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34 Cards in this Set
- Front
- Back
Classification of Fixed Assets (PPE) |
Land (Property) Buildings (Plant) Equipment Accumulated Depreciation (contra-asset) |
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Valuation of Fixed Assets GAAP |
historical cost aka purchase price
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Donated fixed assets JE |
Fixed asset (FMV) Gain on non-reciprocal transfer
*unusual and infrequent nature |
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2 Methods of Valuation of Fixed Assets IFRS |
1)Cost method (GAAP) 2)Revaluation Method |
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Revaluation Method (IFRS) |
A class of fixed assets is revalued to fair value and reported on the books
Revaluation model carrying value=FV at revaluation - subsequent acc dept - subsequent impairment
Recognize Revaluation Loss (IS), Gain (OCI), Impairment (OCI-IS) |
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Cost of Equipment |
Invoice price Less cash/other discounts Freight-in Installation charges (testing, and necessary prep) Sales and federal excise taxes |
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Accounting for Additions (increase quantity in FA)
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Capitalize
Fixed Asset Cash/AP |
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Accounting for Improvements and Replacements |
Capitalize a) if carrying value of old asset it known, recognize gain or loss b) if unknown -increase usefulness - capitalize -increase life - reduce Accumulated Depreciation |
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Accounting for Repairs
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1) if ordinary - expense
2) if extraordinary - capitalize (treat as addition, improvement, replacement) |
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Cost of Land |
Purchase price and all costs up to excavation - broker's fee - title and recording fee - legal fees - demolishing of old building less proceeds from sale of the building - site development (filling and leveling) - clearing of trees - existing obligations assumed by buyer of land (mortgage, back taxes)
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Land Improvements |
depreciable additions to Land - fences - sidewalks - paving - landscaping - lighting - interest costs incurred during construction (weighted average of accumulated expenditure) |
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Cost of Buildings |
Excavation forward - purchase price - repairs - improvements - architect's fees - digging a hole for foundation |
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Investment Property (IFRS) |
land or building held by an entity or by a lessee under a finance (capital) lease to earn rentals or for capital appreciation; can be under construction or development
Purchase price + expenses directly related to purchase (legal, professional fees, taxes)
Capitalize subsequent costs except those ordinary or minor |
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Investment Property Measurement Models (IFRS) |
1) Cost Model - historical cost less acc depr, disclose fair value of property 2) Fair Value Model - fair value and NO DEPRECIATION. remove when sold or disposed. Revalue regularly and recognize G/L |
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Computing Capitalized Interest Cost |
weighted average of accumulated expenditure (capitalize interest on money actually spent) - rate on specific construction loan - rate on general debt for excess expenditure *subtotal is computed capitalized interest (avoidable interest)
cannot exceed actual interest costs incurred |
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Depreciation Method choice under IFRS |
has to be appropriate to the method of consumption of the asset and reviewed for appropriateness at each balance sheet date.
Component depreciation is required |
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Component Depreciation |
depreciation is calculated for each component of asset if it has different useful life from each other. Required method under IFRS |
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Composite (dissimilar asset) or Group (similar assets) DEpreciation |
Averaging the economic lives of a number of units and depreciating the whole class over a single life |
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Straight Line Depreciation |
Depreciable base/estimated useful life= depreciation expense |
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Depreciable base |
cost-salvage value |
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Net Book Value |
Cost - Accumulated Depreciation |
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Sum of the Years digits denominator calculation (SYD) |
n (n+1) / 2 n - useful life |
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SY Depreciation expense |
(Cost - Salvage) * remaining life of asset / SYD |
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Double Declining Balance Method |
2 * 1/N * NBV = Depreciation expense
NBV = cost - accumulated depreciation * adjust the NBV for each year *last year's depreciation is a "plug" because Accumulated Depreciation cannot exceed (Cost-SV)
150% DB would be 1.5/N |
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Units of Production |
(Cost - salvage)/Estimated units or hours = Rate per unit or hour
Rate * #units produced(hours worked)=depreciation expense
becomes a variable cost |
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Sale of an asset JE |
Dr. Cash received from Sale Dr. Accumulated Depreciation to Date Dr. Loss on Sale Cr. Sold asset at cost Cr. Gain on Sale |
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Write-off fully depreciated asset |
Accumulated Depreciation (100%) Asset at full cost (100%) |
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total and permanent impairment of fixed asset |
Accumulated Depreciation per records Loss due to impairment (PLUG) Asset at full cost |
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Depletion |
allocation of cost of natural resources: oil, gas, timber, minerals to the production costs (raw materials for example) |
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Purchase cost of natural resources |
Purchase cost + cost of preparing the land for removal (drilling, building mines, tunnels) or prepare asset for harvest |
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Depletion base |
Cost - residual value |
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Cost Depletion (GAAP) |
Depletion base / Current estimated recoverable units = unit depletion rate
unit depletion rate * units extracted = depletion expense
unit depletion rate * units sold = COGS |
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Depletion on land (REAL property) |
REAL property
Residual value (subtract) Extraction/development cost Anticipated restoration cost Land purchase price |
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Calculating inventory using Retail Method (General Rules) |
Column for Cost, Column for Retail
- ending inventory at retail - ending inventory at retail * cost to retail ratio = ending inventory at cost |