CK purchased a machine that cost $26,000 on January 1,2001.The estimated useful life was 10 years and the residual value was $4,000.Complete the following schedule to reflect amortization expense for 2002 and the balance in the accumulated amortization account at the end of 2002,for each amortization method indicated.CK's year-end is December 31 and only accounts for amortization at year-end. $\begin{array}{llc} &&\text { Balance in }\\ &&\text { Accumulated }\\ & \text { Amortization } & \text { Amort, at Dec. 31, } \\ \text { Amortization Method } & \text { Expense for } 2002 & 2002 \end{array}$ $\text { (a) Straight-line. }\quad\quad\$\_\_\_\quad\$\_\_\_$ $\text { (b) Sum-of-the-years'-digits }\quad\quad\$\_\_\_\quad\$\_\_\_$ (c) Declining balance$\quad\quad\$\_\_\_\quad\$\_\_\_$ (d) Productive output (Units: total estimated,20,000; actual $2001,4,000 ; 2002,2,000 ) \ldots\quad\quad\$\_\_\_\quad\$\_\_\_$

\[\begin{array} { c | l } \text { Amort

A machine cost $21,000 and has an estimated useful life of five years and a residual value of $3,000.What is the annual amortization expense for each of the first two years under the following amortization methods? $\begin{array}{llll} & \text { Year 1 } & \text { Year 2 } \\ \hline\text { (a) Sum-of-the-years'-digits... }&\$\_\_\_\_&\$\_\_\_\_ \end{array}$ $\text { (b) Declining balance... }\quad\quad\quad\quad\$\_\_\_\_ \quad\quad\quad\quad\$\_\_\_\_$ (c) Productive output (potential output is estimated at 90,000 units,in the first year, The machine turned out 15,000 units; in the second year, $\text { I8,000 units) }\quad\quad\quad\quad\$\_\_\_\_ \quad\quad\quad\quad\$\_\_\_\_ $ $\text { (d) Straight-line .................. } \quad\quad\quad\quad\$\_\_\_\_\quad\quad\quad\quad\$\_\_\_\_$

The answer of A machine cost $21,000 and has an...

Exam 10: Depreciation,Amortization,and Impairment

Under ASPE,the first step in the two-step impairment test for depreciable assets is to determine whether an assets discounted cash flows exceeds its carrying amount.

(True/False)

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Question 21

CK purchased a machine that cost $26,000 on January 1,2001.The estimated useful life was 10 years and the residual value was $4,000.Complete the following schedule to reflect amortization expense for 2002 and the balance in the accumulated amortization account at the end of 2002,for each amortization method indicated.CK'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 $\text { (a) Straight-line. }\quad\quad\$\_\_\_\quad\$\_\_\_$ $\text { (b) Sum-of-the-years'-digits }\quad\quad\$\_\_\_\quad\$\_\_\_$ (c) Declining balance $\quad\quad\$\_\_\_\quad\$\_\_\_$ (d) Productive output (Units: total estimated,20,000; actual $2001,4,000 ; 2002,2,000 ) \ldots\quad\quad\$\_\_\_\quad\$\_\_\_$

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Question 22

Store of Values Inc.has a new building that cost $400,000.It will be depreciated using DB amortization.The estimated residual value of the building is $50,000 and it has an expected useful life of 10 years.Assuming the first year's amortization expense was recorded properly,what would be the amount of amortization expense for the second year?

(Multiple Choice)

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Question 23

Amortization expense is the difference between the current realizable value (in current condition) and the original cost of the asset with the:

(Multiple Choice)

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Question 24

Individual assets may never be tested for impairment on their own.

(True/False)

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Question 25

Now suppose that on January 2^nd,2014,independent research reveals that Aerospace's patents have a market value of $200.The carrying value of Aerospace's Goodwill on that date would be:

(Multiple Choice)

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Question 26

At the start of Year 1,DEF Inc.has a UCC balance of $100.During Year 1,the company acquired assets in the amount of $50 and disposed of assets with an undepreciated value of $25 for $20.The pool qualifies as Class 8 assets (20% CCA). The remaining balance in the asset pool at the end of Year 1 as a result of the above information would be:

(Multiple Choice)

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Question 27

Impairment losses on intangible assets are to be amortized over the asset's remaining useful life.

(True/False)

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Question 28

Held-for-sale capital assets are not depreciated.

(True/False)

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Question 29

Has the aerospace division experienced impairment? If so,by how much?

(Multiple Choice)

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Question 30

On January 1,2014,CT purchased a machine that had a list price of $24,960.CT paid cash $12,000 and executed a one-year note for the balance.No interest was specified in the note; however,the going rate of interest was 8 percent.Assume an estimated life of six years and no estimated residual value.Straight-line amortization is used.Amortization expense for the year ending December 31,2014,would be $___________________.

(Essay)

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Question 31

For each succeeding period,the declining balance (DB) method of amortization recognizes an amount of amortization expense that is:

(Multiple Choice)

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Question 32

At the end of the annual reporting period,December 31,2014,LTX had the accounting situation given below under consideration for adjusting entries.Give the appropriate adjusting entry.Assume straight-line amortization.If an adjusting entry is not needed,explain why. Situation: LTX had a small (and old) plant that has been idle for two years.LTX has been unable to sell it for the asking price of $75,000.It originally cost $325,000 and the accumulated depreciation is $265,000.A recent independent appraisal of its current value (the land plus salvage value of the plant) was $35,000.

(Essay)

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Question 33

An asset's recoverable amount is the higher of its value-in-use or fair value less costs to sell.

(True/False)

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Question 34

A gain or loss is recognized on the retirement of an asset under the following amortization system or method:

(Multiple Choice)

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Question 35

Residual value not subtracted from cost when computing amortization when using the declining balance method until such time as the book nears the residual value.

(True/False)

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Question 36

The operations of XY are seasonal; therefore,XY defers as much routine machinery maintenance as possible to the next slack season.Repair expense,however,is accrued monthly in an Allowance for repairs account.The balance accumulated in the Allowance account until shortly before the slack season should be reported as a:

(Multiple Choice)

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Question 37

A machine cost $21,000 and has an estimated useful life of five years and a residual value of $3,000.What is the annual amortization expense for each of the first two years under the following amortization methods? Year 1 Year 2 (a) Sum-of-the-years'-digits... \_\_ \_\_ $\text { (b) Declining balance... }\quad\quad\quad\quad\$\_\_\_\_ \quad\quad\quad\quad\$\_\_\_\_$ (c) Productive output (potential output is estimated at 90,000 units,in the first year, The machine turned out 15,000 units; in the second year, $\text { I8,000 units) }\quad\quad\quad\quad\$\_\_\_\_ \quad\quad\quad\quad\$\_\_\_\_$ $\text { (d) Straight-line .................. } \quad\quad\quad\quad\$\_\_\_\_\quad\quad\quad\quad\$\_\_\_\_$

(Essay)

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Question 38

Amortization expense has no effect on potential cash dividends.

(True/False)

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Question 39

The 2011 revaluation journal entry would include

(Multiple Choice)

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Question 40

Under ASPE,the first step in the two-step impairment test for depreciable assets is to determine whether an assets discounted cash flows exceeds its carrying amount.

Amortization expense is the difference between the current realizable value (in current condition) and the original cost of the asset with the:

Individual assets may never be tested for impairment on their own.

Now suppose that on January 2^nd,2014,independent research reveals that Aerospace's patents have a market value of $200.The carrying value of Aerospace's Goodwill on that date would be:

Impairment losses on intangible assets are to be amortized over the asset's remaining useful life.

Held-for-sale capital assets are not depreciated.

Has the aerospace division experienced impairment? If so,by how much?

For each succeeding period,the declining balance (DB) method of amortization recognizes an amount of amortization expense that is:

An asset's recoverable amount is the higher of its value-in-use or fair value less costs to sell.

A gain or loss is recognized on the retirement of an asset under the following amortization system or method:

Residual value not subtracted from cost when computing amortization when using the declining balance method until such time as the book nears the residual value.

Amortization expense has no effect on potential cash dividends.

The 2011 revaluation journal entry would include

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Property,Plant,and Equipment; Intangibles; and Goodwill

Financial Instruments: Investments in Debt and Equity Securities

Filters

Exam 10: Depreciation,Amortization,and Impairment

Under ASPE,the first step in the two-step impairment test for depreciable assets is to determine whether an assets discounted cash flows exceeds its carrying amount.

Amortization expense is the difference between the current realizable value (in current condition) and the original cost of the asset with the:

Individual assets may never be tested for impairment on their own.

Now suppose that on January 2nd,2014,independent research reveals that Aerospace's patents have a market value of $200.The carrying value of Aerospace's Goodwill on that date would be:

Impairment losses on intangible assets are to be amortized over the asset's remaining useful life.

Held-for-sale capital assets are not depreciated.

Has the aerospace division experienced impairment? If so,by how much?

For each succeeding period,the declining balance (DB) method of amortization recognizes an amount of amortization expense that is:

An asset's recoverable amount is the higher of its value-in-use or fair value less costs to sell.

A gain or loss is recognized on the retirement of an asset under the following amortization system or method:

Residual value not subtracted from cost when computing amortization when using the declining balance method until such time as the book nears the residual value.

Amortization expense has no effect on potential cash dividends.

The 2011 revaluation journal entry would include

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Property,Plant,and Equipment; Intangibles; and Goodwill

Financial Instruments: Investments in Debt and Equity Securities

Filters

Now suppose that on January 2^nd,2014,independent research reveals that Aerospace's patents have a market value of $200.The carrying value of Aerospace's Goodwill on that date would be: