Topic 1: PPE

Question 1

Cost model

Answer 1

HC
(Acc dep)
(Acc imp)
= CA / BV

Question 2

What is HC

Answer 2

Purchase price + anything else needed to get asset ready to be used

Question 3

Capitalized

Answer 3

To record a cost / expense on the balance sheet for the purpose of delaying full recognition of the expense. Meaning depreciated over time, cost is spread over its useful life.

Question 4

JE to record acquisition of machinery

Answer 4

Item. Xxx
Cash / a/c payable. Xxx

Question 5

What is this JE for?

Land. Xxx
Building. Xxx
Machinery. Xxx
Inventory. Xxx
Cash / a/c payable. Xxx

Answer 5

To record acquisition of multiple assets.

Question 6

Statements for dep exp and Acc dep

Answer 6

Dep exp - IS
Acc dep - BS - contra asset a/c

Question 7

Contra asset def

Answer 7

An asset a/c in which the natural bal of the a/c is 0 or a credit (negative bal) offsetting the asset a/c it is paired with, reducing the value of that asset.

Question 8

Straight line dep equation

Answer 8

(Asset cost - salvage value) / useful life

Salvage value = BV of an asset after dep expensed

Question 9

JE for sale

Answer 9

Cash at bank. Xxx
Loss on disposal (if any). Xxx
Acc Dep. xxx
Asset. Xxx
Gain on disposal (if any). Xxx

Question 10

Exchange of assets JE

Answer 10

New Asset. Xxx
Loss on exchange of old asset (if any). Xxx
Acc Dep - old asset. Xxx
Old asset. Xxx
Gain on exchange of old asset (if any). Xxx

Question 11

Steps is disposal

Answer 11

1) eliminate the asset at HC , Acc dep of the asset
2) recognize the considered received
3) recognize gain or loss on disposal

Question 12

Destruction JE

Answer 12

Dep exp
Acc dep

Cash
Loss on disposal
Acc Dep
Item

Question 13

Donation JE - company gives a donation

Answer 13

Dep exp
Acc Dep

Donation exp
Acc Dep
Item
Gain on disposal

Question 14

Donation JE - company received a donation

Answer 14

Asset (FV)
Contribution received

Question 15

Revaluation increment JE

Answer 15

Acc dep
Asset

Asset
Rev Surplus

Question 16

Revaluation decrement JE

Answer 16

Loss on Revaluation
Asset

Question 17

Steps of revaluation:

Answer 17

1) update Acc dep
Dep exp
Acc dep

2) eliminate Acc dep
Acc dep
Item

3) do the revaluation of the asset - FV / RI / RD

Question 18

What statements RI and RD go to

Answer 18

RI - equity

RD - IS

Question 19

FV > CA

Answer 19

RI

Question 20

CA > FV

Answer 20

RD

Question 21

Steps to revalue land

Answer 21

Land doesn’t depreciate so just:

HC - FV = Xxx

Land. Xxx
Rev Surplus. Xxx

Question 22

JE - decrement reversing previous increment

Answer 22

Rev surplus
Loss on rev
Asset

Question 23

JE - increment reversing previous decrement

Answer 23

Asset
Gain on rev (full gain)
Rev surplus (gain - previous decrement)

Question 24

JE - disposal of revalued land

Answer 24

Land
Rev surplus

Cash
Gain on rev
Land

Rev surplus
RE

Question 25

JE - disposal of revalued asset

Answer 25

Item Cash Dep Acc dep Item Rev surplus Dep Acc dep (FV/ul) Cash Acc dep Item Gain on disposal Rev surplus Retained earnings

Question 26

Impairment JE

Answer 26

Impairment loss Acc impairment loss

Question 27

Ra < ca

Answer 27

Impairment loss

Question 28

Ra > ca

Answer 28

No impairment but can do recovery of impairment

Question 29

Recoverable amount (RA)

Answer 29

Whichever is higher of : - fair value less cost to sell Or - value in use

Question 30

Reversal of impairment loss JE:

Answer 30

Dep Acc dep Imp loss Acc imp loss Acc imp loss Reversal of imp loss Dep Acc dep