# 3 depreciation for 2014 299000 6 ½ years 46000 4

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3. Depreciation for 2014: \$299,000 ÷ 6 ½ years = \$46,000 4.

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AACSB: Analytic AACSB: Diversity AICPA BB: Global Blooms: Apply Difficulty: 3 Hard Learning Objective: 11-02 Determine periodic depreciation using both time-based and activity-based methods. Learning Objective: 11-10 Discuss the primary differences between U.S. GAAP and IFRS with respect to the utilization and impairment of property; plant; and equipment and intangible assets. Spiceland - Chapter 11 #133 Topic: Determine periodic depreciation using both time-based and activity-based methods Topic: Discuss the primary differences between U.S. GAAP and IFRS with respect to the utilization and impairment of PP & E and intangible assets
134. Smithson Ltd. prepares its financial statements according to IFRS. On March 30, 2013, the company purchased a franchise for \$3,000,000. The franchise has a 10-year contractual life with no residual value. Smithson uses the straight-line amortization method for all intangible assets. On December 31, 2013, the end of the company's fiscal year, Smithson chooses to revalue the franchise. There is an active market for this particular franchise and its fair value on December 31 is \$2,860,000. Required: 1. Calculate amortization for 2013. 2. Prepare the journal entry to record the revaluation of the patent. 3. Calculate amortization for 2014. 1. 2013 amortization: \$3,000,000 ÷ 10 = \$300,000 x 9/12 = \$225,000 2. 3. 2014 amortization: \$2,860,000 ÷ 9.25 = \$309,189 AACSB: Analytic AACSB: Diversity AICPA BB: Global Blooms: Apply Difficulty: 3 Hard Learning Objective: 11-04 Calculate the periodic amortization of an intangible asset. Learning Objective: 11-10 Discuss the primary differences between U.S. GAAP and IFRS with respect to the utilization and impairment of property; plant; and equipment and intangible assets. Spiceland - Chapter 11 #134 Topic: Calculate the periodic amortization of an intangible asset Topic: Discuss the primary differences between U.S. GAAP and IFRS with respect to the utilization and impairment of PP & E and intangible assets

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135. Sanders Corporation operates a factory in Arizona. Due to a change in business climate, an impairment test is deemed appropriate. Management has acquired the following information for the assets at the plant: Required: 1. Determine the amount of impairment loss, if any. 2. If a loss is indicated, prepare the entry to record the loss 3. Repeat requirement 1 assuming that Sanders prepares its financial statements according to International Financial Reporting Standards. Also assume that the estimated fair value of the factory approximates fair value less costs to sell. 1. An impairment loss is indicated because the estimated undiscounted sum of future cash flows of \$110 million is less than the book value of \$121 million. The amount of the loss to be reported is calculated using the estimated fair value rather than the undiscounted future cash flows: 2.
3. Impairment loss is the difference between book value and the recoverable amount. The recoverable amount is \$94 million, the higher of the present value of estimated future cash flows (\$94 million) and the fair value less costs to sell (\$90 million).

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