Exam 10: Applications of Fair Value to Non-Current Assets

Stay Dry Raincoats uses three different machines (A, B, and C)to manufacture raincoats. These machines are considered to be a cash generating unit (CGU). Due to climate change and changes in consumer preferences, demand for raincoats has declined in recent years. The following information is relevant to the evaluation of impairment. Required: Determine the amount of impairment loss that should be recorded for the cash generating unit and for each of the three machines.

Wallace Inc wishes to use the revaluation model for this property: The fair value for the property is $60,000. Assuming this is the first year of using the revaluation model, what amount would be booked to the "other comprehensive income" account if Wallace chooses to use the proportional method to record the revaluation?

Explain how non-current assets that are held for sale should be accounted for.

Grover Inc wishes to use the revaluation model for this property: The fair value for the property is $100,000. What amount would be booked to the "accumulated depreciation" account if Grover chooses to use the proportional method to record the revaluation?

Which of the following is correct with respect to the "fair value model"?

Wilson Inc wishes to use the revaluation model for this property: The fair value for the property is $40,000. Assuming this is the first year of using the revaluation model, which of the following amounts will be booked?

Wilson Inc wishes to use the revaluation model for this property: The fair value for the property is $40,000. Using straight-line depreciation and assuming that the property has a remaining depreciable life of 5 years, how much would be booked to accumulated depreciation in the year subsequent to the revaluation?

Which statement is not correct?

How is a revaluation loss on non-current assets accounted for?

Which of the following is correct with respect to the "reversal of impairment loss"?

What impairment, if any, exists on this product line?

Explain why non-current assets held for sale are valued at fair value less costs to sell rather than at their value in use.

How should a discontinued operation be presented in the financial statements?

What information is not necessary about discontinued operations in the statement of comprehensive income or in the notes?

On December 31, 2012, CA Inc. had a machine with an original cost of $20,000 and accumulated depreciation of $5,000. An impairment test on that date indicated that the machine had a value in use of $12,000 and a fair value of $10,000 (no disposal costs). What impairment loss is recorded for fiscal 2012?

Compare the proportional method and the elimination method for recording the revaluation entry. Which method is preferred?

Wallace Inc wishes to use the revaluation model for this property: The fair value for the property is $60,000. Using straight-line depreciation and assuming that the property has a remaining depreciable life of 5 years, how much would be booked to accumulated depreciation in the year subsequent to the revaluation?

What is "fair value less costs to sell"?

Grover Inc wishes to use the revaluation model for this property: The fair value for the property is $140,000. Assuming this is the first year of using the revaluation model, what amount would be booked to profit and loss if Grover chooses to use the elimination method to record the revaluation?

Which statement is not correct?