Question

1, ABC Inc. has a machine that, as of December 31, 2018, has the following information: Cost: $10,800; Residual value: $1,800; Age: 2 years; Accumulated depreciation $6,000. Which of the following statements is correct?

	a.	The useful life of the machine is 6 years. The annual depreciation is $1,500.
	b.	The useful life of the machine is 3 years. The annual depreciation is $3,000.
	c.	The useful life of the machine is 6 years. The annual depreciation is $3,000.
	d.	The useful life of the machine is 3 years. The annual depreciation is $1,500.

2.

Which of the following statements is false about the asset Goodwill?

	a.	It only occurs when one company buys another company.
	b.	The value of goodwill is the amount by which the purchase price exceeds the fair market value of the net assets acquired.
	c.	It represents the amount paid to the employees of the acquired company in exchange for the commitment not to leave the firm.
	d.	It is not amortized over the useful life of the asset.

3.

Question 3

DEF Inc. has the following information as of December 31, 2018:

Cost of property and equipment (12/31/2017):      $5,000

Accumulated depreciation (12/31/2017):                           $3,000

Cost of property and equipment (12/31/2018):   $7,000

Accumulated depreciation (12/31/2018):                           $4,000

Capital expenditures in 2018:    $4,000

              There were no disposals of PP&E in 2018

Which of the following statements is correct?

	a.	Depreciation expense in 2018 was $1,000.
	b.	PP&E impairment loss in 2018 was $2,000.
	c.	(a) and (b) are correct.
	d.	None of the above are correct.

4.

At the end of the fiscal year, Walter white Inc. had a machine with a cost of $1,000 and accumulated depreciation of $600. The estimated future cash flows from the machine is $350, and the fair value of the machine is $300. The net book value of the machine after considering impairment is:

	a.	$400.
	b.	$300.
	c.	$350.
	d.	$600.

5.

Which of the following statements is correct?

	a.	The net asset value of PP&E will always be lower under the double-declining-balance depreciation method relative to the straight-line depreciation method.
	b.	The depreciation expense under the double-declining-balance depreciation method will always be lower than the depreciation expense under the straight-line depreciation method.
	c.	The depreciation expense under the double-declining-balance depreciation method will always exceed the depreciation expense under the straight-line depreciation method.
	d.	The net asset value of PP&E under the double-declining-balance depreciation method will never be higher the net asset value under the straight-line depreciation method.

Answer 1

Answer:

1. Machine cost is $10,800

Residual Value is $1,800

Balance useful life is 2 Yrs

Accumulated Depreciation $6,000

from the above figues Statement a.The useful life of the machine is 6 years. The annual depreciation is $1,500 is correct

Explanation :

Annual Deprecxiation =$1,500

Useful Life is 6 years means 4 years already compledted

Annual Depreciation =($10,800-$1,800)/6=$1,500

So Accumulated depreciation for 4 years =4*$1,500=$6,000

So accumulated depreciation is correct

So Answer is a. The useful life of Machine is 6 Years & The anbnual Depreciation is$1,500 is correct

2. Statement c.It represents the amount paid to the employees of the acquired company in exchange for the commitment not to leave the firm is false

Explanation :

"the amount paid to the employees of the acquired company in exchange for the commitment not to leave the firm" is not goodwill

Remaining all statements are correct

So answer is c.It represents the amount paid to the employees of the acquired company in exchange for the commitment not to leave the firm

4.Answer is c.$350

Machine cost =$1,000

Accumulated depreciation =$600

So carrying amount(net of depreciation) =$400

But estimated future cash flow from asset is $350 & Fair value is $300

As per IAS 36 Impairment of Assets,entity's assets are not carried at more than their recoverable amount(.i.e the higher of fair value less costs of disposal and value in use)

So as per above carrying amount is $400 greter than higher of fair value less costs of dispoal($350) or value in use($300) So asset is got impaired

impairment amount =$400-Higher of $350 or $300=$400-$350=$50

So asset value after impairment is =$400-$50=$350

The net book value of the machine after considering impairment is $350

So answer is c.$350

5. d.The net asset value of PP&E under the double-declining-balance depreciation method will never be higher the net asset value under the straight-line depreciation method is correct

Explanation:

Under double-declining balance method of depreciation   higher depreciation expenses in the beginning of an asset’s life and lower depreciation expenses later.So The net asset value of PP&E under the double-declining-balance depreciation method will never be higher the net asset value under the straight-line depreciation method is correct

So Answer is d.The net asset value of PP&E under the double-declining-balance depreciation method will never be higher the net asset value under the straight-line depreciation method is correct.