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Exam 11: Depreciation, Impairment, and Disposition

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Question 1

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Kierov Inc.purchased a building for $800,000 on January 1, 2000.At the time of acquisition, the building had an estimated residual value of $300,000 and an estimated useful life of twenty years.The company has recorded monthly depreciation using the straight-line method.On January 1, 2010, it is decided to put the building up for sale at the price of $1,200,000.At December 31, 2010, the building is still for sale.The correct depreciation to record for 2010 is

A) $25,000.
B) nil.
C) $40,000.
D) $60,000.

E) None of the above
F) A) and B)

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Question 2

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Consider a company's asset that was expropriated by government authorities.The following additional information is available: Under current Canadian GAAP, this situation would be reflected in the company's financial statements as follows:

A) As an extraordinary gain of $1.8 Mill.
B) As a $1.8 Mill.gain from expropriation of assets
C) As a $1.8 Mill.gain from discontinued operations.
D) As a $1.8 Mill.gain that would be included in other comprehensive income.

E) C) and D)
F) A) and B)

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Question 3

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Which of the following best describes the concept of cash-generating units (CGU) ?

Which of the following is most likely an indicator for possible asset impairment?

On January 1, 2003, Selkirk Company purchased equipment at a cost of $80,000.The equipment was estimated to have a residual value of $8,000 and it is being amortized over eight years under the straight-line method.What should be the charge for depreciation of this equipment for the year ended December 31, 2010?

The asset turnover ratio is calculated by dividing

A plant asset has a cost of $48,000 and a residual value of $12,000.The asset has a three-year life.If depreciation in the second year amounted to $4,000, which depreciation method was used?

Which of the following does not describe the cost recovery model?

Which of the following does not describe the rational entity model?

Which of the following is not a time based depreciation method?

On January 1, 2010, Mirage Company purchased a new machine for $1,400,000.The new machine has an estimated useful life of nine years and the residual value was estimated to be $50,000.Depreciation was calculated on the double declining-balance method.What amount should be shown in Storey's balance sheet at December 31, 2011, net of accumulated depreciation, for this machine?

Moritz Company purchased a new machine on May 1, 2001 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, 2010, the machine was sold for $18,000.What should be the loss recognized from the sale of the machine?

A principal objection to the straight-line method of depreciation is that it

On July 1, 2010, Jenkins Corporation purchased factory equipment for $300,000. Residual value was estimated to be $8,000.The equipment will be amortized over ten years using the double declining-balance method.Counting the year of acquisition as one- Half year, Blenko should record depreciation expense for 2011 on this equipment of

Depletion expense

Disclosures relating to PP&E assets

On January 1, 2010, the Accumulated depreciation-Machinery account of a particular company showed a balance of $760,000 At the end of 2010, after the adjusting entries were posted, it showed a balance of $820,000.During 2010, one of the machines which cost $240,000 was sold for $118,000 cash.This resulted in a loss of $7,000.Assuming that no other assets were disposed of during the year, how much was depreciation expense for 2010?

On September 19, 2010, Nara Co.purchased machinery for $285,000.Residual value was estimated to be $15,000.The machinery will be amortized over eight years using the double declining-balance method.If depreciation is calculated on the basis of the nearest full month, Trane should record depreciation expense for 2011 on this machinery of

Portland Corporation purchased a machine on July 1, 2007, for $250,000.The machine was estimated to have a useful life of 10 years with an estimated residual value of $14,000.During 2010, it became apparent that the machine would become uneconomical after December 31, 2014, and that the machine would have no scrap value.Accumulated depreciation on this machine as of December 31, 2009, was $59,000.What should be the Charge for depreciation in 2010 under current GAAP?

Depreciation should be discontinued when