Fundamental Accounting Principles Volume 2 17th Edition By Kermit D. Larson test bank

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181)       When the cost of the asset changes because of a subsequent capital expenditure, revised depreciation for current and future periods must be calculated and adjusted.

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182)       Depreciation amounts can be revised because of changes in the estimates for residual value, useful life or because of subsequent revenue expenditures.

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183)       An asset with a current book value of $5,000 has a current market value of $2,000. The company should recognize an impairment loss of $3,000.

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184)       If the book value of a property, plant and equipment item is less than the amount to be recovered through the asset's use or sale, the difference is an impairment loss and the asset is described as impaired.

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185)       Impairment can result from a variety of situations that include a significant decline in an asset's market value or a major adverse effect caused by technological, economic, or legal factors.

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186)       Impairment losses must be assessed by companies on an annual basis.

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187)       The gain or loss from disposal of property, plant and equipment is the difference between an asset's book value and the value received.

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188)       Property, plant and equipment can be disposed of by discarding, sale, or exchange of the asset.

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189)       The first step in accounting for the disposal of property, plant and equipment is calculating the gain or loss on disposal.

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190)       Equipment costing $14,000 with accumulated depreciation of $10,000 was sold for $3,000. The company should recognize a $1,000 loss on disposal of the equipment.

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191)       At the time a plant asset is being discarded or sold, it is necessary to update the accumulated depreciation of the plant asset to the date of disposal.

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192)       When accumulated depreciation equals the asset's cost, the asset is fully depreciated. The entry to record the removal of the asset is called exchanging the equipment.

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193)       When assigning values to an exchange of assets you should use the fair value of the asset given up.

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