Understanding Impairment of Assets in Intermediate Accounting I:

School: Batangas State University - Course: ACC 205 - Subject: Accounting

Chapter QUIZ- INTERMEDIATE ACCOUNTING I Impairment of Assets NAME: MERCADO, MARY ELLAINE L.Date: Professor: Sir Arnold MalaluanSection: BSMA 2203Score: QUIZ 1: 1.Under PAS 36Impairment of Assets, which of the following statements best describes 'value in use'? a.The present value of estimated future cash flows expected to arise from the continuing use of an asset and from its ultimate disposal. b.The amount of cash or cash equivalents that could currently be obtained by selling an asset in an orderly disposal. c.The net amount which an entity expects to obtain for an asset at the end of its useful life. d.The amount at which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction. 2.Under PAS 36Impairment of Assets, which of the following terms best describes the higher of an asset's fair value less costs of disposal and its value in use? a.Recoverable amount b.Revalued amount c.Depreciable amount d.Carrying amount 3.Under PAS 36Impairment of assets, which of the following statements best describes the term 'impairment loss'? a.The removal of an asset from an entity's statement of financial position b.The amount by which the carrying amount of an asset exceeds its recoverable amount c.The systematic allocation of an asset's cost less residual value over its useful life d.The amount by which the recoverable amount of an asset exceeds its carrying amount 4.According to PAS 36Impairment of Assets, which of the following terms is defined as: "The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets"? a.Non-current assets b.A cash-operating unit c.An operating segment d.A cash-generating unit 5.PAS 36Impairment of assetsshould be applied in accounting for the impairment of which of the following types of asset? a.Assets arising from construction contracts b.Non-current assets held for sale c.Investment properties measured at fair value d.Non-current assets measured at cost 6.According to PAS 36Impairment of assets, which of the following are relevant in determining a non-current asset's 'value in use'? I.The expected future cash flows from the asset II.The carrying amount of the asset III.The future annual depreciation expense in respect of the asset IV.The time value of money a. I, II, IIIc. I, IV b. II, III, IVd. I, II, IV 7.An entity is considering whether to apply an impairment test to an individual asset or to the cash-generating unit to which that asset belongs. Are the following statements true or false, according to PAS 36Impairment of assets? 1)If the individual asset does not generate cash inflows that are largely independent of those from other assets, then the cash-generating unitshouldbe identified. 2)If the individual asset generates an insignificant proportion of the cash inflows of the entity as a whole, then the cash-generating unitshould notbe identified. Statement (1)Statement (2) a. FalseFalse b. FalseTrue c. TrueFalse d. TrueTrue 8.The Naylor Company has determined that it needs to recognize an impairment loss on each of two non-current assets; plant and land. The relevant amounts are as follows: PlantLand Original cost₱700,000₱1,400,000 Previous revaluationsNil₱450,000 Existing carrying amount₱700,000₱1,850,000 Impairment loss to be recognized in year₱200,000₱300,000 According to PAS 36Impairment of Assets, how should each of the impairment losses be recognized? PlantLand a.In profit or lossIn profit or loss b.In profit or lossIn other comprehensive income c.In other comprehensive incomeIn profit or loss d.In other comprehensive incomeIn other comprehensive income 9.On 1 January 20X2 The Prosper Company acquired a non-current asset with an estimated useful life of 8 years for₱320,000. Non-current assets are accounted for under the cost model and depreciation is charged by the straight-line method.