Question 1

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

Accepted Answer

A) True 
 B)False  True

Question 2

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.

Accepted Answer

The answer of On January 1, 2018, Morrow Inc. purchased...

Question 3

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.

Accepted Answer

The answer of In its 2018 annual report to shareholders,...

Question 4

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

Accepted Answer

A)  Considered if indicated that book value may not be recoverable.
B)  Estimate of recoverable cost at end of an asset's life.
C)  Should be capitalized since they provide future benefits.
D)  Capitalize unless unsuccessful.
E)  Should be expensed unless they are material and provide a future benefit.

Question 5

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

Accepted Answer

The answer of Briefly explain the following statement. Depreciation is...

Question 6

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

Accepted Answer

The answer of Briefly discuss why straight-line is the most...

Question 7

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.

Accepted Answer

The answer of Synthetic Fuels Corporation prepares its financial statements...

Question 8

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:

Accepted Answer

A)   $3,500.
B)   $4,400.
C)   $5,400.
D)   None of these answer choices are correct.

Question 9

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

Accepted Answer

A)  Cost allocation for an intangible asset.
B)  Adding a new major component to existing plant and equipment.
C)  Can be expressed in units of time or in units of activity.
D)  Cost allocation for natural resources.
E)  The amount the company expects to receive for the asset at the end of its life.F) The replacement of a major component of plant and equipment asset.G) Allocates an equal amount of depreciable base to each period.H) Estimates service life in terms of a measure of activity.I) The difference between cost and residual value.J) Multiplies book value by twice the straight-line rate.

Question 10

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:

Accepted Answer

A)   $26,400 and $45,600 respectively.
B)   $28,800 and $43,200 respectively.
C)   $28,800 and $37,200 respectively.
D)   $26,400 and $36,600 respectively.

Question 11

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

Accepted Answer

A)  Triggers commencement of depreciation.
B)  Cost less accumulated depreciation.
C)  Expenditures made to restructure an asset without addition, replacement, or improvement.
D)  Only used for tax purposes.
E)  Three methods are employed to record these costs.

Question 12

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

Accepted Answer

A)  Cost allocation for an intangible asset.
B)  Adding a new major component to existing plant and equipment.
C)  Can be expressed in units of time or in units of activity.
D)  Cost allocation for natural resources.
E)  The amount the company expects to receive for the asset at the end of its life.F) The replacement of a major component of plant and equipment asset.G) Allocates an equal amount of depreciable base to each period.H) Estimates service life in terms of a measure of activity.I) The difference between cost and residual value.J) Multiplies book value by twice the straight-line rate.

Question 13

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

Accepted Answer

A)   Repairs and maintenance.
B)   Improvement.
C)   Rearrangement.
D)   Addition.

Question 14

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.

Accepted Answer

The answer of On April 1, 2018, Parks Co. purchased...

Question 15

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

Accepted Answer

A)  Allocation of cost for plant and equipment.
B)  Is a change in accounting estimate.
C)  Results from subsequent year correction of a material error.
D)  Expenditures made to maintain a given level of benefits from an asset.
E)  Generate declining amounts of depreciation over time.

Question 16

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:

Accepted Answer

A)   $19,200 and $30,800 respectively.
B)   $17,600 and $26,400 respectively.
C)   $19,200 and $28,800 respectively.
D)   $17,600 and $32,400 respectively.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A)   A retrospective change back to the date of acquisition as though the current estimated life and residual value had been used all along.
B)   A prospective change from the current year through the remainder of its useful life, using the new estimates.
C)   A cumulative adjustment to income in the current year for the difference in depreciation under the new versus old estimates.
D)   All of these answer choices are incorrect.

Question 19

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?

Accepted Answer

A)   Straight-line.
B)   Units-of-production.
C)   Double-declining balance.
D)   Sum-of-the-year's digits.

Question 20

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.

Accepted Answer

The answer of El Dorado Foods Inc. owns a chain...

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).

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.

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:

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?