Final Exam Review

The flashcards below were created by user atcannon on FreezingBlue Flashcards.

  1. Depletion cost
    • Intangible development cost and cost to restore are included in the depletion base
    • Tangible cost  are not included and depreciate separately
  2. Depletion computation
    Units of Production Method
    Depletion rate= (cost-salvage) / total estimated units available
  3. Depletion Journal entries:
    • Purchase
    • Natural Resource/ Payment method
    • Use
    • Inventory/ Natural Resource
    • Sell
    • Cost of Goods Sold/ Inventory
  4. Impairment-test
    step 1-Is the Asset Recoverable (in use)
    If Current Value > Future Undiscounted Net Cash Flows, the asset is impaired
  5. Impairment-test
    Step 2-Impaired asset (in use)
    • Decrease Carrying Value to the Fair Market Value and record a loss.
    • Loss is the difference between the items stated above
    • If Fair Market Value is not determinable use the Future discounted cash flows
  6. Impairment-test
    step 1-Is the Asset Recoverable (for sale)
    If current value > Net Realizable Value(FMV-Disposal), than the asset is impaired
  7. Impairment-test
    Step 2-Impaired asset (for sale)
    Decrease Carrying Value to the Net Realizable Value and record a loss
  8. Journal Entry to Record Impairment
    adjust AD
    • Dr.  Loss on Impairment
    • Cr.  Accumulated Depreciation
  9. Journal Entry to Record Impairment
    adjust asset
    • Dr.  Loss on impairment
    • Dr.  Accumulated Depreciation
    • Cr.  Asset
  10. Impaired asset-Depreciation expense
    new value-salvage value/ remaining useful life
  11. Intangibles
    • Fixed assets that lack physical existence-purchased outside-cost recorded when purchased
    • Finite lives-amortize over useful life
    • Useful life-could be legal life (Patent 20yr)
    • Indefinite lives-no amortization-test impair annually
    • Patents-capitalize legal fees and cost tor register only. capitalize cost of patent infringement suits if success if probable
  12. Resource Development
    (no future revenue)
    • All R&D cost expensed immediately
    • cost relating to non-productive, non-income projects are R&D
    • Expenditures for buildings, depend on future use of those assets depreciate as R&D
  13. Goodwill
    Recorded when a company is purchased, and the price paid exceeds the individual fair value of the net assets(assets-liabilities). No amortization. Test for impairment annually
  14. Impairment of Intangible (finite lives)
    • Cost-Amortization=CV
    • CV > UNCF impaired
    • reduce to fair value, no recoveries
  15. Impairment of Intangible (infinite lives)
    • Cost > Fair Market Value, impaired
    • reduce to fair market value, no recoveries
  16. Impairment of Goodwill
    Step 1
    test for impairment
    • If CV > FMV, impaired
    • CV = use all company items purchased on the book at date of impairment and determine net asset
    • FMV- given or price someone would pay
  17. Impairment of Goodwill
    Step 2
    FMV of goodwill
    • Determine FMV of good will
    • FMV-net assets(assets-libilities-goodwill when purchased+ adjust for market value)
    • =FV of good will
  18. Impairment of Goodwill
    Step 3
    Compare CV and FV of goodwill
    If CV goodwill > FV goodwill, reduce by the difference of the two CV - FV
  19. Capitalization of Interest
    step 1 determine Weighted Average of expenditures
    amount of payment * (months accum/12)
  20. Capitalization of Interst
    step 2
    Determine avoidable interest
    • with the debt amounts keep any construction debt interst. rate
    • average the% of other debt:
    • R=Interst amount/ principle
    • add all interest up to get avoidable interest
  21. Capitalization of interest
    Step 3
    determine actual interest and compare
    • actual interest # vs. avoidable
    • capitalize lower of the two numbers
    • note to capitalize interest only to the point of getting the building ready for use
  22. Asset Exchanges
    commercial substance
    • update depreciation prior to sale
    • determine fair market value and book value of old asset
    • determing gain or loss
    • New asset is recorded at fair FMV
  23. Asset Exchanges
    no commercial substance
    • compute gain or loss
    • if loss record
    • if gain no cash-dont record gain defer to new asset
    • if gain and cash received determine amount of gain to record and what to defer
    • (cash rec/cash rec +fmv of asset received)*gain= gain to recognize defer rest
Card Set
Final Exam Review
Show Answers