Exam 9: Long-Lived Assets

Under the cost model, self-constructed assets may be recorded at fair market value if the company so wishes, regardless of costs incurred to date.

Training and advertising costs must be expensed under IFRS.

Borrowing costs on qualifying assets must be capitalized under both IFRS and ASPE.

Plant assets may properly include idle equipment awaiting sale.

The cost of an addition to an existing structure should be debited to an asset account and depreciated over the life of the structure or the addition, whichever is shorter.

JP acquired a tract of land and paid for it in full by issuing (A) $400,000 of its 9 percent bonds payable after a year and (B) 50,000 of its common shares. The shares were selling at $17.82 per share. The land should be recorded at a cost of (rounded to the nearest thousands):

Firm A purchased all the outstanding common shares of firm B for $300,000. Information about firm B follows: Book value Market value Total assets \ 600,000 \ 800,000 Total liabilities 550,000 550,000 How much will Firm A record as goodwill on this purchase?

A primary principle in recording and reporting capital assets other than land is that they are recorded at cost when acquired and subsequently are reported at cost or cost less accumulated amortization.

When a corporation issues preferred shares that are readily marketable, in exchange for land, the land should be recorded at the:

Land and buildings held for rent and/or capital appreciation are considered Investment Property under IFRS and may be accounted for using the Fair Value Model.

A patent should be amortized over its legal life, or useful life, whichever is shorter, but the term should not exceed 20 years.

Donated land and buildings would normally be credited to a contributed capital account at their fair market values.

Under IFRS, Property, Plant and Equipment should be broken down to its major components and depreciated accordingly.

Web content development costs may be expensed or capitalized.

Under IFRS, bearer plants are carried at the lower of cost and net realizable values.

On January 1, 2015, The Bargain Bin owned capital asset X that was reflected in the accounts as follows: Cost, $20,000; accumulated amortization, $15,000. The company acquired capital asset Y that had a nonnegotiable actual cash price of $10,750. In full payment, Asset X was traded in and cash of $6,000 was paid by The Bargain Bin. Give the journal entry required for The Bargain Bin under each of the two independent assumptions: Assumption A-Similar assets. Assumption B-Dissimilar assets.

A firm received services that qualify as a donation. The recognition of the donation has what effect on income?

Higher capitalization of overhead costs means higher income over the asset's useful life.

Only purchased Goodwill is recognized on the financial statements.

City Y sets property valuations for tax assessment purposes low in relation to economic values but are reasonably proportionate among different properties. PQ bought improved property in City Y for $40,000 cash. It consisted of land assessed at $6,000, and a building assessed at $10,000. On PQ's books, the land should be valued at $________________ and the building at $______________.