Exam 10: Long-Lived Assets

Mackerel Company purchased equipment on January 2,2013 for $100,000.The equipment had an estimated eight-year service life and $5,000 salvage value.Mackerel's policy for "eight-year assets" is to use double-declining balance depreciation for the first five years of the asset's life and then switch to the straight-line depreciation method. Required: In its December 31,2015 balance sheet,what amount should Mackerel report as net book value for this equipment?

When companies following IFRS write-up an asset to its current fair value,an owners' equity account entitled "revaluation surplus" is credited and disclosed as a separate line item.

Accounting for intangible long-lived assets under IFRS is very similar to the accounting under U.S.GAAP.

The apportionment of the cost of equipment to future periods under the matching principle is

An impairment loss is reported on the income statement as a/an

In the U.S.,accelerated depreciation is almost universally used for tax purposes.

Staley Enterprises purchased a machine for $260,000.The seller paid $900 freight to deliver the machine.Staley used $4,600 of staff mechanics' time to install the machine and employee training cost $7,000.The state charged a 5% sales tax on the invoice price.What is the capitalized cost of the machine?

An impairment loss increases both assets and net income.

Under IFRS,when an asset is revalued upward,subsequent depreciation is based on

IFRS allows two different models for accounting for long-lived tangible assets: the cost method and appraisal method.

When applying the impairment guidelines to groups of assets,the group should consist of the lowest level for which identifiable cash flows are largely independent of the cash flow of other groups of assets and liabilities.

When the differences in useful lives of long-lived assets reflect real economic differences,the attempt on the part of financial analysts to undo those differences may impede profit and loss comparisons.

The balance sheet carrying value for internally generated intangibles is often below the value of the property rights.

Gains and losses from sales of individual operating assets may satisfy the criteria for extraordinary item treatment.

Avoidable interest is the product of cumulative weighted average expenditures times the interest rate.

According to the 2012 AICPA survey of 2011 annual reports,the most widely-used method of depreciation for financial reporting purposes is

When firms dispose of a long-lived asset before the end of its useful life,the difference between the net book value of the asset and the sale proceeds is a gain or loss from a discontinued item.

Generally,the recorded cost of a nonmonetary asset acquired in exchange for some other nonmonetary asset is the fair value of the asset that was given up.

Eagle Corporation acquired a new machine on January 2, 2013 at a cost of $126,000. The machine has an expected 4 year life and a salvage value of $6,000. -If Eagle uses the straight-line depreciation method,the depreciation expense in 2016 is

To preclude firms from engaging in "sham" exchanges to generate artificial gains,GAAP requires that the transaction must possess commercial substance.