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Homework answers / question archive / California Polytechnic State University, Pomona ACC 311 Chapter 11 1)The three factors in cost allocation of a depreciable asset are service life, allocation base, and allocation method

California Polytechnic State University, Pomona ACC 311 Chapter 11 1)The three factors in cost allocation of a depreciable asset are service life, allocation base, and allocation method

Accounting

California Polytechnic State University, Pomona

ACC 311

Chapter 11

1)The three factors in cost allocation of a depreciable asset are service life, allocation base, and allocation method.

 

 

 

      1. The physical life of a depreciable asset is bounded by its service life.

 

 

 

      1. Any method of depreciation should be both systematic and rational.

 

 

 

 

      1. Total depreciation is the same over the life of an asset regardless of the method of depreciation used.

 

 

 

 

      1. Advocates of accelerated depreciation methods argue that their use tends to level out the total cost of ownership of an asset over its benefit period if one considers both depreciation and repair and maintenance costs.

 

 

 

      1. Activity-based methods of depreciation are appropriate for assets whose service life is a function of use rather than time.

 

 

 

      1. Once selected for existing assets, a company must consistently use the same method of depreciation for all subsequent fixed asset acquisitions.

 

 

 

 

      1. Under group and composite depreciation methods, gains and losses on the disposal of individual assets need not be computed.

 

 

 

 

      1. Statutory depletion is the maximum amount of depletion that may be reported in financial statements prepared according to GAAP.

 

 

 

 

      1. A change in the estimated recoverable units used to compute depletion requires retroactive (prospective) adjustments to the financial statements.

 

 

 

 

      1. Changes in the estimates involved in depreciation, depletion, and amortization require retroactive restatement of financial statements.

 

 

 

 

      1. Property, plant, and equipment and finite-life intangible assets must be tested for impairment at least once a year.

 

 

 

      1. International Financial Reporting Standards (IFRS) require goodwill to be tested for impairment at least annually.

 

 

 

 

      1. According to International Financial Reporting Standards (IFRS), property, plant, and equipment must be valued at cost less accumulated depreciation.

 

 

 

      1. Component depreciation, required under International Financial Reporting Standards (IFRS), is

 

allowed but rarely used by U.S. companies.

 

 

 

      1. Biological assets are valued at fair value less estimated costs to sell under International Financial Reporting Standards (IFRS).

 

 

 

      1. According to International Financial Reporting Standards (IFRS), (should be GAAP) an impairment loss for property, plant, and equipment is required only when an asset’s book value exceeds the undiscounted sum of the asset’s estimated future cash flows.

 

 

      1. According to International Financial Reporting Standards (IFRS), the impairment loss for an indefinite-life intangible asset other than goodwill is the difference between book value and the recoverable amount.

 

 

 

      1. According to International Financial Reporting Standards (IFRS), the costs to successfully defend an intangible right normally are capitalized and amortized.

 

 

      1. MACRS (modified accelerated cost recovery system) depreciation is equivalent to sum-of-the- years’ digits depreciation.

 

 

      1. By the replacement depreciation method, depreciation is recorded when assets are replaced.

 

 

 

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