Final Exam Review

• Intangible development cost and cost to restore are included in the depletion base
• Tangible cost  are not included and depreciate separately

Depletion rate= (cost-salvage) / total estimated units available

• Purchase
• Natural Resource/ Payment method
• Use
• Inventory/ Natural Resource
• Sell
• Cost of Goods Sold/ Inventory

If Current Value > Future Undiscounted Net Cash Flows, the asset is impaired

• 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

If current value > Net Realizable Value(FMV-Disposal), than the asset is impaired

Decrease Carrying Value to the Net Realizable Value and record a loss

• Dr.  Loss on Impairment
• Cr.  Accumulated Depreciation

• Dr.  Loss on impairment
• Dr.  Accumulated Depreciation
• Cr.  Asset

new value-salvage value/ remaining useful life

• 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

• 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

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

• Cost-Amortization=CV
• CV > UNCF impaired
• reduce to fair value, no recoveries

• Cost > Fair Market Value, impaired
• reduce to fair market value, no recoveries

• 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

• Determine FMV of good will
• FMV-net assets(assets-libilities-goodwill when purchased+ adjust for market value)
• =FV of good will

If CV goodwill > FV goodwill, reduce by the difference of the two CV - FV

amount of payment * (months accum/12)

• 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

• 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

• 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

• 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