Section A-2-1 Asset valuation(7).pdf - Double Declining...

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P1 Section A Double Declining Balance Method 3. Depreciation Schedule Year Book Depreciation Accumulated Book value (beg) Depreciation end of year 1 $34,000 $13,600 $13,600 $20,400 2 $20,400 $ 8,160 $21,760 $12,240 3 $12,240 $ 4,896 $ 26,656 $ 7,344 4 $ 7,344 $ 3,344 $ 30,000 $ 4,000 5 $ 4,000 $ none $ 30,000 $ 4,000
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P1 Section A Composite Method And Group Method The composite method is applied to a collection of assets dissimilar in nature. The composite depreciation rate is determined as follows: Total of annual depreciation for all assets Total cost of all assets The group method is applied to a collection of assets similar in nature.
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P1 Section A Impairments An impairment occurs when: the carrying amount of an asset is not recoverable, and a write-off of the impaired amount is needed To determine the amount of impairment, a recoverability test is used.
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P1 Section A Impairments: The Recoverability Test Impairment? Sum of expected future net cash flows from use and disposal of asset is less than the carrying amount Sum of expected future net cash flows from use and disposal of asset is equal to or more than the carrying amount Impairment has occurred No impairment
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P1 Section A Impairments: The Recoverability Test Impairment has occurred Loss = Carrying amount less Fair value of asset Does an active market exist for the asset? Loss = Carrying amount less present value of expected net cash flows Determine impairment loss Yes No Use company’s market rate of interest
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