Question 1

Explain when a non-current asset is impaired.

Accepted Answer

•An asset (or cash generating unit)is impaired if its carrying amount exceeds its recoverable amount.
•The recoverable amount is the higher of fair value less costs to sell and value in use.

Question 2

Based on the following information, what is the net amount that this equipment should be reported at on BAC's balance sheet at December 31, 2021? $$\begin{array} { | l | r | } 
\hline \text { Cost } & \$ 500,000 \
\hline \text { Accumulated depreciation } & 300,000 \
\hline \text { Value in use (sum of discounted cash flows) } & 220,000 \
\hline \text { Fair value } & 240,000 \
\hline \text { Disposal costs } & 10,000 \
\hline
\end{array}$$

Accepted Answer

A) $200,000 
B) $220,000 
C) $230,000 
D) $240,000 
A) $200,000 
B) $220,000 
C) $230,000 
D) $240,000 A

Question 3

Which of the following is correct with respect to the "fair value model"?

Accepted Answer

A) A model that does not recognize any depreciation expense in the financial statements. 
B) A model that recognizes depreciation annually in the revaluation surplus account. 
C) A model that recognizes depreciation annually in the income statement. 
D) A model that recognizes depreciation annually in the other comprehensive income. 
A) A model that does not recognize any depreciation expense in the financial statements. 
B) A model that recognizes depreciation annually in the revaluation surplus account. 
C) A model that recognizes depreciation annually in the income statement. 
D) A model that recognizes depreciation annually in the other comprehensive income. A

Question 4

When should an entity select the exception to using "fair value less point of sale costs" approach for biological assets?

Accepted Answer

A) At time of initial recognition upon acquisition. 
B) If the entity cannot obtain fair value information. 
C) At time of subsequent measurement on each balance sheet. 
D) If the entity can obtain fair value information. 
A) At time of initial recognition upon acquisition. 
B) If the entity cannot obtain fair value information. 
C) At time of subsequent measurement on each balance sheet. 
D) If the entity can obtain fair value information.

Question 5

Which statement is not correct?

Accepted Answer

A) Impairment testing is required under ASPE. 
B) Impairment testing is required under IFRS. 
C) Impairment testing is not required under ASPE. 
D) Impairment testing is required under both IFRS and ASPE. 
A) Impairment testing is required under ASPE. 
B) Impairment testing is required under IFRS. 
C) Impairment testing is not required under ASPE. 
D) Impairment testing is required under both IFRS and ASPE.

Question 6

Which of the following is correct with respect to the "reversal of impairment loss"?

Accepted Answer

A) It is defined as the carrying amount less recoverable amount under IFRS. 
B) It is defined as the carrying amount less fair value under ASPE. 
C) It is possible under IFRS if the recoverable amount subsequently rises. 
D) It is possible under ASPE if the recoverable amount subsequently rises. 
A) It is defined as the carrying amount less recoverable amount under IFRS. 
B) It is defined as the carrying amount less fair value under ASPE. 
C) It is possible under IFRS if the recoverable amount subsequently rises. 
D) It is possible under ASPE if the recoverable amount subsequently rises.

Question 7

Speakspere Partners is scaling back operations; the partnership has the following assets on its books that it is considering for sale:
a. Speakspere has a parcel of land, valued at $1 million, that is currently vacant. The land is located in an area of the city that was undeveloped and Speakspere had purchased it a number of years ago in anticipation of growth. Actual growth has been slower than expected and has in fact been declining since last year. Speakspere is unsure whether a willing buyer can be found under these conditions.
b. Speakspere's operations are located in an office building and a separate storage facility. Speakspere owns the land on which these facilities reside. The partnership is able to vacate the storage facility on short notice and there is an active market for similar storage. As for the office, Speakspere plans to continue its operations, and does not foresee vacating the office space in the immediate future.
Required:
Determine whether Speakspere should present the assets described above as non-current assets held for sale. Be sure to provide any supporting explanation for your conclusions.

Accepted Answer

*The partnership plans to continue its o

Question 8

Based on the following information, what is the recoverable amount? $$\begin{array} { | l | r | } 
\hline \text { Cost } & \$ 750,000 \
\hline \text { Accumulated depreciation } & 530,000 \
\hline \text { Value in use (sum of discounted cash flows) } & 300,000 \
\hline \text { Fair value } & 200,000 \
\hline \text { Disposal costs } & 15,000 \
\hline
\end{array}$$

Accepted Answer

A) $185,000 
B) $200,000 
C) $220,000 
D) $300,000 
A) $185,000 
B) $200,000 
C) $220,000 
D) $300,000

Question 9

Company Ten purchased land for $400,000 during the year. Fair value at the end of the year was $500,000.
Prepare the journal entry to record the revaluation adjustment.

Accepted Answer

None

Question 10

What impairment, if any, exists on these product lines? $$\begin{array} { | l | r | r | } 
\hline & \text { Product A } & \text { Product B } \
\hline \text { Original cost } & \$ 7,222,000 & \$ 12,536,000 \
\hline \text { Accumulated depreciation } & 2,500,000 & 4,200,000 \
\hline \text { Fair value } & 5,062,000 & 8,916,000 \
\hline \text { Costs to sell } & 90,000 & 340,000 \
\hline \text { Value in use } & 4,375,000 & 8,100,000 \
\hline
\end{array}$$

Accepted Answer

A)  $$\begin{array} { | l | l | } 
\hline \text { Product A } & \text { Product B } \
\hline \$ 0 & \$ 0 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | } 
\hline \text { Product A } & \text { Product B } \
\hline \$ 347,000 & 0 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | } 
\hline \text { Product A } & \text { Product B } \
\hline 0 & 236,000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | } 
\hline \text { Product A } & \text { Product B } \
\hline 347,000 & 236,000 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | l | } 
\hline \text { Product A } & \text { Product B } \
\hline \$ 0 & \$ 0 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | } 
\hline \text { Product A } & \text { Product B } \
\hline \$ 347,000 & 0 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | } 
\hline \text { Product A } & \text { Product B } \
\hline 0 & 236,000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | } 
\hline \text { Product A } & \text { Product B } \
\hline 347,000 & 236,000 \
\hline
\end{array}$$

Question 11

Grover Inc wishes to use the revaluation model for this property: $$\begin{array} { | l | r | } 
\hline & \text { Before Revaluation } \
\hline \text { Building Gross Value } & 120,000 \
\hline \text { Building Accumulated Depreciation } & 40,000 \
\hline \text { Net carrying value } & 80,000 \
\hline
\end{array}$$
-According to the table above.The fair value for the property is $20,000. What amount would be booked to the "accumulated depreciation" account if Wilson chooses to use the proportional method to record the revaluation?

Accepted Answer

A) $0 
B) $30,000 debit. 
C) $30,000 credit. 
D) $60,000 debit. 
A) $0 
B) $30,000 debit. 
C) $30,000 credit. 
D) $60,000 debit.

Question 12

Grover Inc wishes to use the revaluation model for this property: $$\begin{array} { | l | r | } 
\hline & \text { Before Revaluation } \
\hline \text { Building Gross Value } & 120,000 \
\hline \text { Building Accumulated Depreciation } & 40,000 \
\hline \text { Net carrying value } & 80,000 \
\hline
\end{array}$$ The fair value for the property is $100,000. Assuming this is the first year of using the revaluation model, what amount would be booked to the "other comprehensive income" account if Grover chooses to use the proportional method to record the revaluation?

Accepted Answer

A) $0 
B) $10,000 debit. 
C) $10,000 credit. 
D) $20,000 credit. 
A) $0 
B) $10,000 debit. 
C) $10,000 credit. 
D) $20,000 credit.

Question 13

A company owns an office building that it rents out to other businesses. Due to a downturn in the economy, rental rates have dropped while vacancy rates have increased. Due to these circumstances, the company evaluated the building for impairment. The building has a cost of $70 million, accumulated depreciation of $47.05 million, and a value in use of $20 million. In addition, the company has recently received an offer to purchase the building for $22 million. Legal and other costs necessary to complete a sale of this type would amount to $200,000.
Required:
Determine the amount of impairment, if any.

Accepted Answer

None

Question 14

What is a "discontinued operation"?

Accepted Answer

A) A component of an entity that either has been disposed of or is classified as held for sale. 
B) A component of an entity that has been disposed of or will be sold within one year. 
C) A component with operations and cash flows that are not distinguishable from the rest of the entity. 
D) A group of assets and liabilities to be disposed of together in separate transactions. 
A) A component of an entity that either has been disposed of or is classified as held for sale. 
B) A component of an entity that has been disposed of or will be sold within one year. 
C) A component with operations and cash flows that are not distinguishable from the rest of the entity. 
D) A group of assets and liabilities to be disposed of together in separate transactions.

Question 15

Grover Inc wishes to use the revaluation model for this property: $$\begin{array} { | l | r | } 
\hline & \text { Before Revaluation } \
\hline \text { Building Gross Value } & 120,000 \
\hline \text { Building Accumulated Depreciation } & 40,000 \
\hline \text { Net carrying value } & 80,000 \
\hline
\end{array}$$
-According to the table above.The fair value for the property is $150,000. What amount would be booked to the "accumulated depreciation" account if Smith chooses to use the proportional method to record the revaluation?

Accepted Answer

A) $0 
B) $35,000 debit. 
C) $35,000 credit. 
D) $70,000 credit. 
A) $0 
B) $35,000 debit. 
C) $35,000 credit. 
D) $70,000 credit.

Question 16

Adam's Bikes produces specialized bicycle frames. The production process uses two machines, which together form a cash generating unit (CGU). The following information is relevant to the evaluation of impairment for these machines.
 $$\begin{array} { | l | r | r | r | } 
\hline & \text { Bending machine } & \text { Welding machine } & \text { Total CGU } \
\hline \text { Net carrying value } & 550,000 & 450,000 & 1,000,000 \
\hline \text { Fair value less costs to sell } & 380,000 & \text { See requirement } & \text { See requirement } \
\hline \text { Value in use } & & & 950,000 \
\hline
\end{array}$$ Required:
a. Assume that the welding machine has a fair value less costs to sell of $420,000. Determine the amount of impairment that should be recorded for the cash generating unit and for each of the two machines.
b. Assume that the welding machine has a fair value less costs to sell of $455,000. Determine the amount of impairment that should be recorded for the cash generating unit and for each of the two machines.

Accepted Answer

a. The total impairment in the cash gene

Question 17

Wright Now Limited (WNL)was incorporated on January 1, 2020 when the sole shareholder invested $7,500,000. This is the only financing the firm needed. WNL used $1,200,000 of the funds to purchase land. The company has a single project that it developed over four years. Below are details of the four years of operations. At the end of 2023 the land was sold for its fair value.
 $$\begin{array} { | l | r | r | r | r | } 
\hline \text { in thousands) } & 2020 & 2021 & 2022 & 2023 \
\hline \text { Revenue - all cash } & \$ 3,100 & \$ 3,500 & \$ 2,600 & \$ 2,400 \
\hline \text { Expenses - all cash } & 2,900 & 2,900 & 2,200 & 2,300 \
\hline \text { Fair value of land, end of year } & 1,550 & 1,150 & 1,400 & 1,500 \
\hline
\end{array}$$ Required:
Complete the following table, assuming that WNL uses the revaluation model of measurement. OCI refers to other comprehensive income.
 $\begin{array}{c}
\begin{array}{|l}
 \hline\text { Revaluation ( \( \$ 000 $ 's) } &\
\hline \text { Revenue } &\
 \hline\text {  Expenses} &\
\hline \text { Revaluation gain (loss) } &\
\hline \text { Gain on disposal of land } &\
\hline \text {  Net income} &\
 \hline\text {  
OCI for revaluation gain (loss)} &\
\hline \text { Comprehensive income } &\
\hline\
\hline \text { Cash } &\
\hline \text { Land } &\
 \hline\text {  Total assets} &\
\hline\
 \hline\text { Share capital } &\
 \hline\text {  Accumulated revaluation surplus} &\
\hline \text {Retained earnings  } &\
\hline \text {Total shareholder's equity  } &\
\hline
\end{array}
\begin{array}{|r|}
\hline 2020 \
\hline \$ 3,100 \
\hline 2,900 \
\hline \
\hline \
\hline \
\hline\
\hline \
\hline \
\hline{\$6,500} \
\hline 1,550\
\hline {\$8,050}\
\hline \
\hline {\$7,500}\
\hline \
\hline \
\hline \
\hline 
\end{array}
\begin{array}{r|}
\hline2021 \
\hline{\$3,500} \
\hline 2,900\
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline 
\end{array}
\begin{array}{r|}
\hline2022 \
\hline{\$2,600} \
\hline 2,200\
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline 
\end{array}
\begin{array}{r|}
\hline2023 \
\hline{\$2,400} \
\hline 2,300\
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline \
\hline 
\end{array}
\end{array}\)

Accepted Answer

None

Question 18

What is the recoverable amount for this product line? $$\begin{array} { | l | r | } 
\hline & \text { Product KJY } \
\hline \text { Original cost } & \$ 5,200,000 \
\hline \text { Accumulated depreciation } & 2,100,000 \
\hline \text { Fair value } & 4,500,000 \
\hline \text { Costs to sell } & 500,000 \
\hline \text { Value in use } & 4,100,000 \
\hline
\end{array}$$

Accepted Answer

A) $900,000 
B) $3,100,000 
C) $4,000,000 
D) $4,100,000 
A) $900,000 
B) $3,100,000 
C) $4,000,000 
D) $4,100,000

Question 19

Where are gains and losses on agricultural activity reported in the financial statements?

Accepted Answer

A) Gains are recorded through profit and loss, but losses should be recorded in other comprehensive income. 
B) Losses are recorded through profit and loss, but gains should be recorded in other comprehensive income. 
C) Gains and losses are recorded through profit and loss, and nothing should be recorded in other comprehensive income. 
D) Gains and losses are recorded in other comprehensive income, and nothing should be recorded through profit and loss. 
A) Gains are recorded through profit and loss, but losses should be recorded in other comprehensive income. 
B) Losses are recorded through profit and loss, but gains should be recorded in other comprehensive income. 
C) Gains and losses are recorded through profit and loss, and nothing should be recorded in other comprehensive income. 
D) Gains and losses are recorded in other comprehensive income, and nothing should be recorded through profit and loss.

Question 20

How is "discontinued operations" information presented in the financial statements?

Accepted Answer

A) Summary information is presented as well as a subsequent explanation of more extensive breakdowns of revenues, expenses, taxes, and financing cash flow figures. 
B) A single amount is presented for discontinued operations on the balance sheet. 
C) The net profit from discontinued operations is presented separately. 
D) The net gain or loss from disposal of discontinued operations is presented separately. 
A) Summary information is presented as well as a subsequent explanation of more extensive breakdowns of revenues, expenses, taxes, and financing cash flow figures. 
B) A single amount is presented for discontinued operations on the balance sheet. 
C) The net profit from discontinued operations is presented separately. 
D) The net gain or loss from disposal of discontinued operations is presented separately.

Explain when a non-current asset is impaired.

Based on the following information, what is the net amount that this equipment should be reported at on BAC's balance sheet at December 31, 2021? Cost \ 500,000 Accumulated depreciation 300,000 Value in use (sum of discounted cash flows) 220,000 Fair value 240,000 Disposal costs 10,000

Which of the following is correct with respect to the "fair value model"?

When should an entity select the exception to using "fair value less point of sale costs" approach for biological assets?

Which statement is not correct?

Which of the following is correct with respect to the "reversal of impairment loss"?

Based on the following information, what is the recoverable amount? Cost \ 750,000 Accumulated depreciation 530,000 Value in use (sum of discounted cash flows) 300,000 Fair value 200,000 Disposal costs 15,000

Company Ten purchased land for $400,000 during the year. Fair value at the end of the year was $500,000. Prepare the journal entry to record the revaluation adjustment.

What impairment, if any, exists on these product lines? Product A Product B Original cost \ 7,222,000 \ 12,536,000 Accumulated depreciation 2,500,000 4,200,000 Fair value 5,062,000 8,916,000 Costs to sell 90,000 340,000 Value in use 4,375,000 8,100,000

What is a "discontinued operation"?

What is the recoverable amount for this product line? Product KJY Original cost \ 5,200,000 Accumulated depreciation 2,100,000 Fair value 4,500,000 Costs to sell 500,000 Value in use 4,100,000

Where are gains and losses on agricultural activity reported in the financial statements?

How is "discontinued operations" information presented in the financial statements?

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Accrual Accounting

Revenue and Recognition

Cash and Receivables

Inventories

Financial Assets

Property, Plant and Equipment

Intangible Assets, Goodwill, Mineral Resources, and Government Grants

Filters

Exam 10: Applications of Fair Value to Non-Current Assets

Explain when a non-current asset is impaired.

Based on the following information, what is the net amount that this equipment should be reported at on BAC's balance sheet at December 31, 2021? Cost \ 500,000 Accumulated depreciation 300,000 Value in use (sum of discounted cash flows) 220,000 Fair value 240,000 Disposal costs 10,000

Which of the following is correct with respect to the "fair value model"?

When should an entity select the exception to using "fair value less point of sale costs" approach for biological assets?

Which statement is not correct?

Which of the following is correct with respect to the "reversal of impairment loss"?

Based on the following information, what is the recoverable amount? Cost \ 750,000 Accumulated depreciation 530,000 Value in use (sum of discounted cash flows) 300,000 Fair value 200,000 Disposal costs 15,000

Company Ten purchased land for $400,000 during the year. Fair value at the end of the year was $500,000. Prepare the journal entry to record the revaluation adjustment.

What impairment, if any, exists on these product lines? Product A Product B Original cost \ 7,222,000 \ 12,536,000 Accumulated depreciation 2,500,000 4,200,000 Fair value 5,062,000 8,916,000 Costs to sell 90,000 340,000 Value in use 4,375,000 8,100,000

What is a "discontinued operation"?

What is the recoverable amount for this product line? Product KJY Original cost \ 5,200,000 Accumulated depreciation 2,100,000 Fair value 4,500,000 Costs to sell 500,000 Value in use 4,100,000

Where are gains and losses on agricultural activity reported in the financial statements?

How is "discontinued operations" information presented in the financial statements?

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Accrual Accounting

Revenue and Recognition

Cash and Receivables

Inventories

Financial Assets

Property, Plant and Equipment

Intangible Assets, Goodwill, Mineral Resources, and Government Grants

Filters