EX1 1. The accounting model IFRS permits for long-lived tangible assets is: A. the cost method. B. the revaluation method. C. either the cost method or the revaluation method under certain circumstances. D. the same method prescribed by U.S. GAAP. 2. When an assets fair value has increased and a firm elects the revaluation method: A. the amount of the necessary write-up is credited to a contra-asset account called revaluation surplus. B. subsequent depreciation is based on the assets original cost. C. under U.S. GAAP, the accumulated depreciation account is removed and the revalued amount becomes the new book value. D. under IFRS, the accumulated depreciation account is removed and the revalued amount becomes the new book value. 3. Which of the following is used to measure the amount of the write-down that must be recognized on an impaired asset? A. Undiscounted total future cash inflows minus future outflows B. Undiscounted future cash inflows minus the current carrying amount of the asset C. Fair value of the asset minus the current carrying amount of the asset D. Discounted total future cash inflows minus future outflows 4. Under IFRS, when an asset is revalued upward, subsequent depreciation is based on the: A. assets original cost. B. method used for determining depreciation on the companys tax returns. C. assets fair value. D. amount of future cash flows the asset is expected to generate. 5. The Simon Company acquired a long-lived asset three years ago at a cost of $125,000. Two years later the asset sustained impairment in value. At the time of the impairment the fair value of the asset was $25,000 and the carrying value was $50,000. The entry to record the impairment would be: A. DR Retained earnings 25,000 CR Accumulated depreciation 25,000 B. DR Impairment loss 25,000 CR Long-lived asset 25,000 C. DR Retained earnings 25,000 CR Extraordinary loss 25,000 D. DR Extraordinary loss 25,000 CR Long-lived asset 25,000 6.If a long-lived assets remaining expected future value falls below its net book value, the asset is considered to be a/an: A. extraordinary item. B. discontinued operation. C. valuable asset. D. impaired asset. 7. Deuce Company purchased a truck for $50,000 on January 2, 2013. The asset has an expected salvage value of $5,000 at the end of its five-year useful life. (DDB switches to straight-line in year 2015.) How much is the depreciation expense in 2017 if double-declining balance depreciation is used and there is a switch to straight-line in year 2015? A. $4,333.33 B. $3,000 C. $9,000 D. $12,000 8. Doggy Co. began construction of a new cutter for the U.S. Coast Guard on January 1, 2014 and completed construction of the ship on October 31, 2015. To finance construction, Doggy took out an $8,000,000, 2-year, 6% construction loan on February 1, 2014. Interest on the loan was to be paid annually on the anniversary date of the loan. Doggy has no other outstanding interest-bearing debt. Doggy made the following expenditures in conjunction with this construction project: Date Amount 2/1/2014 $1,050,000 3/31/2014 $900,000 6/1/2014 $750,000 10/1/2014 $1,000,000 12/31/2014 $600,000 3/1/2015 $900,000 9/1/2015 $250,000 How much interest should Doggy capitalize in 2014 related to the cutter project? A. $129,000 B. $139,500 C. $440,000 D. $480,000 9. Devine Company sold a machine that originally cost $34,000 and accumulated depreciation of $27,000 and for $6,000. Devine had a/an: A. gain of $1,000. B. extraordinary gain of $1,000. C. loss of $1,000. D. extraordinary loss of $1,000. 10. When the differences in useful lives of long-lived assets reflect real economic differences, the attempt on the part of financial analysts to undo these differences may: A. impede profit and loss comparisons. B. enhance profit comparisons. C. enhance profit comparisons, but impede loss comparisons. D. enhance profit and loss comparisons. 11. An impairment loss is reported on the income statement as a/an: A. continuing operations item. B. extraordinary item. C. discontinued operations item. D. accounting change. 12. Financial analysts can make comparisons between the long-lived assets of two companies, both of which use straight-line depreciation, by computing the average useful life of assets with which one of the following formulas? A. Net depreciable property, plant, and equipment/average useful life B. Gross depreciable property, plant, and equipment/average useful life C. Gross depreciable property, plant, and equipment/straight-line depreciation expense D. Straight-line depreciation expense/net depreciable property, plant, and equipment 13. Long-lived assets are: A. non-operating assets expected to yield their economic benefits (or service potential) over a period longer than one year. B. operating assets expected to yield their economic benefits (or service potential) over a period longer than one year. C. non-operating assets expected to yield their economic benefits (or service potential) over a period longer than five years. D. operating assets expected to yield their economic benefits (or service potential) over a period longer than two years. 14. Which one of the following factors makes it difficult for financial analysts to use trend analysis? A. Decreasing costs and prices B. Deflation C. An aging asset base D. A relatively new asset base 15. Deuce Company purchased a truck for $50,000 on January 2, 2013. The asset has an expected salvage value of $5,000 at the end of its five-year useful life. (DDB switches to straight-line in year 2015.) How much is the depreciation expense in 2014 if double-declining balance depreciation is used? A. $6,000 B. $9,000 C. $12,000 D. $15,000 16. When certain kinds of assets are built that require public welfare and safety expenditures at the end of the assets life: A. these estimated future expenditures are subtracted from the carrying value of the asset. B. these asset retirement costs are expensed when asset retirement occurs. C. this fact is only reported in the notes to the financial statements. D. a liability simultaneously arises. 17. Presume that an asset exchange transaction does not culminate an earning process and that the transaction does not involve cash. In such a case: A. a gain will be recognized only when the fair value of the acquired assets exceeds the book value of the relinquished assets. B. a loss will be recognized only when the fair value of the acquired assets exceeds the book value of the relinquished assets. C. the assets acquired are recorded at the book value of the assets relinquished. D. a gain will be recognized only when the fair value of the acquired assets exceeds the fair value of the relinquished assets. 18. The apportionment of the cost of a copyright to future periods under the matching principle is: A. depletion. B. amortization. C. depreciation. D. allocation. 19. Doggy Co. began construction of a new cutter for the U.S. Coast Guard on January 1, 2014 and completed construction of the ship on October 31, 2015. To finance construction, Doggy took out an $8,000,000, 2-year, 6% construction loan on February 1, 2014. Interest on the loan was to be paid annually on the anniversary date of the loan. Doggy has no other outstanding interest-bearing debt. Doggy made the following expenditures in conjunction with this construction project: Date Amount 2/1/2014 $1,050,000 3/31/2014 $900,000 6/1/2014 $750,000 10/1/2014 $1,000,000 12/31/2014 $600,000 3/1/2015 $900,000 9/1/2015 $250,000 How much interest should Doggy expense in 2014? A. $220,000 B. $300,500 C. $340,500 D. $440,000 20. Deuce Company purchased a truck for $50,000 on January 2, 2013. The asset has an expected salvage value of $5,000 at the end of its five-year useful life. (DDB switches to straight-line in year 2015.) What depreciation method is used if depreciation expense is $6,000 in 2016? A. Straight-line B. Sum of years' digits C. Double-declining balance D. Composite