Exam 11: Property, plant, and Equipment and Intangible Assets: Utilization and Impairment

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

Component depreciation,required under International Financial Reporting Standards (IFRS),is allowed but rarely used by U.S.companies.

The three factors in cost allocation of a depreciable asset are service life,allocation base,and allocation method.

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

Canliss Mining uses the retirement method to determine depreciation on its office equipment.During 2014,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 2016,equipment costing $5,000 was sold for $600 and replaced with new equipment costing $6,000.Canliss would record 2016 depreciation of:

The table below contains data on depreciation for equipment. Required: Fill in the missing data in the table.

Depreciation,depletion,and amortization:

Using the double-declining balance method,depreciation for 2017 would be:

Required: Compute depreciation for 2016 and 2017 and the book value of the drill press at December 31,2016 and 2017,assuming the units-of-production method is used.

Accounting for a change in the estimated service life of equipment:

Fryer Inc.owns equipment for which it paid $90 million.At the end of 2016,it had accumulated depreciation on the equipment of $27 million.Due to adverse economic conditions,Fryer's management determined that it should assess whether an impairment loss should be recognized for the equipment.The estimated undiscounted future cash flows to be provided by the equipment total $60 million,and the equipment's fair value at that point is $40 million.Under these circumstances,Fryer:

Using the straight-line method,the book value at December 31,2016,would be:

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

Using the double-declining balance method,depreciation for 2016 and the book value at December 31,2016,would be:

Required: Compute depreciation for 2016 and 2017 and the book value of the spooler at December 31,2016 and 2017,assuming the straight-line method is used.

In the first year of an asset's life,which of the following methods has the smallest depreciation?

Depreciation for 2016,using the straight-line method is:

Using the sum-of-the-years'-digits method,depreciation for 2016 and book value at December 31,2016,would be:

Using the sum-of-the years'-digits method,depreciation for 2017 and book value at December 31,2017,would be

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