Quiz 11.3 – T/F Asset is Depreciated Over…
Intermediate Accounting
Spiceland, Nelson, and Thomas
10th Edition
An asset may be depreciated over the asset’s service life or physical life whichever is longer. True or false?
An asset may be depreciated over the asset’s service life or physical life whichever is longer. True or false?
A company can change its depreciation method under generally accepted accounting principles (GAAP) if the change is adequately justified.
Depreciation method changes are accounted for retrospectively.
If a depreciation error from a prior year is detected, prior financial statements must be retrospectively restated.
To correct an understatement of depreciation expense in a prior year, the current year’s depreciation expense is overstated by the same amount.
Rectifying an overstatement of depreciation expense in a previous year entails a prior period adjustment that raises the current year’s opening balance of retained earnings.
Impairment testing is required at least once a year for property, plant, and equipment, as well as finite-life intangible assets.
Impairment of property, plant, and equipment occurs when the book value of the asset exceeds the undiscounted sum of estimated future cash flows from it.
When testing for impairment of property, plant, and equipment, the impairment loss is calculated as the book value of the asset less the undiscounted sum of estimated future cash flows.
When evaluating the recoverability of intangible assets with indefinite useful lives, estimated future cash flows are typically not considered.