Exam 11: Property, Plant, and Equipment and Intangible Assets: Utilization and Disposition

Biological assets are valued at fair value less estimated costs to sell under International Financial Reporting Standards (IFRS).

On January 1, 2018, Morrow Inc. purchased a spooler at a cost of $40,000. The equipment is expected to last eight years and have a residual value of $4,000. During its eight-year life, the equipment is expected to produce 250,000 units of product. In 2018 and 2019, 42,000 and 76,000 units respectively were produced. -Required: Compute depreciation for 2018 and 2019 and the book value of the spooler at December 31, 2018 and 2019, assuming the straight-line method is used.

In its 2018 annual report to shareholders, Custard Cup Inc. included the following note: Note 4 Property, Plant, and Equipment Property, plant, and equipment (PPE) at December 31, 2018, and December 31, 2017, consisted of the following: Depreciation expense for property, plant and equipment was $26 million in 2018. Required: Compute the Accumulated depreciation on PPE disposed of by Custard Cup during 2018.

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Rearrangements

Briefly explain the following statement. Depreciation is a process of cost allocation, not valuation.

Briefly discuss why straight-line is the most common depreciation method used in practice.

Synthetic Fuels Corporation prepares its financial statements according to IFRS. On June 30, 2018, the company purchased equipment for $350,000. The equipment is expected to have a seven-year useful life with no residual value. Synthetic uses the straight-line depreciation method for all depreciable assets. On December 31, 2018, the end of the company's fiscal year, Synthetic chooses to revalue the machinery to its fair value of $299,000. Required: 1. Calculate depreciation for 2018. 2. Prepare the journal entry at the end of 2018 to record the revaluation of the equipment. 3. Calculate depreciation for 2019. 4. Repeat requirement 2 assuming that the fair value of the equipment at the end of 2018 is $338,000.

Canliss Mining uses the retirement method to determine depreciation on its office equipment. During 2016, its first year of operations, office equipment was purchased at a cost of $14,000. Useful life of the equipment averages four years and no salvage value is anticipated. In 2018, equipment costing $5,000 was sold for $600 and replaced with new equipment costing $6,000. Canliss would record 2018 depreciation of:

Listed below are 10 terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the correct term. -Double-declining balance

Cutter Enterprises purchased equipment for $72,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $6,000. - Using the double-declining balance method, depreciation for 2018 and the book value at December 31, 2018, would be:

Listed below are five terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term. -Percentage depletion

Listed below are 10 terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the correct term. -Amortization

Adding a refrigeration unit to a delivery truck that previously did not have this capability is an example of:

On April 1, 2018, Parks Co. purchased machinery at a cost of $42,000. The machinery is expected to last 10 years and to have a residual value of $6,000. -Compute depreciation for 2018 and 2019 and the book value of the machinery at December 31, 2018 and 2019, assuming double-declining balance method is used.

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Accelerated methods

Cutter Enterprises purchased equipment for $72,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $6,000. - Using the sum-of-the-years'-digits method, depreciation for 2019 and book value at December 31, 2019, would be:

Under group and composite depreciation methods, gains and losses on the disposal of individual assets need not be computed.

A change in the estimated useful life and residual value of machinery in the current year is handled as:

Assuming an asset is used evenly over a four-year service life, which method of depreciation will always result in the largest amount of depreciation in the first year?

El Dorado Foods Inc. owns a chain of specialty stores in the Pacific Northwest. Recently, four of the stores have experienced declining profits due to market saturation in the area. As a result, management gathered data about possible impairment of the assets of the stores. The information gathered was as follows: Book value: $17.5 million Fair value: $14.9 million Undiscounted sum of future cash flows: $16.5 million -Required: Determine the amount, if any, of the impairment loss that El Dorado must recognize on these assets.