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

Once selected for existing assets,a company must consistently use the same method of depreciation for all subsequent fixed asset acquisitions.

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

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

Jung Inc.owns a patent for which it paid $66 million.At the end of 2016,it had accumulated amortization on the patent of $16 million.Due to adverse economic conditions,Jung's management determined that it should assess whether an impairment loss should be recognized for the patent.The estimated undiscounted future cash flows to be provided by the patent total $43 million,and the patent's fair value at that point is $35 million.Under these circumstances,Lester:

An asset acquired January 1,2016,for $15,000 with an estimated 10-year life and no residual value is being depreciated in an equipment group asset account that has an average service life of eight years.The asset is sold on December 31,2017,for $6,000.The entry to record the sale would be:

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

An asset should be written down if there has been an impairment of value that is:

Wilson Inc.owns equipment for which it paid $70 million.At the end of 2016,it had accumulated depreciation on the equipment of $12 million.Due to adverse economic conditions,Wilson'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 $50 million.Under these circumstances,Wilson:

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

In 2015,Antle Inc.had acquired Demski Co.and recorded goodwill of $245 million as a result.The net assets (including goodwill)from Antle's acquisition of Demski Co.had a 2016 year-end book value of $580 million.Antle assessed the fair value of Demski at this date to be $700 million,while the fair value of all of Demski's identifiable tangible and intangible assets (excluding goodwill)was $550 million.The amount of the impairment loss that Antle would record for goodwill at the end of 2016 is:

Depreciation:

Depreciation for 2016,using double-declining balance,would be:

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

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

Prego would report depreciation in 2017 of:

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

Jennings Advertising Inc.reported the following in its December 31,2016,balance sheet: Equipment $500,000 Less: Accumulated depreciation-equipment $135,000 In a disclosure note,Jennings indicates that it uses straight-line depreciation over 10 years and estimates salvage value at 10% of cost.What is the average age of the equipment owned by Jennings?

On January 1,2014,Al's Sporting Goods purchased store fixtures at a cost of $180,000.The anticipated service life was 10 years with no residual value.Al's has been using the double-declining balance method,but in 2016 adopted the straight-line method because the company believes it provides a better measure of income.Al's has a December 31 year-end.The journal entry to record depreciation for 2016 is:

Which of the following types of subsequent expenditures normally is capitalized?

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