Exercise 11–24
Requirement 1
IFRS requires an impairment loss to be recognized when an asset’s book value
exceeds the higher of the asset’s value–in-use (present value of estimated future cash
flows) and fair value less costs to sell. In this case, value–in-use and fair value less
Requirement 2
An impairment loss also is indicated because book value ($6.5 million) exceeds
fair value less costs to sell/value-in-use ($5 million). The amount of impairment loss
is $1.5 million.
11–42 Intermediate Accounting, 8/e
Exercise 11–25
Requirement 1
IFRS requires an impairment loss to be recognized when an asset’s book value
exceeds the higher of the asset’s value–in-use (present value of estimated future cash
Requirement 2
U.S. GAAP requires an impairment loss to be recognized when an asset’s book
Exercise 11–26
Requirement 1
An impairment loss is indicated because the estimated undiscounted sum of
Requirement 2
Requirement 3
Requirement 4
An impairment loss is indicated because the estimated undiscounted sum of
future cash flows of $12 million is less than the book value of $18.3 million.
Exercise 11–27
Requirement 1
Determination of implied fair value of goodwill:
Fair value of Centerpoint, Inc. $220 million
Exercise 11–28
Under IFRS, the impairment loss is the difference between book value and the
Exercise 11–29
Requirement 1
Calculation of goodwill:
Consideration exchanged $420 million
Less fair value of net assets:
Requirement 2
Because the book value of the net assets ($410 million) exceeds fair value ($400
million), an impairment loss is indicated.
Determination of implied fair value of goodwill:
Requirement 3
Entry to record the impairment loss:
11–46 Intermediate Accounting, 8/e
Exercise 11–30
Requirement 1
The Codification topic number that provides guidance on accounting for the
impairment of long-lived assets is FASB ASC 360: “Property, Plant, and Equipment.”
Requirement 2
Requirement 3
All of the following information shall be disclosed in the notes to financial
statements that include the period in which an impairment loss is recognized:
Exercise 11–31
The FASB Accounting Standards Codification® represents the single source
of authoritative U.S. generally accepted accounting principles. The specific
citation for each of the following items is:
1. Depreciation involves a systematic and rational allocation of cost
rather than a process of valuation:
FASB ASC 360–10–35–4: “Property, Plant, and Equipment–Overall–
Subsequent Measurement–Depreciation.”
2. The calculation of an impairment loss for property, plant, and
equipment:
FASB ASC 360–10–35–17: “Property, Plant, and Equipment–Overall–
Subsequent Measurement.”
11–48 Intermediate Accounting, 8/e
3. Accounting for a change in depreciation method:
FASB ASC 250–10–45–18: “Accounting Changes and Error
Correction–Overall–Other Presentation Matters.”
Distinguishing between a change in an accounting principle and a change
4. Goodwill should not be amortized:
FASB ASC 350–20–35–1: “Intangibles-Goodwill and Other–Goodwill–
Exercise 11–32
1. To record the replacement of the heating system.
2. To record the addition to the building.
3. To expense annual maintenance costs.
4. To capitalize rearrangement costs.
11–50 Intermediate Accounting, 8/e
Exercise 11–33
Requirement 1
Requirement 2
Requirement 3
Calculation of revised annual amortization:
$6,000,000 Cost
Requirement 4
Requirement 2:
Exercise 11–34
Requirement 1
Cash …………………………………………………………………….. 17,000
Accumulated depreciation—lathe (determined below) …… 56,250
11–52 Intermediate Accounting, 8/e
Exercise 11–34 (concluded)
Requirement 2
Cash ……………………………………………………………………… 17,000
Accumulated depreciation:
Sum-of-the-digits is ([5 (5 + 1)]/2) = 15
Exercise 11–35
List A List B
g 1. Depreciation a. Cost allocation for natural resource.
d 2. Service life b. Accounted for prospectively.
11–54 Intermediate Accounting, 8/e
Exercise 11–36
Requirement 1
To record the acquisition of small tools.
2014
Small tools ……………………………………………………………. 8,000
Exercise 11–36 (concluded)
Requirement 2
To record the acquisition of small tools.
2014
Small tools …………………………………………………………… 8,000
11–56 Intermediate Accounting, 8/e
CPA / CMA REVIEW QUESTIONS
CPA Exam Questions
1. a. Double-declining-balance depreciation rate = 2 x 1/8 = ¼ or 25%
CPA Exam Questions (concluded)
9. c. $12,000.
$80,000 10 years = $ 8,000
10. a. When as asset is revalued, the entire class of property, plant, and equipment
CMA Exam Questions
1. d. Because 50% of the original estimate of quality ore was recovered during
the years 2008 through 2015, recorded depletion of $250,000 [50% x
2. a. Given that the company paid $6,000,000 for net assets acquired with a fair
3. a. The cost should be amortized over the remaining legal life or useful life,
whichever is shorter. In addition to the initial costs of obtaining a patent,
Problem 11–1
Requirement 1
Determine useful life:
$200,000 depreciable base
= 20-year useful life
Requirement 2
Depreciation expense (below) …………………. 20,000
Accumulated depreciation ……………….. 20,000
PROBLEMS
11–60 Intermediate Accounting, 8/e
Problem 11–2
Requirement 1
CORD COMPANY
Analysis of Changes in Plant Assets
For the Year Ending December 31, 2016
Balance Balance
12/31/15 Increase Decrease 12/31/16
Land $ 175,000 $ 312,500 [1] $ — $ 487,500
Explanations of Amounts:
[1] Plant facility acquired from King 1/6/16—allocation to Land and Building:
Allocation in proportion to appraised values at date of exchange:
% of
Amount Total
Land $187,500 25