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Exam 13: Long-Term Operating Assets: Departures From Historical Cost

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Question 21

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To determine the implied fair value of goodwill,the company will compare the fair value of the reporting unit (including goodwill) with ________.

A) the fair value of the net assets of the reporting unit (without goodwill)
B) the fair value of the net assets of the reporting unit (including goodwill)
C) the fair value of the reporting unit (without goodwill)
D) the book value of the reporting unit (without goodwill)

E) All of the above
F) A) and B)

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Question 22

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In 2017,Yumster Company determined that a production machine used in its operations was impaired and an impairment loss of $110,000 was recognized.In 2017,the fair value of the asset increased by $170,000 due to an unexpected resurgence in demand for the products the machine was designed to produce.How would the gain due to increase in fair value be recognized in 2017?

A) U) S.GAAP permits the recognition of this impairment reversal as income from continuing operations.
B) U) S.GAAP permits the recognition of this impairment reversal as other comprehensive income.
C) U) S.GAAP allows the recognition of this impairment reversal as either income from continuing operations or as other comprehensive income,depending upon management's intent.
D) U) S.GAAP does not permit recognition of gains on reversal of previous impairment loss write-downs.

E) A) and B)
F) A) and D)

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Question 23

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One example of an impairment indicator is a significant increase in the market price of an asset or asset group.

IFRS allows recoveries of impairment losses.What related disclosures are required and at what organizational level are they required?

Impairment of a long-term operating asset occurs when ________.

If impairment indicators suggest that an asset might be impaired,the firm then performs a ________.

Devo Co.has an indefinite-life intangible asset with a carrying value of $782,000.The undiscounted cash flows expected to be realized from that asset total $827,000; the discounted cash flows are $574,000; and the fair value of the asset has been determined to be $646,000.What is the new carrying value of the asset after impairment loss has been recorded?

Visdant Company provided the following information: The qualitative assessment of goodwill is completed and it is more likely than not that goodwill is impaired.Describe the process for determining if Visdant needs to record a goodwill impairment loss and prepare any required journal entries.

The implied fair value of goodwill is calculated as the difference between ________.

Which of the following is not an impairment indicator?

Describe the accounting requirements for a long-term asset that is retired from operations and held for disposal or sale.

What is the nature of the recoverability test for indefinite-life intangible assets?

For which of the following does U.S.GAAP permit recognition of recovery of impairment?

IFRS permits firms to waive the annual goodwill impairment test and instead utilize the prior year's test.

Impairment loss equals carrying value less fair value.

In 2011,Yondoor Inc.Company acquired production machinery which now has a book value of $740,000.The undiscounted cash flows from use of the machinery is $365,000.and it's fair value is $305,000.Yondoor has determined that an impairment loss has occurred.What is the carrying value of the machinery after the journal entry to record the impairment loss has been recorded?

All of the following are key steps related to accounting for impairments of long-term operating assets except ________.

Deluxe Corp.has four international divisions.One of them,RohrSchockt Inc.,was acquired on January 1,2016,for €700,000,000,and recorded goodwill of €80,000,000 as a result of that purchase.At December 31,2016,RohrSchockt had value in use of €635,000,000 and a book value (including goodwill) of €675,000,000.The total fair value of RohrSchockt was €650,000,000.What amount of loss on impairment of goodwill should Deluxe record in 2016?

In 2010,Bambung Corporation acquired production machinery at a cost of £410,000.In 2013 when accumulated depreciation was £100,000,Banbung reported an impairment loss of £75,000.Now,in 2017 the machinery has a book value of £190,000.The recoverable amount of the machinery is £210,000.and its value in use is £195,000.During impairment testing,Bambung recognized the possibility of a reversal of the previous impairment loss.What amount,if any,should Bambung recognize as a reversal of impairment loss? A)£75,000 B)£20,000 C)£ 5,000 D)-0-

Which of the following is not a required disclosure requirement under both U.S.GAAP and IFRS?