Exam 10: Depreciation,Amortization,and Impairment

ABC's December 31^st,Year 3 revaluation entry would include:

Revaluation accounting is an option,not a requirement under IFRS.

An asset is said to be impaired when its carrying value exceeds its recoverable amount.

Which of the following items relevant to the amortization of an asset can be negative?

With the exception of Goodwill,all impairment losses are reversible under IFRS.

Gains or losses upon the retirement of individual asset units are not recognized when the assets concerned are natural resources

An asset cost $93,000 (no residual value) and is being depreciated on the SYD basis over 30 years.What is the amount of amortization expense for years: (1)__________________ (10)_______________ (30)________________?

Which of the following is one of the underlying rationales for recognizing periodic amortization?

A firm depreciates its plant assets by applying the double declining balance method.Its policy is to switch to the straight-line method in the year in which continued application of the DDB method would result in excessive total amortization.One of the assets recently purchased cost $10,000,has a useful life of four years,and a $4,000 estimated residual value.What is the amortization expense in each of the last three years of this asset's life?

One impairment indicator may be management's decision to retire a revenue generating asset prematurely.

The methods of amortization based upon output assume that obsolescence will not significantly affect the usefulness of the asset.

Under both IFRS and ASPE,if the fair value of a reporting unit is less than its book value,an impairment loss has automatically occurred and no further impairment testing is required.

(a) While studying a firm's income statement,you notice the line item: Amortization expense $\quad\quad\quad\$ 400,000$ Write a short report to a client of yours who is interested in providing a loan to this firm.In other words,what does the $400,000 amount mean,and perhaps more importantly,what does it not imply? (b) Also,you come across the following line item: Impairment loss, property $\quad\quad\$ 600,000$ What does this amount represent,when is it recognized,what may have caused it,and how does it affect subsequent amortization,assuming that the property is not a total loss?

(Appendix 1) The Capital Cost Allowance Method (CCA) used for amortization for Canadian Income Tax purposes is most similar to which of the following methods permitted for financial reporting?

Goodwill impairment losses are reversible under IFRS but not under ASPE.

Which of the following is not necessarily one of the four factors leading to the periodic determination of amortization expense?

During 2014,King Co.sold equipment that had cost $82,000 for $49,200.This resulted in a gain of $4,300.The balance in Accumulated Amortization--Equipment was $270,000 on January 1,2014,and $258,000 on December 31.No other equipment was disposed of during 2014.Calculate the amount of amortization expense for 2014.King Co.has a calendar year-end and adjusting entries are only made at year-end.

Cummings corporation purchased a machine that cost $82,653,on terms of 2/10,net/30.The invoice price was paid in full 20 days after the purchase date.The machine has an estimated useful life of 3 years and a residual value of $9,000.What is the amortization expense in the second year,assuming SYD amortization?

If income tax effects are ignored,accelerated amortization methods tend to offset the effect of steadily increasing repair and maintenance costs on the income statement.

ABC Aerospace Inc.adheres to IFRS and applies component accounting to its major long-lived asset categories.Accordingly,the following data pertain to the company's fleet of test aircraft as at December 31,2013 (in millions $): Category Cost Accumulated Depreciation Net Book Value Avionics \ 100 \ 48 \ 52 Fuselage \& Wings \ 200 \ 120 \ 80 Aircraft Engines \ 20 \ 16 \ 4 Additional information includes the following: - The avionics have a salvage value $2 and a remaining useful life of ten years and are depreciated on a straight-line basis. - Both the fuselage and wings and aircraft engines are depreciated at a declining rate of 25%. Assuming there were no acquisitions or disposals made,compute the depreciation expense for 2014 (in millions $).Round your answers to the nearest whole dollar.