Exam 10: Depreciation,Amortization,and Impairment

The Declining balance method of amortization take into account residual value.

Amortization retains funds by reducing income and thereby impacting the dividend payment decision.

The sum-of-the-years'-digits amortization method does not take into account the asset's estimated residual value.

An asset cost $13,000; estimated residual value,$1,000,and estimated life: -In years................. 5 -In running time (hours)... 3,000 Actual in Year 1- 700 hours -In productive output (units) 10,000 Actual in Year 1-2,000 units Compute the following: Amortization Carrying Value Method Expense-Year 1 End of Year 1 (a) Straight-line (b) Service hours (c) Productive output (d) SYD (e) Double declining Balance

An asset that cost $49,577 ($1,850 estimated residual value) is being depreciated on the SYD basis over an estimated useful life of 20 years.What is the amount of amortization expense for year 10?

The book (or carrying) value of a capital asset declines more rapidly when an accelerated amortization method is used than when the straight-line amortization method is used.

If a company attempts to take CCA in excess of its UCC balance for the asset class in question,this would result in:

The 2010 revaluation journal entry would include

The assets of the DEF Inc.(a separately incorporated entity fully owned of subsidiary GHI Transport Inc.) showed the following asset carrying values on December 31^st,2014 (in millions): Cash \ 100 Accounts Receivable \ 20 Inventories \ 10 Property, Plant \& Equipment (net) \ 200 Patents (net) \ 20 Goodwill \ 75 Total On December 31^st,2014,the fair values of the assets listed above were as follows: Cash \ 100 Accounts Receivable \ 15 Inventories \ 25 Property, Plant \& Equipment (net) \ 120 Patents (net) \ 60 Total \ 320 Both DEF and GHI Inc.adhere to IFRS. Required: Provide the journal entry to record the impairment loss (if any) above.

If an industrial firm uses the units-of-output method for computing amortization on its only plant asset,factory machinery,the credit to accumulated amortization from period to period during the life of the firm will vary with sales revenue.

On January 1,2013,Rubin Company purchased a new machine for $3,525,000.The new machine has an estimated useful life of nine years and the residual value was estimated to be $150,000.Amortization expense was computed on the double-declining balance method.What amount should be shown in Rubin's balance sheet at December 31,2014,net of accumulated amortization,for this machine?

The net book value or carrying value of an asset is its original cost less any capitalized post-acquisition cost less accumulated amortization to date.

Amortization expense is a source of cash because it is a non-cash expense.

TX signed a 5-year lease on a tract of vacant land owned by UT.TX immediately constructed a metal building on the land at a cost of $120,000 (estimated life 10 years and a 20 percent residual value).There was no lease provision for removal of the building by TX.Assuming straight-line amortization,the annual amortization expense recorded by TX would be:

Which of the following is not an objection to the use of the straight-line method of amortization?

RJB acquired an asset,which cost $12,000 on January 1,2001,the estimated useful life was 6 years and residual value was $1,500.RJB has a December 31 year-end and adjusting entries are only made at year-end. (a) Assume the retirement system is used and that shortly before the end of an asset's expected life,a replacement was purchased at a cost of $13,000.The $1,500 residual value proved to be correct.Under these conditions the amount of amortization expense recorded would have been: (1) for the first year of the original life,$________________; 2) for the last year of the original life,$____________________. (b) Assume the same facts as in (a),except that the replacement system was used.Under these conditions,the amount of amortization expense recorded would have been: (1) for the first year of the original life,$________________; 2) for the last year of the original life,$____________________. (c) Assume instead that the SYD method was used; amortization expense for the second year on the asset would be: $__________________. (d) Assume instead that the DDB method was used; amortization expense for the second year on the asset would be: $_______________________.

Amortization expense each period is proportionate to usage of the asset each period with the service hours method.

A general description of the amortization methods applicable to major classes of depreciable assets is not essential to a fair presentation of financial position.

Under the elimination method of revaluation,the accumulated depreciation account is eliminated against the historical cost of the asset prior to any revaluation.

On January 1,2014,REP replaced a major component in Plant A,which had been operating for 10 years (from construction date of the plant); its original cost as a part of the plant was $36,000.The replacement component cost $40,000 (cash) and has an estimated life of 25 years.Plant A is depreciated as one unit on the straight-line basis (not group or composite amortization system) and has an estimated life of 30 years (total).All residual values were zero.REP has a December 31 year-end and only accounts for amortization at year-end. (a) Give the entry (entries) on January 1,2014. (b) At the end of 2014,what amount of amortization should be recorded on the replacement item? $____________________.