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Exam 11: Property, plant, and Equipment and Intangible Assets: Utilization and Impairment

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Question 71

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Property,plant,and equipment and finite-life intangible assets must be tested for impairment at least once a year.

A) True
B) False

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Question 72

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Gonzaga Company has used the double-declining-balance method for depreciation since it started business in 2012.At the beginning of 2016,the company decided to change to the straight-line method.Depreciation as reported and what it would have been reported if the company had always used straight-line is listed below: Required: What journal entry,if any,should Gonzaga make to record the effect of the accounting change (ignore income taxes)? Explain.

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The change in depreciation method is tre...

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Question 73

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The depreciable base for an asset is:

Required: Assume that the undiscounted sum of future cash flows is $18.2 million,instead of $16.5 million.Determine the amount,if any,of the impairment loss that El Dorado must recognize on these assets.

According to International Financial Reporting Standards (IFRS),the impairment loss for an indefinite-life intangible asset other than goodwill is the difference between book value and the recoverable amount.

On February 20,2016,Genoa Mining Company incurred costs of $3,600,000 to acquire and prepare to extract an estimated 4,000,000 tons of mineral deposits.In 2016,450,000 tons of ore were mined.At the beginning of 2017,Genoa geologists estimated that 3,900,000 tons of ore still remained.In 2017,700,000 tons of ore were mined. Required: Compute depletion for 2016 and 2017.

Using the double-declining balance method,the book value at December 31,2017,would be:

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the correct term.

Broadway Ltd.purchased equipment on January 1,2014,for $800,000,estimating a five-year useful life and no residual value.In 2014 and 2015,Broadway depreciated the asset using the straight-line method.In 2016,Broadway changed to sum-of-years'-digits depreciation for this equipment.What depreciation would Broadway record for the year 2016 on this equipment?

Activity-based methods of depreciation are appropriate for assets whose service life is a function of use rather than time.

Weaver Textiles Inc.has used the straight-line method to depreciate its equipment since it started business in 2012.At the beginning of 2016,the company decided to change to the double-declining-balance (DDB)method.Depreciation as reported and as it would have been reported if the company had always used DDB is listed below: Required: What journal entry,if any,should Weaver make to record the effect of the accounting change (ignore income taxes)? Explain.

Murgatroyd Co.purchased equipment on January 1,2014,for $500,000,estimating a four-year useful life and no residual value.In 2014 and 2015,Murgatroyd depreciated the asset using the sum-of-years'-digits method.In 2016,Murgatroyd changed to straight-line depreciation for this equipment.What depreciation would Murgatroyd record for the year 2016 on this equipment?

Required: Compute depreciation for 2016 and 2017 and the book value of the spooler at December 31,2016 and 2017,assuming the double-declining-balance method is used.