Home
Flashcards
Preview
Chapter 11
Home
Get App
Take Quiz
Create
What is an asset's depreciable base?
Original cost
less
: salvage value
Depreciation base
What are the 4 main depreciation methods?
Activity method (units of use or production)
Straight-line
Sum-of-year's digits
Declining 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-salvage
Estimated total service hours
=Depreciation/hour
Multiply by hours used
Straight-line Depreciation
Depreciation as a function of time
Cost less salvage
Estimated 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 asset
2- Compare it to the carrying amt of the asset
3-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
Author
kchiccarine
ID
53266
Card Set
Chapter 11
Description
Depreciation, Impairments and Depletion
Updated
2010-12-08T15:46:27Z
Show Answers
Home
Flashcards
Preview