Exam 11: Depreciation, Impairment, and Disposition

Depreciation should be discontinued when an asset has been

One of Spade Corp.'s assets was expropriated by government authorities. The following additional information is available: Book value at the time of expropriation..................$600,000 Cash received.......................................................... $\$ 1,500,000$ Under ASPE, this situation would be reflected in the company's financial statements as a $900,000

Gibbon Corp., a Canadian public corporation, owns equipment for which the following year-end information is available: Carrying amount (book value)............$59,000 Recoverable amount.............................52,000 Fair value less disposal costs............. $\quad 55,000$ Which of the following best describes the proper accounting treatment for Gibbon's equipment?

Componentization and depreciation of PP&E assets You are the accountant for a manufacturing company. You have just been advised of the acquisition of a new machine. You have received a memo that only gives you the following information: Grinding Equipment Model: XZ-1-1000 Cost: $1,250,000 Instructions To be able to properly account for this asset, list and briefly describe what additional information you require.

Cassidy Corporation purchased factory equipment that was installed and put into service on January 2, 2019, at a total cost of $55,000. Residual value was estimated at $3,000. The equipment is being depreciated over four years using the double-declining-balance method. For the calendar year 2020, Cassidy should record depreciation expense on this equipment of

Depletion expense

Deciding which PP&E components to depreciate separately is called

A graph is set up with "yearly depreciation expense" on the vertical axis and "time" on the horizontal axis. Assuming linear relationships, how would the graphs for straight-line and declining-balance depreciation, respectively, be drawn?

If income tax effects are ignored, accelerated depreciation methods

Which of the following is NOT a time-based depreciation method?

Use the following information to answer questions: Tarantula Corp. reported the following information about the only machine that it owns: Date of purchase..............................March 31, 2020 Capital cost................................ $\$ 200,000$ Estimated useful life......................10 years Estimated residual value................ $\$ 20,000$ CCA Class..................................Class $10(30 \%)$ Tarantula uses straight-line depreciation to the nearest month for accounting purposes. -Assuming Tarantula always takes the maximum CCA, what is the CCA for calendar 2020?

The rational entity impairment model

Which of the following is NOT likely to be an indicator of possible asset impairment?

On May 1, 2011, Platypus Ltd. purchased a new machine for $132,000. At the time of acquisition, the machine was estimated to have a useful life of ten years and an estimated residual value of $6,000. The company has recorded monthly depreciation using the straight-line method. On March 1, 2020, the machine was sold for $18,000. The loss to be recognized from the sale is

Use the following data to answer the questions:: Wren Corp. reported the following data on its most recent financial statements: Net revenues:.............................$312,500 Net income................................. $\quad 58,200$ Total assets, Jan 1....................... $\quad 174,280$ Total assets, Dec $31$ ..................... 168,420 -To two decimals, what is Wren Corp.'s asset turnover ratio?

On January 3, 2013, Hippo Corp. purchased a machine for $600,000. The machine was being depreciated using the straight-line method over an estimated useful life of ten years, with no residual value. At the beginning of 2020, the company paid $150,000 to overhaul the machine. As a result of this improvement, the company estimated that the useful life of the machine would be extended an additional five years (15 years total). The depreciation expense for 2020 should be

Disclosures relating to PP&E assets are

Definitions Provide clear, concise answers for the following: 1. Define depreciation. 2. Define depreciation accounting. 3. Does depreciation accounting provide cash? If not, what does provide cash? In relation to cash, what does depreciation accounting do?

Rational entity impairment model Cougar Corp.'s balance sheet includes the following asset: Equipmant..................................................$95,000 Less: accumulated depreciation......................(25,000) Book value (carrying amount).........................$70,000 After performing its annual review for impairment, Cougar obtains the following data: Asset's value in use.............................................. $\$ 58,000$ Fairvalue less disposal costs................................62,000 Instructions Assuming Cougar uses the rational entity impairment model, a) Calculate the recoverable amount. b) Calculate the impairment loss. c) Prepare the entry to record the impairment loss.

On January 1, 2015, Rabbit Corp. acquired machinery that it depreciated using the straight-line method with an estimated useful life of 15 years and no residual value. On January 1, 2020, Rabbit estimated that the remaining life of this machinery was six years with no residual value. This change should be accounted for