expense for 20B?

All research costs should be capitalized when incurred.

Behren Company purchased a building and the parcel of land on which the building was located for a total purchase price of $810,000. To record the acquisition, the account, Building, should be debited for $810,000.

The cost of a finite life intangible asset is not amortized, but the asset is tested for impairment.

The straight-line depreciation method assumes an approximately equal decline in the economic usefulness of the asset each period and provides greater tax benefits early in the useful life of the asset.

If a building is sold at a gain, the gain on disposal should be reported in the non-operating section of the cash flow statement.

With respect to depreciation policies, the principle of consistency means: