Indicate whether each of the following statements is true or false. An impairment loss is the amount by which the carrying amount of the asset exceeds the sum of the expected future cash flows from the use of that asset. Answer The economic performance of an asset being worse than expected can be viewed as an external indicator of impairment of asset values for property, plant and equipment. Answer Under IFRS, an impairment loss can be reversed when estimates change.

Indicate whether each of the following statements is true or false. An impairment loss is the amount by which the carrying amount of the asset exceeds the sum of the expected future cash flows from the use of that asset. Answer The economic performance of an asset being worse than expected can be viewed as an external indicator of impairment of asset values for property, plant and equipment. Answer Under IFRS, an impairment loss can be reversed when estimates change.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 14MC: Which of the following is true regarding special issues in accounting for long-term assets? A. An...

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Which of the following is true regarding special issues in accounting for long-term assets? A. An assets useful life can never be changed. B. An assets salvage value can never be changed. C. Depreciation expense calculations may need to be updated using new and more accurate estimates. D. Asset values are never reduced in value due to physical deterioration.
The following statements relate to the depreciation of property, plant and equipment. Which statement is incorrect? A. the change in the expected pattern of consumption of economic benefits of a depreciation asset should be accounted for as a change in accounting policy and the effect is included in retained earnings. b. The change in the expected pattern of consumption of economic benefits of a depreciable asset should be accounted for as a change in accounting estimate and the effect is included in the determination of income or loss in the period of change and future periods. c The sum of unit method results in a charge based on the expected use or output of the asset D The useful life of an Item of property, plant and equipment should be reviewed periodically and it expectations are significantly different from previous estimates the depreciation charge for the current and future periods should be adjusted
Question 1 Which of the following is not correct in relation to the reversal of an impairment loss of an individual asset? If the individual asset is recorded under the cost model, then the increase in the carrying amount is recognised immediately in profit or loss. Where the recoverable amount is less than the carrying amount of an individual asset, the reversal of a previous impairment loss requires adjusting the camying amount of the asset to recoverable amount. When reversing an impairment loss, the carrying amount cannot be increased to an amount in excess of the carrying amount that would have been determined had ne impairmert los been recognised. O For a depreciable asset there needs to be a calculation of carrying amount using the depreciation variables applied before the impairment loss to determine what the carrying amount would have been if there had been no impairment loss.
Once an asset has been determined to be impaired, the amount of impairment is measured as: The asset's cost minus the fair value The asset's future cash inflows minus the book value The asset's book value minus the fair value The asset's cost minus the book value
Which statement about depreciation is false?a. A major objective of depreciation accounting is to allocate the cost of using an assetagainst the revenues it helps to generate.b. Depreciation should not be recorded in years in which the market value of the asset hasincreased.c. Obsolescence as well as physical wear and tear should be considered when determiningthe period over which an asset should be depreciated.d. Depreciation is a process of allocating the cost of an asset to expense over its usefullife.
What element must be present when determining if an asset is a depreciating asset? a. An asset that holds its value for a period of time or increases in value for a period. b. An asset that has a limited effective life. c. A fixture that completely loses its value. d. An asset that cannot reasonably be expected to decline in value over time.
Impairment loss is a situation whenSelect one:a. Carrying amount of an asset is greater than recoverable amount of it.b. Carrying amount of an asset is smaller than that of recoverable amount of it.c. Carrying amount of an asset is equal to recoverable amount of it.d. Correct option is not listed
Why is depreciation expense recognized? Select one: a. To provide a better estimate of the market value of the depreciated assets. b. So that the balance sheet value of plant assets will more accurately reflect the replacement cost of the assets. c. To ensure that cash will be available at the end of the assets' useful life in order to replace it. d. To match the cost of the asset against the revenue using a reasonable allocation. method. Save AnswersNext
Which of the following is not likely to be an indicator of possible asset impairment? O evidence of obsolescence or physical damage. O a significant decrease in the asset's market value. O the carrying amount of the entity's net assets is greater than the entity's market capitalization. O costs incurred for asset acquisition or operation are significantly lower than originally expected. WEDNESDAY Save for Later
What is the purpose of charging depreciation in financial statements? A To allocate the cost of a non-current asset over the accounting periods expected to benefit from its use B To ensure that funds are available for the eventual replacement of the asset C To reduce the cost of the asset in the statement of financial position to its estimated market value D To account for the ‘wearing-out’ of the asset over its life
in calculating an impairment loss, which TWO of the following are correct? Assets should be carried at the higher of their carrying amount and recoverable amount Recoverable amount is the higher of value in use and fair value less costs of disposal Recoverable amount is the lower of value in use and fair value less costs of disposal Assets should be carried at the lower of their carrying amount and recoverable amount
Which of the following statements is/are FALSE: I. Following the acquisition of an item of property, plant and equipment, subsequent expenditure for this item that will extend the asset’s useful life and increase the asset’s capacity is capitalised. II. Investment property does not get depreciated, unless it is measured at cost. III. In the statement of comprehensive income, costs can be analysed according to function or nature. Costs analysed according to function are classified into the following categories: distribution & selling costs; administrative expenses; other operating expenses (or income). IV. Because of the prudence convention, inventories are expensed in the income statement as cost of goods sold when they are sold, and not when they are bought in by the business and paid for. V. A complete set of financial statements consists of the statement of financial position, the statement of comprehensive income, the statement of changes in equity and the statement of…