Exam 9: Reporting and Analyzing Long-Lived Assets

Under IFRS, companies must account for their property, plant, and equipment using the revaluation model, where depreciable assets are revalued upward to their fair values.

All research costs should be capitalized when incurred.

Intangible assets

Jemima Ltd purchased factory equipment for $200,000, and estimated that the equipment will have a $20,000 residual value at the end of its estimated 5-year useful life. If Jemima uses the double diminishing-balance method of depreciation, the depreciation expense for the second year after purchase would be

Using the units-of-production method of depreciation for equipment will generally result in more depreciation expense being recorded over the life of the asset than if the straight-line method had been used.

In recording the acquisition cost of an entire business

Under a finance lease, both the leased asset and the related lease obligation are shown on the statement of financial position.

Which of the following statements concerning research and development costs is not true?

Equipment that cost of $180,000 has an estimated residual value of $15,000 and an estimated useful life of 4 years or 25,000 hours. Using the units-of-production method, the depreciation expense for the first year, during which the machine was used 3,300 hours, would be

On July 1, 2012, Arvolo Corporation purchased a copyright for $90,000. It is estimated that the copyright will have a useful life of 5 years with no residual value. The amount of Amortization Expense recognized for the year 2012 would be

An asset that cannot be sold separately in the market place is

If an acquired franchise or licence is for an indefinite time period, then the cost of the asset should not be amortized.

A tangible asset must be fully depreciated before it can be removed from the books.

Intangible assets involve rights, privileges, and/or competitive advantages that result from ownership of identifiable assets that do not possess physical substance.

A change in the estimated residual value of property, plant, and equipment requires a restatement of prior years' depreciation.

A company purchased land for $120,000 cash; $7,000 was spent to demolish an old building on the land before construction of a new building could start; and $1,500 was received for material salvaged from the old building. The cost of the land would be recorded at

A loss on disposal results if the cash proceeds received from the asset sale are less than the asset's carrying amount.

Recording depreciation on equipment affects both the statement of financial position and the income statement.

Which of the following should not be classified as property, plant and equipment?

If a company wants to increase its return on assets, it should not