Question :
101. Under U.S. GAAP and IFRS reporting standards, management assesses the : 1230672
101. Under U.S. GAAP and IFRS reporting standards, management assesses the firm’s assets for impairment at each reporting date by determining if impairment indicators are present. Impairment indicators do not include
A. the decline in the market value of an asset significantly beyond what would be expected because of use or the passage of time.
B. significant adverse changes in the entity’s technological environment;
C. significant adverse changes in the entity’s economic environment;
D. significant adverse changes in the entity’s legal environment;
E. significant adverse changes in the entity’s Chief Executive Officer’s health.
102. U.S. GAAP provisions require a three-step procedure for measuring and recording impairments for long-lived assets other than nonamortized intangibles and goodwill. An asset impairment loss arises when the carrying values of the assets
A. exceed the sum of the discounted cash flows.
B. exceed the sum of the undiscounted cash flows.
C. exceed the replacement cost.
D. exceed the fair market value less cost to sell.
E. exceed the fair market value.
103. Applying IFRS, the test for an impairment loss for long-lived assets other than nonamortized intangibles and goodwill compares the balance sheet carrying value with the asset’s
A. recoverable amount.
B. sum of the undiscounted cash flows
C. sum of the discounted cash flows
D. expected future value.
E. fair market value.
104. Washington Company owns an apartment building that originally cost $40 million and by the end of the current period has accumulated depreciation of $10 million, with net carrying value of $30 million. Washington Company had originally expected to collect rentals of $3.34 million each year for 30 years before selling the building for $16 million. Unanticipated placement of a new shopping center has caused Washington Company to reassess the future rentals. Washington Company expects the building to provide rentals for only 15 more years before Washington will sell it. Washington Company uses a discount rate of 8% per year in discounting expected rentals from the building.
Washington now expects to receive annual rentals of $2.7 million per year for 15 years and to sell the building for $10.0 million after 15 years; these payments, in total, have a present value of $26.2 million when discounted at 8% per year. The building’s fair value is $25 million today. Costs to sell are estimated at $1,000,000.
(Refer to the Washington Company information) Under U.S. GAAP
A. no impairment loss has occurred.
B. an impairment loss has occurred in the amount of $3.8 million.
C. an impairment loss has occurred in the amount of $6 million.
D. an impairment gain has occurred in the amount of $6 million.
E. an impairment gain has occurred in the amount of $3.8 million.
105. Washington Company owns an apartment building that originally cost $40 million and by the end of the current period has accumulated depreciation of $10 million, with net carrying value of $30 million. Washington Company had originally expected to collect rentals of $3.34 million each year for 30 years before selling the building for $16 million. Unanticipated placement of a new shopping center has caused Washington Company to reassess the future rentals. Washington Company expects the building to provide rentals for only 15 more years before Washington will sell it. Washington Company uses a discount rate of 8% per year in discounting expected rentals from the building.
Washington now expects to receive annual rentals of $2.7 million per year for 15 years and to sell the building for $10.0 million after 15 years; these payments, in total, have a present value of $26.2 million when discounted at 8% per year. The building’s fair value is $25 million today. Costs to sell are estimated at $1,000,000.
(Refer to the Washington Company information) Applying IFRS,
A. no impairment loss has occurred.
B. an impairment loss has occurred in the amount of $3.8 million.
C. an impairment loss has occurred in the amount of $6 million.
D. an impairment gain has occurred in the amount of $6 million.
E. an impairment gain has occurred in the amount of $3.8 million.
106. Madison Company owns an apartment building that originally cost $40 million and by the end of the current period has accumulated depreciation of $10 million, with net carrying value of $30 million. Madison Company had originally expected to collect rentals of $3.34 million each year for 30 years before selling the building for $16 million. Unanticipated placement of a new shopping center has caused Madison Company to reassess the future rentals. Madison Company expects the building to provide rentals for only 15 more years before Madison will sell it. Madison Company uses a discount rate of 8% per year in discounting expected rentals from the building.
Madison now expects to receive annual rentals of $1,200,000 per year for 15 years and to sell the building for $6.0 million after 15 years; these payments, in total, have a present value of $12.2 million when discounted at 8% per year. The building’s fair value is $11.0 million today and costs to sell are $600,000.
Under U.S. GAAP, Madison recognizes
A. no impairment loss.
B. an impairment loss of $17.8 million.
C. an impairment loss of $19.0 million.
D. an impairment loss of $18.7 million.
E. an impairment loss of $30.0 million.
107. Madison Company owns an apartment building that originally cost $40 million and by the end of the current period has accumulated depreciation of $10 million, with net carrying value of $30 million. Madison Company had originally expected to collect rentals of $3.34 million each year for 30 years before selling the building for $16 million. Unanticipated placement of a new shopping center has caused Madison Company to reassess the future rentals. Madison Company expects the building to provide rentals for only 15 more years before Madison will sell it. Madison Company uses a discount rate of 8% per year in discounting expected rentals from the building.
Madison now expects to receive annual rentals of $1,200,000 per year for 15 years and to sell the building for $6.0 million after 15 years; these payments, in total, have a present value of $12.2 million when discounted at 8% per year. The building’s fair value is $11.0 million today and costs to sell are $600,000.
Under U.S. GAAP, Madison would record the following entry
A. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,000,000
Apartment Building (New Valuation) . . . . . . . . . . . . . . . . . . . .10,000,000
Loss on Impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,000,000
Apartment Building (Acquisition Cost) . . . . . . . . . . . . . . . . . . . . . . . . . 40,000,000
B. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
Apartment Building (New Valuation) . . . . . . . . . . . . . . . . . . . .10,000,000
Loss on Impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000,000
Apartment Building (Acquisition Cost) . . . . . . . . . . . . . . . . . . . . . . . . . 40,000,000
C. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
Apartment Building (New Valuation) . . . . . . . . . . . . . . . . . . . 11,000,000
Loss on Impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,000,000
Apartment Building (Acquisition Cost) . . . . . . . . . . . . . . . . . . . . . . . . . 40,000,000
D. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
Apartment Building (New Valuation) . . . . . . . . . . . . . . . . . . . 12,000,000
Loss on Impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000,000
Apartment Building (Acquisition Cost) . . . . . . . . . . . . . . . . . . . . . . . . . 40,000,000
E. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
Apartment Building (New Valuation) . . . . . . . . . . . . . . . . . . . 12,200,000
Loss on Impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,800,000
Apartment Building (Acquisition Cost) . . . . . . . . . . . . . . . . . . . . . . . . . 40,000,000
108. Madison Company owns an apartment building that originally cost $40 million and by the end of the current period has accumulated depreciation of $10 million, with net carrying value of $30 million. Madison Company had originally expected to collect rentals of $3.34 million each year for 30 years before selling the building for $16 million. Unanticipated placement of a new shopping center has caused Madison Company to reassess the future rentals. Madison Company expects the building to provide rentals for only 15 more years before Madison will sell it. Madison Company uses a discount rate of 8% per year in discounting expected rentals from the building.
Madison now expects to receive annual rentals of $1,200,000 per year for 15 years and to sell the building for $6.0 million after 15 years; these payments, in total, have a present value of $12.2 million when discounted at 8% per year. The building’s fair value is $11.0 million today and costs to sell are $600,000.
Under IFRS, Madison recognizes
A. no impairment loss.
B. an impairment loss of $17.8 million.
C. an impairment loss of $19.0 million.
D. an impairment loss of $18.7 million.
E. an impairment loss of $30.0 million.
109. Madison Company owns an apartment building that originally cost $40 million and by the end of the current period has accumulated depreciation of $10 million, with net carrying value of $30 million. Madison Company had originally expected to collect rentals of $3.34 million each year for 30 years before selling the building for $16 million. Unanticipated placement of a new shopping center has caused Madison Company to reassess the future rentals. Madison Company expects the building to provide rentals for only 15 more years before Madison will sell it. Madison Company uses a discount rate of 8% per year in discounting expected rentals from the building.
Madison now expects to receive annual rentals of $1,200,000 per year for 15 years and to sell the building for $6.0 million after 15 years; these payments, in total, have a present value of $12.2 million when discounted at 8% per year. The building’s fair value is $11.0 million today and costs to sell are $600,000.
Applying IFRS, Madison would record the following entry
A. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,000,000
Apartment Building (New Valuation) . . . . . . . . . . . . . . . . . . . .10,000,000
Loss on Impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,000,000
Apartment Building (Acquisition Cost) . . . . . . . . . . . . . . . . . . . . . . . . . 40,000,000
B. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
Apartment Building (New Valuation) . . . . . . . . . . . . . . . . . . . .10,000,000
Loss on Impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000,000
Apartment Building (Acquisition Cost) . . . . . . . . . . . . . . . . . . . . . . . . . 40,000,000
C. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
Apartment Building (New Valuation) . . . . . . . . . . . . . . . . . . . 11,000,000
Loss on Impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,000,000
Apartment Building (Acquisition Cost) . . . . . . . . . . . . . . . . . . . . . . . . . 40,000,000
D. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
Apartment Building (New Valuation) . . . . . . . . . . . . . . . . . . . 12,000,000
Loss on Impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000,000
Apartment Building (Acquisition Cost) . . . . . . . . . . . . . . . . . . . . . . . . . 40,000,000
E. Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
Apartment Building (New Valuation) . . . . . . . . . . . . . . . . . . . 12,200,000
Loss on Impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,800,000
Apartment Building (Acquisition Cost) . . . . . . . . . . . . . . . . . . . . . . . . . 40,000,000
110. U.S. GAAP requires firms to recognize an impairment loss on a nonamortized intangible other than goodwill whenever the carrying value of the asset exceeds its
A. undiscounted cash flows less cost to sell.
B. replacement cost less cost to sell.
C. undiscounted cash flows
D. present value of future cash flows.
E. fair value.
