M5 - PP&E: Depreciation and Disposal

Question 1

True or False: Composition of fixed assets should be disclosed in the “summary of significant accounting policies.”

Answer 1

False

Question 2

Sum of the years digits formula

Answer 2

Depr. Exp =
(cost-salvage value) x Remaining Life/ Sum of the years digits

Sum of the Years Digits =

 2

N = estimated useful life

Question 3

True or False: The only methods that ignore salvage value is the annual calculation of depreciation are the declining balance methods. Salvage value is only used as the limitation on total depreciation.

Answer 3

True: Pass Key

Question 4

Double Declining Balance Depreciation Method

Answer 4

Depreciation Expense =

2 x 1/n x (cost-accumulated depreciation)

Question 5

True or False: Both group and composite depreciation are based on the straight-line depreciation method. The group method is for groups of similar assets while the composite method is for collection of dissimilar assets.

Answer 5

True

Question 6

If accumulated depreciation equals original cost, then the asset has been depreciated to $0, Depreciable assets should not be depreciated below salvage value under any depreciation method. True or false

Answer 6

true

Question 7

IFRS requires what kind of depreciation?

Answer 7

Component Depreciation,

Under this method, the machinery, component, and inspection costs are recognized and depreciated separately.

Question 8

How do you calculate depreciable base?

Answer 8

Cost - salvage value

Question 9

Are restoration costs depreciated or depleted?

Answer 9

Depleted.

Estimated restoration costs should be added to the depletable base of the natural resource. In this way, the amount of depletion charged to expense over the life of the mining operation will include the restoration costs.

Question 10

Units-of-production depreciation method reflects that an asset’s service potential declines with use. True or false

Answer 10

True