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10. Which of the following is the major difference between impairment of a fixed asset and impairment of goodwill? a. b. C. d. Problem

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10. Which of the following is the major difference between impairment of a fixed asset and impairment of goodwill? a. b. C. d. Problem #1 1a. The fixed asset is first subjected to a recoverability test, whereas impairment of goodwill does not use the recoverability test. Goodwill is first subjected to a recoverability test, whereas a fixed asset impairment does not use the recoverability test. The impairment of a fixed asset is limited to maximum amount of $100,000, whereas the impairment of goodwill is unlimited. The impairment of goodwill is limited to a maximum amount of $100,000, whereas the impairment of a fixed asset is unlimited. (10 points) For each of the following items, indicate whether the expenditure should be capitalized (C) or expensed (E) in the period incurred. Improvement Replacement of a minor broken part on a machine Expenditure that increases the efficiency and effectiveness of a productive asset but does not increase the salvage value Expenditure that increases the efficiency and effectiveness of a productive asset and increases the asset's salvage value Expenditure that increases the useful life of an existing asset Expenditure that increases the quality of the output of the productive asset Improvement to a machine that increases its fair market value and its production capacity by 30% without extending the machine's useful life Ordinary repairs Expenditures for replacement of heavy-duty batteries and tires on 18-wheeler tractor rigs, where the useful life of the rigs is not increased by these expenditures Major overhaul of 18-wheeler engine

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