Instructions: Multiple choice questions 1.) Factors to consider in the depreciation process do NOT include a. the asset's depreciable amount. _b. the period over which to depreciate the asset X C. the asset's fair market value. d. which asset components should be depreciated separately. 2.) Deciding which PPE components to depreciate separately is called La separate depreciation. _ _b. componentization C. group depreciation d. individual asset depreciation. 3.) An asset's useful life a. remains unchanged once it has been determined b. is the same as it's physical life. X c. is affected by physical and economic factors. d. is not affected by physical and economic factors. Depreciation commences or continues when a. the asset has been paid for. b. the asset is available for use. C. the asset's fair value can be recovered. d. the asset is taken out of service. 5.) Which of the following is NOT a time-based depreciation method? a. straight-line. X b. units of production C. double-declining balance. d. any diminishing balance method. 6.) Depletion expense a. is usually part of cost good goods sold. b. includes tangible equipment costs in the depletion base. C. excludes intangible development costs from the depletion base./ d. excludes restoration costs from the depletion base. 111H H 7) On January 1, 2012. Rabbit Corp. acquired machinery which is depreciated using the straighine method with an estimated useful life of 15 years and no residual value On January 1, 2017, Rabbit estimated that the remaining e of this machinery was six years with no residual value. This change should be accounted for a. as prior period adjustment. X b. as the cumulative effect of a change in accounting principle in 2017/1 Lc. by setting future anual depreciation equal to one-sixth of the book value on January 1 2017 d. by continuing to depreciate the machinery over the original 15 year lite. 8.) Changes in the depreciation rate are accounted for as aln) X a. adjustment to current and future periods. __ b. adjustment to the current period only -C. adjustment to future periods only. d. catch-up adjustment to prior periods. 9.) IFRS require that assets must be assessed for indications of impairment a. at the end of every quarter. b. at the end of each reporting period. X c. when events and circumstances indicate that asset's carrying amount may be not recoverable. d. whenever the method of depreciation has changed. 10.) The cost recovery impairment model X a. uses undiscounted cash flows in its determination of impairment. _b. uses discounted cash flows in its determination of impairment. -C. is the method used under IFRS. d. requires the calculation of value in use. 11.) The rational entity impairment model X a does not allow the reversal of previously recognized impairment losses. b. is the method used under ASPE c. uses undiscounted cash flows in its determination of impairment. d. compares the asset's carrying value with its recoverable amount. 12) The sale of a depreciable asset resulting in a loss indicates that the proceeds from the sale were X_a less than book value. b. greater than cost -C. greater than book value. d. less than current market value. 13.) The rate of retum on assets (ROA) is calculated by dividing La average total assets by net income. X b . net revenue by average total assets. - net income by average total assets. d. net income by net revenue 1111111111 YEARS 14) The three main characteristics of intangible assets are X_a identifiability, non-physical existence, and nonmonetary nature b. identifiability, physical existance, and separability. c. separability, identifiability, and nonmonetary nature d. physical existence, nonmonetary nature, and identifiability 15.) Cougar Corp.'s balance sheet includes the following asset: Equipment .............................. $95,000 Less: accumulated depreciation ......... (25.000) Book value (carrying amount) ............. $70,000 After performing its annual review for impairment, Cougar obtains the following data: Asset's value in use ........................ $58,000 Fair value less disposal costs .............. 62,000 higher Instructions Assuming Cougar uses the rational entity impairment model a) Calculate the recoverable amount. b) Calculate the impairment loss. c) Prepare the entry to record the impairment loss. recoverable a) under the rational entity impairment model the amount is the higher of invoke in use or 21 fair value less cost of disposal. In this case less cost of disposed is higher. fair rebe Carrying amount is greater = imporment loss 6 70 762