,DOWNLOAD THE Test Bank for Accounting Principles Volume 2 8th Edition
l l l l l l l l l l
Weygandt l
CHAPTER 9 l
LONG-LIVED ASSETS l
CHAPTER STUDY OBJECTIVES
l l
1. Calculate lthe lcost lof lproperty, lplant, land lequipment. lThe lcost lof lproperty, lplant, land lequipment
lincludes lall lcosts lthat lare lnecessary lto lacquire lthe lasset land lmake lit lready lfor lits lintended luse. lAll lcosts
lthat lbenefit lfuture lperiods l(that lis, lcapital lexpenditures) lare lincluded lin lthe lcost lof lthe lasset. lWhen
lapplicable, lcost lalsolincludes lasset lretirementlcosts. lWhen lmultiple lassets lare lpurchased lin lone
ltransaction, lor lwhen lan lasset lhas lsignificant lcomponents, lthe lcost lis lallocated lto leach lindividual lasset lor
lcomponent lusing ltheir lrelative lfair lvalues.
2. Apply ldepreciation lmethods lto lproperty, lplant, land lequipment. lAfter lacquisition, lassets lare
laccountedlforlusinglthe lcost lmodellor lthelrevaluationlmodel. lDepreciationlis lrecordedland lassets lare
lcarriedlat lcostlless laccumulated ldepreciation.lDepreciationlis lthe lallocationlof lthelcostlof lallong-lived
lasset lto lexpense lover lits luseful llife l(its lservice llife) lin la lrational land lsystematic lway. lDepreciation lis
lnot la lprocess lof lvaluationland lit ldoes lnot lresult lin lan laccumulation lof lcash. lThere lare lthree lcommonly
lused ldepreciation lmethods:
EffectlonlAnnual
Method Depreciation Calculation
Straight-line Constant lamount (Cost l− lresidual lvalue) l÷
estimatedlusefulllife
l(in lyears)
Diminishing- Diminishing Carryinglamountlat
balance amount beginning lof lyear l×
ldiminishing-balance lrate
Units-of- Varying (Cost l− lresidual lvalue) l÷
production amount totallestimatedlunits-of-
lproduction l× lactual
lactivity lduring lthe lyear
Eachlmethodlresults linlthelsamelamount lofldepreciationloverlthelasset’s lusefulllife.lDepreciation
expenselfor lincome ltax lpurposes lis lcalled lcapitallcost lallowancel(CCA).
3. Explain lthe lfactors lthat lcause lchanges lin lperiodic ldepreciation land lcalculate lrevised
ldepreciation lfor lproperty, lplant, land lequipment. lA lrevision lto ldepreciation lwill lbe lrequired lif lthere
larel(a)lcapitallexpenditures lduringlthe lasset’s lusefulllife; l(b)limpairments linlthelasset’s lfair lvalue; l(c)
lchanges lin lthe lasset’s lfair lvalue lwhen lusing lthe lrevaluation lmodel; land/or l(d) lchanges lin lthe lappropriate
ldepreciation lmethod, lestimated luseful llife, lor lresidual lvalue. lAn limpairment lloss lmust lbe lrecorded lif lthe
lrecoverable lamount lis lless lthan lthe lcarrying lamount. lRevisions lof lperiodic
1
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,DOWNLOAD THE Test Bank for Accounting Principles Volume 2 8th Edition
l l l l l l l l l l
Weygandt
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depreciationlarelmadelinlpresentlandlfuturelperiods,lnotlretroactively.lThelnewlannualldepreciation lis
ldetermined lby lusingltheldepreciable lamount l(carrying lamount lless lthe lrevised lresidual lvalue), land
lthe lremaining luseful llife, lat lthe ltime lof lthe lrevision.
4. Demonstrate lhow lto laccount lfor lproperty, lplant, land lequipment ldisposals. lThe laccounting lfor
lthe ldisposal lof la lpiece lof lproperty, lplant, lor lequipment lthrough lretirement lor lsale lis las lfollows:
(a) Update lany lunrecorded ldepreciation lfor lpartial lperiods lsince ldepreciationlwas llast lrecorded.
(b) Calculatelthelcarryinglamountl(costl–laccumulatedldepreciation).
(c) Calculatelanylgainl(proceedsl>lcarryinglamount)lorllossl(proceedsl<lcarryinglamount)lonldisposal.
(d) Removelthelasset land laccumulated ldepreciationlaccounts lat ltheldatelofldisposal. lRecord lthe
lproceeds lreceived land lthe lgain lor lloss, lif lany.
Anlexchangeloflassetslislrecordedlaslthelpurchaseloflalnewlassetlandlthelsaleloflanloldlasset.lThelnew
lassetlis lrecordedlat lthe lfairlvaluelof lthelassetlgivenluplplus lany lcash lpaidl(or lless lanylcashlreceived).
lThelfair lvaluelof lthe lasset lgivenluplis lcomparedlwithlits lcarrying lamount ltolcalculate lthe lgainlor lloss. lIf lthe
lfair lvalue lof lthe lnew lasset lor lthe lasset lgivenluplcannot lbe ldetermined, lthe lnew llong-lived lasset lis
lrecorded lat lthe lcarryinglamount lof lthe lold lasset lthat lwas lgiven lup, lplus lany lcash lpaid l(or lless lany
lcash lreceived).
5. Record lnatural lresource ltransactions land lcalculate ldepletion. lThe lunits-of-production lmethod lof
ldepreciation lis lgenerally lused lfor lnatural lresources. lThe ldepreciable lamount lper lunit lis lcalculated lby
ldividinglthe ltotalldepreciable lamount lby lthe lnumberlof lunits lestimated ltolbe lin lthe lresource. lThe
ldepreciable lamount lper lunit lis lmultiplied lby lthe lnumber lof lunits lthat lhave lbeen lextracted lto ldetermine
lthe lannual ldepreciation. lThe ldepreciation land lany lother lcosts lto lextract lthe lresource lare lrecorded las
linventory luntil lthe lresource lis lsold. lAt lthat ltime, lthe lcosts lare ltransferred lto lcost lof
lresource lsoldlon lthe lincome lstatement. lRevisions lto ldepreciation lwill lbe lrequired lfor lcapital
lexpenditures lduring lthe lasset’s luseful llife, lfor limpairments, land lfor lchanges lin lthe ltotal lestimated lunits
lof lthe lresource.
6. Identify lthe lbasic laccounting lissues lfor lintangible lassets land lgoodwill. lThe laccounting lfor
ltangible land lintangible lassets lis lmuch lthe lsame. lIntangible lassets lare lreported lat lcost, lwhich lincludes
lall lexpenditures lnecessary lto lprepare lthe lasset lfor lits lintended luse. lAn lintangible lasset lwith la lfinite llife lis
lamortized lover lthe lshorter lof lits luseful llife land llegal llife, lusually lon la lstraight-line lbasis. lThe
lextent lof lthe lannual limpairment ltests ldepends lon lwhether lIFRS lor lASPE lis lfollowed land lwhether lthe
lintangible lasset lhad la lfinite lor lindefinite llife. lIntangible lassets lwith lindefinite llives land lgoodwill lare lnot
lamortized land lare ltested lat lleast lannually lfor limpairment. lImpairment llosses lon lgoodwill lare
lnever lreversed lunder lbothlIFRS land lASPE.
7. Illustrate lthe lreporting land lanalysis lof llong-lived lassets. lIt lis lcommon lfor lproperty, lplant, land
lequipment, land lnatural lresources lto lbe lcombinedlin lfinancial lstatements lunder lthe lheading l―property,
lplant, land lequipment.‖ lIntangible lassets lwith lfinite land lindefinite llives lare lsometimes lcombined lunder
lthe lheading l―intangible lassets‖ lor lare llisted lseparately. lGoodwill lmust lbe lpresented lseparately. lEither lon
lthe lbalance lsheet lorlin lthe lnotes, lthe lcost lof lthe lmajor lclasses lof llong-lived
2
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, DOWNLOAD THE Test Bank for Accounting Principles Volume 2 8th Edition
l l l l l l l l l l
Weygandt
l l l l l l l
assetslis lpresented.lAccumulatedldepreciationl(iflthelassetlisldepreciable)landlcarryinglamountlmust lbe
ldisclosed leither lin lthe lbalance lsheet lor lin lthe lnotes. lThe ldepreciation land lamortization lmethods land lrates,
las lwell las lthe lannual ldepreciation lexpense, lmust lalso lbe lindicated. lThe lcompany’s limpairment lpolicy land
lany limpairment llosses lshould lbe ldescribed land lreported. lUnder lIFRS,
lcompanies lmust linclude la lreconciliation lof lthe lcarryinglamount lat lthe lbeginningland lend lof lthe lperiod lfor
leach lclass lof llong-lived lassets land lstate lwhether lthe lcost lor lrevaluation lmodel lis lused.
Thelassetlturnoverlratiol(netlsalesl÷laverageltotallassets)lislonelmeasurelthatlislusedlbylcompanieslto
lshow lhow lefficiently ltheylare lusingltheir lassets lto lgenerate lsales lrevenue. lA lsecondlratio, lreturn lon
lassets l(profit l÷ laverage ltotallassets), lcalculates lhowlprofitable lthe lcompany lis lin lterms lof lusinglits lassets
lto lgenerate lprofit.
3
Copyright l© l2019 lJohn lWiley l& lSons lCanada, lLtd. lUnauthorized lcopying, ldistribution, lor ltransmission lof lthis lpage lis lstrictly lprohibited.
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l l l l l l l l l l
Weygandt l
CHAPTER 9 l
LONG-LIVED ASSETS l
CHAPTER STUDY OBJECTIVES
l l
1. Calculate lthe lcost lof lproperty, lplant, land lequipment. lThe lcost lof lproperty, lplant, land lequipment
lincludes lall lcosts lthat lare lnecessary lto lacquire lthe lasset land lmake lit lready lfor lits lintended luse. lAll lcosts
lthat lbenefit lfuture lperiods l(that lis, lcapital lexpenditures) lare lincluded lin lthe lcost lof lthe lasset. lWhen
lapplicable, lcost lalsolincludes lasset lretirementlcosts. lWhen lmultiple lassets lare lpurchased lin lone
ltransaction, lor lwhen lan lasset lhas lsignificant lcomponents, lthe lcost lis lallocated lto leach lindividual lasset lor
lcomponent lusing ltheir lrelative lfair lvalues.
2. Apply ldepreciation lmethods lto lproperty, lplant, land lequipment. lAfter lacquisition, lassets lare
laccountedlforlusinglthe lcost lmodellor lthelrevaluationlmodel. lDepreciationlis lrecordedland lassets lare
lcarriedlat lcostlless laccumulated ldepreciation.lDepreciationlis lthe lallocationlof lthelcostlof lallong-lived
lasset lto lexpense lover lits luseful llife l(its lservice llife) lin la lrational land lsystematic lway. lDepreciation lis
lnot la lprocess lof lvaluationland lit ldoes lnot lresult lin lan laccumulation lof lcash. lThere lare lthree lcommonly
lused ldepreciation lmethods:
EffectlonlAnnual
Method Depreciation Calculation
Straight-line Constant lamount (Cost l− lresidual lvalue) l÷
estimatedlusefulllife
l(in lyears)
Diminishing- Diminishing Carryinglamountlat
balance amount beginning lof lyear l×
ldiminishing-balance lrate
Units-of- Varying (Cost l− lresidual lvalue) l÷
production amount totallestimatedlunits-of-
lproduction l× lactual
lactivity lduring lthe lyear
Eachlmethodlresults linlthelsamelamount lofldepreciationloverlthelasset’s lusefulllife.lDepreciation
expenselfor lincome ltax lpurposes lis lcalled lcapitallcost lallowancel(CCA).
3. Explain lthe lfactors lthat lcause lchanges lin lperiodic ldepreciation land lcalculate lrevised
ldepreciation lfor lproperty, lplant, land lequipment. lA lrevision lto ldepreciation lwill lbe lrequired lif lthere
larel(a)lcapitallexpenditures lduringlthe lasset’s lusefulllife; l(b)limpairments linlthelasset’s lfair lvalue; l(c)
lchanges lin lthe lasset’s lfair lvalue lwhen lusing lthe lrevaluation lmodel; land/or l(d) lchanges lin lthe lappropriate
ldepreciation lmethod, lestimated luseful llife, lor lresidual lvalue. lAn limpairment lloss lmust lbe lrecorded lif lthe
lrecoverable lamount lis lless lthan lthe lcarrying lamount. lRevisions lof lperiodic
1
Copyright l© l2019 lJohn lWiley l& lSons lCanada, lLtd. lUnauthorized lcopying, ldistribution, lor ltransmission lof lthis lpage lis lstrictly lprohibited.
mynursytest.store
,DOWNLOAD THE Test Bank for Accounting Principles Volume 2 8th Edition
l l l l l l l l l l
Weygandt
l l l l l l l
depreciationlarelmadelinlpresentlandlfuturelperiods,lnotlretroactively.lThelnewlannualldepreciation lis
ldetermined lby lusingltheldepreciable lamount l(carrying lamount lless lthe lrevised lresidual lvalue), land
lthe lremaining luseful llife, lat lthe ltime lof lthe lrevision.
4. Demonstrate lhow lto laccount lfor lproperty, lplant, land lequipment ldisposals. lThe laccounting lfor
lthe ldisposal lof la lpiece lof lproperty, lplant, lor lequipment lthrough lretirement lor lsale lis las lfollows:
(a) Update lany lunrecorded ldepreciation lfor lpartial lperiods lsince ldepreciationlwas llast lrecorded.
(b) Calculatelthelcarryinglamountl(costl–laccumulatedldepreciation).
(c) Calculatelanylgainl(proceedsl>lcarryinglamount)lorllossl(proceedsl<lcarryinglamount)lonldisposal.
(d) Removelthelasset land laccumulated ldepreciationlaccounts lat ltheldatelofldisposal. lRecord lthe
lproceeds lreceived land lthe lgain lor lloss, lif lany.
Anlexchangeloflassetslislrecordedlaslthelpurchaseloflalnewlassetlandlthelsaleloflanloldlasset.lThelnew
lassetlis lrecordedlat lthe lfairlvaluelof lthelassetlgivenluplplus lany lcash lpaidl(or lless lanylcashlreceived).
lThelfair lvaluelof lthe lasset lgivenluplis lcomparedlwithlits lcarrying lamount ltolcalculate lthe lgainlor lloss. lIf lthe
lfair lvalue lof lthe lnew lasset lor lthe lasset lgivenluplcannot lbe ldetermined, lthe lnew llong-lived lasset lis
lrecorded lat lthe lcarryinglamount lof lthe lold lasset lthat lwas lgiven lup, lplus lany lcash lpaid l(or lless lany
lcash lreceived).
5. Record lnatural lresource ltransactions land lcalculate ldepletion. lThe lunits-of-production lmethod lof
ldepreciation lis lgenerally lused lfor lnatural lresources. lThe ldepreciable lamount lper lunit lis lcalculated lby
ldividinglthe ltotalldepreciable lamount lby lthe lnumberlof lunits lestimated ltolbe lin lthe lresource. lThe
ldepreciable lamount lper lunit lis lmultiplied lby lthe lnumber lof lunits lthat lhave lbeen lextracted lto ldetermine
lthe lannual ldepreciation. lThe ldepreciation land lany lother lcosts lto lextract lthe lresource lare lrecorded las
linventory luntil lthe lresource lis lsold. lAt lthat ltime, lthe lcosts lare ltransferred lto lcost lof
lresource lsoldlon lthe lincome lstatement. lRevisions lto ldepreciation lwill lbe lrequired lfor lcapital
lexpenditures lduring lthe lasset’s luseful llife, lfor limpairments, land lfor lchanges lin lthe ltotal lestimated lunits
lof lthe lresource.
6. Identify lthe lbasic laccounting lissues lfor lintangible lassets land lgoodwill. lThe laccounting lfor
ltangible land lintangible lassets lis lmuch lthe lsame. lIntangible lassets lare lreported lat lcost, lwhich lincludes
lall lexpenditures lnecessary lto lprepare lthe lasset lfor lits lintended luse. lAn lintangible lasset lwith la lfinite llife lis
lamortized lover lthe lshorter lof lits luseful llife land llegal llife, lusually lon la lstraight-line lbasis. lThe
lextent lof lthe lannual limpairment ltests ldepends lon lwhether lIFRS lor lASPE lis lfollowed land lwhether lthe
lintangible lasset lhad la lfinite lor lindefinite llife. lIntangible lassets lwith lindefinite llives land lgoodwill lare lnot
lamortized land lare ltested lat lleast lannually lfor limpairment. lImpairment llosses lon lgoodwill lare
lnever lreversed lunder lbothlIFRS land lASPE.
7. Illustrate lthe lreporting land lanalysis lof llong-lived lassets. lIt lis lcommon lfor lproperty, lplant, land
lequipment, land lnatural lresources lto lbe lcombinedlin lfinancial lstatements lunder lthe lheading l―property,
lplant, land lequipment.‖ lIntangible lassets lwith lfinite land lindefinite llives lare lsometimes lcombined lunder
lthe lheading l―intangible lassets‖ lor lare llisted lseparately. lGoodwill lmust lbe lpresented lseparately. lEither lon
lthe lbalance lsheet lorlin lthe lnotes, lthe lcost lof lthe lmajor lclasses lof llong-lived
2
Copyright l© l2019 lJohn lWiley l& lSons lCanada, lLtd. lUnauthorized lcopying, ldistribution, lor ltransmission lof lthis lpage lis lstrictly lprohibited.
mynursytest.store
, DOWNLOAD THE Test Bank for Accounting Principles Volume 2 8th Edition
l l l l l l l l l l
Weygandt
l l l l l l l
assetslis lpresented.lAccumulatedldepreciationl(iflthelassetlisldepreciable)landlcarryinglamountlmust lbe
ldisclosed leither lin lthe lbalance lsheet lor lin lthe lnotes. lThe ldepreciation land lamortization lmethods land lrates,
las lwell las lthe lannual ldepreciation lexpense, lmust lalso lbe lindicated. lThe lcompany’s limpairment lpolicy land
lany limpairment llosses lshould lbe ldescribed land lreported. lUnder lIFRS,
lcompanies lmust linclude la lreconciliation lof lthe lcarryinglamount lat lthe lbeginningland lend lof lthe lperiod lfor
leach lclass lof llong-lived lassets land lstate lwhether lthe lcost lor lrevaluation lmodel lis lused.
Thelassetlturnoverlratiol(netlsalesl÷laverageltotallassets)lislonelmeasurelthatlislusedlbylcompanieslto
lshow lhow lefficiently ltheylare lusingltheir lassets lto lgenerate lsales lrevenue. lA lsecondlratio, lreturn lon
lassets l(profit l÷ laverage ltotallassets), lcalculates lhowlprofitable lthe lcompany lis lin lterms lof lusinglits lassets
lto lgenerate lprofit.
3
Copyright l© l2019 lJohn lWiley l& lSons lCanada, lLtd. lUnauthorized lcopying, ldistribution, lor ltransmission lof lthis lpage lis lstrictly lprohibited.
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