Exam 10: Depreciation,Amortization,and Impairment

Calculate amortization for the first year (to the nearest dollar) for a capital asset which cost $11,500,has a $500 residual value,and a 10-year estimated life under each of the amortization methods listed below. (a) Straight-line $_____________________. (b) Sum-of-the-years'-digits $_____________________. (c) Declining balance $_________________. (d) Productive output (where total potential output is 1,250 units and output for the year is 200 units) $_________________.

On January 2,2007,Jones & Smith Limited acquired equipment to be used in its manufacturing operations.The equipment has an estimated useful life of 10 years,an estimated residual value of $15,000,and was expected to be used 38,000 hours.The amortization applicable to this equipment was $63,075 for 2000,computed under the activity method after the machine was used 4,350 hours.Calculate the acquisition cost of the equipment.

What is the minimum book value to be disclosed in the balance sheet for a plant asset,which is expected to be sold for reasonable amount at the end of its useful life?

Recording periodic amortization on the basis of historical cost may result in holding back insufficient assets to replace fully depreciated assets if the general price:

Amortization is also called depreciation when it is associated with tangible capital assets and depletion when associated with natural resources.

Only long lived assets with finite lives should be tested for impairment.Long-lived assets with unlimited lives are not subject to impairment tests.

Fractional year amortization can be determined in two different ways for declining balance methods,but only one way for sum of years' digits.

In which amortization method is the first year's amortization computed by applying the amortization rate to the total cost of the asset (without reducing it for residual value)?

RB's plant building (original cost $600,000; estimated useful life,30 years,residual value,$120,000) no longer has space for storage of raw materials.At the start of Year 21,the company purchased an addition (a wood building) which was attached to the plant building.The wood building cost $60,000 and,under normal conditions,would have a useful life of 15 years and no residual value. Give the entry that RB should make at the end of the accounting period,December 31,Year 21,to record amortization expense,assuming straight-line amortization for these capital assets.Clearly explain the basis for any assumptions you have made.

Cummings corporation has a capital asset .The estimated cost of dismantling and removing the machine at the end of year 4 is $150.Assuming straight-line amortization,the annual amortization expense is:

Lone Co.purchased a machine on July 1,2018,for $600,000.The machine has an estimated useful life of five years and a residual value of $80,000.The machine is being amortized from the date of acquisition by the 150% declining balance method.Calculate for the year ended December 31,2018,the amount that Lone should record for amortization expense on this machine.

Long-lived assets with finite lives are generally tested for impairment annually under IFRS,while under ASPE; impairment testing is only performed when events or circumstances indicate that impairment(s) may have occurred.

The half-year convention is applied to CCA calculations.

For each succeeding period,the units-of-production method of amortization usually recognizes an amount of amortization expense that is:

SBD decided to use group amortization for its new fleet of 10 panel delivery trucks.The trucks were purchased on January 1,2013 at a cost of $12,000 each.The estimated useful life was 5 years and the estimated residual value was 10 percent of cost.Assume straight-line group amortization is used.SBD has a December 31 year-end and only accounts for amortization at year-end. (a) At the end of 2013,amortization expense should be recorded in the amount of $____________________. During 2014,three transactions occurred affecting the trucks: (1) One truck was wrecked and the only recovery was $1,000 received from the salvage yard. (2) Ordinary repair expenditures amounted to $700. (3) A new truck was purchased at a cost of $12,200 on December 26. (b) At the end of 2014,amortization expense should be recorded in the amount of $_____________________.

Which of the following categories of long-lived assets may or may not be amortized?

On January 1,2001,FR purchased a machine that cost $50,000 (estimated 10-year life and residual value $6,000).FR's president is considering several amortization methods that could be used for this machine.For analytical purposes,you have been asked to complete the following schedule (round all amounts to the nearest dollar).FR's year-end is December 31 and only accounts for amortization at year-end. Balance in Accumulated Amortization Amort, at Dec. 31, Amortization Method Expense for 2002 2002 (a) Straight-line. $\quad$$\$\_\_\_$$\quad$$\$\_\_\_$ (b) SYD $\quad$$\$\_\_\_$$\quad$$\$\_\_\_$ (c) DDB $\quad$$\$\_\_\_$$\quad$$\$\_\_\_$ (d) Productive Output (UNITS: total estimated,20,000; actual $2001,4,000 ; 2002,2,000 ) \ldots \ldots$$\quad$$\$\_\_\_$$\quad$$\$\_\_\_$

The accounts of The Tool Bin Inc.at the end of 2014,showed the tools account as follows: Beginning balance. \1 2,000 New tools purchased during 2001 3,000 At the end of 2014,the tools were inventoried at "cost in present condition" as $12,500.The amount of the adjusting entry for amortization expense at the end of 2014,assuming the inventory/appraisal system,should be $_________________________.

On January 1,2013,Buildings-4-U Ltd.purchased 5 heavy duty dump trucks for cash.Each truck cost $35,000 and the estimated useful life was 5 years with a residual value of $5,000.On the same day Buildings-4-U also purchased 5 small dump trucks for cash.Each small truck cost $15,000 and had an estimated useful life of 5 years and a residual value of $3,000.Buildings-4-U will use group amortization for the 20 trucks on a straight-line basis.Building-4-U has a December 31 year-end and only accounts for amortization at year-end. On March 1,2014,one of the large trucks was involved in an accident,which resulted in a total loss; however,insurance claim proceeds of $21,000 were received from the insurance company. On June 1,2014,the company purchased one additional heavy duty truck (same type) at a cost of $36,000 (useful life and residual value unchanged). Give all entries required on each of the following dates relating to the above transactions: January 1,2013: December 31,2013: March 1,2014: June 1,2014: December 31,2014:

Any impairment losses to a CGU's group assets are generally prorated among the CGU's long-lived assets including Goodwill.