Principles of Financial Accounting · free preview
Special Issues in Accounting for Long-Term Assets
Natural resources are depleted as they are extracted, assets are tested for impairment and written down when carrying value exceeds recoverable value, and exchanges of similar assets carry the old asset's book value into the new one.
1. Depletion of natural resources
Depletion of natural resources
2. Impairment of long-lived assets
Impairment of long-lived assets
3. Exchanges of similar assets
Exchanges of similar assets
4. Retirement and sale
Retirement and sale
5. Depletion versus depreciation
What distinguishes depletion from depreciation?
6. Impairment trigger
Which event would trigger an impairment test for a long-lived asset?
7. Similar asset exchange
A machine with cost of 60,000 dollars and accumulated depreciation of 40,000 dollars is traded for a similar machine, with 5,000 dollars cash paid. What is the new machine's recorded cost?
8. Impairment reversal rule
An impaired asset later recovers market value. How is the recovery treated under GAAP?
9. Depletion per ton
A depletable base of 4,800,000 dollars covers 500,000 tons. Compute depletion per ton in dollars, number only.
10. Exchange book value
Equipment costs 60,000 dollars with 40,000 dollars of accumulated depreciation. Compute book value given up in an exchange in dollars, number only.
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