Spiceland topic determine periodic depreciation using

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Spiceland - Chapter 11 #144 Topic: Determine periodic depreciation using both time-based and activity-based methods
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145. Briefly explain how to account for a change in depreciation method. A change in depreciation method is treated prospectively, just like a change in accounting estimate. Thus, no entry is required to record the effect of the change. Rather, depreciation for the year of change and subsequent periods would be determined by applying the new depreciation method to the remaining depreciable basis of the assets. AACSB: Reflective Thinking AICPA BB: Critical Thinking Blooms: Remember Difficulty: 2 Medium Learning Objective: 11-06 Explain the appropriate accounting treatment required when a change in depreciation; amortization; or depletion method is made. Spiceland - Chapter 11 #145 Topic: Explain the appropriate accounting treatment required when a change in depreciation, amortization, or depletion method is made
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146. Qualcomm Inc. engages in the development, design, manufacture, and marketing of digital wireless telecommunications products and services. In its 2011 income statement the company reported a $114 million goodwill impairment charge. The charge related to the goodwill of its Firethorn reporting unit. Required: 1. Why did Qualcomm conduct an impairment test of the goodwill of these reporting units? 2. Describe the steps Qualcomm performed to conduct its impairment test. 3. Where would the impairment charge be shown in the company's income statement? 1. Generally accepted accounting principles require that reporting units with significant goodwill be tested annually for impairment. Companies usually perform these tests at the end of the fiscal year. Companies have the option to evaluate relevant events and circumstances to determine whether it is "more likely than not" (a likelihood of more than 50 percent) that the fair value of a reporting unit is now less than its book value. Only if that's determined to be the case will the company perform the first step of the two-step goodwill impairment test. In addition, an impairment test might be conducted during the fiscal year if events and circumstances indicate that goodwill might be impaired. 2. The two-step process is as follows: 1. Recoverability. A goodwill impairment loss is indicated when the fair value of the reporting unit is less than its book value. 2. Measurement. A goodwill impairment loss is measured as the excess of the book value of the goodwill over its "implied" fair value. The implied fair value of goodwill is calculated in the same way that goodwill is determined in a business combination. That is, it's a residual amount, measured by subtracting the fair value of all identifiable net assets from the purchase price using the unit's previously determined fair value as the purchase price.
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3. The charge should be included in operating expenses.
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