# Chapter 11

 What is an asset's depreciable base? Original costless: salvage valueDepreciation base What are the 4 main depreciation methods? Activity method (units of use or production)Straight-lineSum-of-year's digitsDeclining balance method SOY digits and DD balance are accelerated methods but OVERALL depreciation is always the same regardless of the method used Activity Method Cost-salvageEstimated total service hours =Depreciation/hour Multiply by hours used Straight-line Depreciation Depreciation as a function of time Cost less salvageEstimated service life =Depreciation per year Sum of years digits Depreciation fraction (Depreciation base) = Depreciation expense Formula for determining the denominator in sum of years digits n (n+1)2 =denominator Double-declining balance method Does not use depreciable base--use book value Book value (rate [double that of straight-line])= depreciation expense Impairment When a company writes off the carrying amount of an asset that is not recoverable Recoverability test 1- Determine future cash flows of the asset2- Compare it to the carrying amt of the asset3-If future cash flows < carrying amt = Impairment If future cash flows > carrying amt =No Impairment How is an asset adjusted due to an impairment? Carrying amount - FMV = Impairment loss What is the journal entry to record loss on impairment? Loss on impairment xxx Accumulated Depreciation xxx Depletion Similar to units of activity depreciation Total cost - salvage value Total estimated units available = Depletion cost per unit How is impairment different when the asset will be disposed? Each period the assets are reported at LCM or net realizable value. Impairment loss= carrying amt less FMV + cost of disposal No depreciation taken restoration of impairment loss permitted Authorkchiccarine ID53266 Card SetChapter 11 DescriptionDepreciation, Impairments and Depletion Updated2010-12-08T15:46:27Z Show Answers