When an independent valuation expert advises an entity that the salvage value of its plant and machinery had drastically changed and thus the change is material, the entity should (a) Retrospectively change the depreciation charge based on the revised salvage value. (b) Change the depreciation charge and treat it as a correction of an error. (c) Change the annual depreciation for the current year and future years. (d) Ignore the effect of the change on annual depreciation, because changes in salvage values would normally affect the future only since these are expected to be recovered in future.

When an independent valuation expert advises an entity that the salvage value of its plant and machinery had drastically changed and thus the change is material, the entity should (a) Retrospectively change the depreciation charge based on the revised salvage value. (b) Change the depreciation charge and treat it as a correction of an error. (c) Change the annual depreciation for the current year and future years. (d) Ignore the effect of the change on annual depreciation, because changes in salvage values would normally affect the future only since these are expected to be recovered in future.

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter17: Property Transactions: §1231 And Recapture Provisions

Section: Chapter Questions

Problem 3RP

See similar textbooks

Similar questions

Which of the following statements about depreciation is not true? A. Depreciation does not mirror the actual loss of value over time. B. Depreciation is the allocation of the asset’s cost to expense over the expected years of use. C. If the fair value of the asset increases, depreciation is reversed to reflect the change in value. D. U.S. GAAP requires depreciation methods to be systematic and rational.
If the estimated useful life of equipment changes, then this change requires OO a retroactive change in the amount of the periodic depreciation recognized in previous years. that income for the current year be increased. that the amount of the periodic depreciation be changed in the current year and in future years. that no change be made in the periodic depreciation so that depreciation amounts are comparable over the life of the asset. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
According to IAS 16 Property, Plant and Equipment, which, if any, of the following statements about depreciation are correct? The main purpose of depreciation is to reflect the fall in value of an asset over its useful life When an asset is revalued, subsequent depreciation relating to the amount of the revaluation should be debited to the revaluation surplus rather than to the income statement The provision for depreciation ensures that there are funds available to replace an asset when this becomes necessary, though in times of inflation, additional amounts may need to be set aside A change in depreciation method constitutes a change in accounting policy and must be accounted for as such
According to IAS 16 Property, Plant and Equipment, which, if any, of the following statements about depreciation are correct? The main purpose of depreciation is to reflect the fall in value of an asset over its useful life When an asset is revalued, subsequent depreciation relating to the amount of the revaluation should be debited to the revaluation surplus rather than to the income statement The provision for depreciation ensures that there are funds available to replace an asset when this becomes necessary, though in times of inflation, additional amounts may need to be set aside A change in depreciation method constitutes a change in accounting policy and must be accounted for as such A (1) and (4) B (2) and (3) C (4) only D None of the statements is correct
The most appropriate reason for an increase in depreciation expense is that a. Depreciation for prior periods was overstated. b. Major repairs were not recorded. c. A depreciable asset was impaired. d. Retained earnings have been appropriated for a possible loss on retirement. e. Based on a re-evaluation, estimated salvage values have been lowered.
Which of the following statements about depreciation is false?: Depreciation does not apply to most buildings because their usefulness and revenue producing ability generally remain intact over time. Recording depreciation in each period is an application of the expense recognition (matching) principle. Depreciation is required because of wear-and-tear and technological obsolescence. The balance in accumulated depreciation represents the total cost that has been charged to expense since placing an asset in service.
Which statement about depreciation is false?a. A major objective of depreciation accounting is to allocate the cost of using an assetagainst the revenues it helps to generate.b. Depreciation should not be recorded in years in which the market value of the asset hasincreased.c. Obsolescence as well as physical wear and tear should be considered when determiningthe period over which an asset should be depreciated.d. Depreciation is a process of allocating the cost of an asset to expense over its usefullife.
Which amortization method should be used for intangibles that are amortized? the straight-line method; all others are inappropriate a method based on an annual review for impairment any method is appropriate a method based on the expected pattern of benefits to be produced by the asset
All of the following are true regarding the revaluation model allowed under GAAP except; Select one: a. Once selected, the revaluation policy applies to an entire class of property, plant and equipment. b. When an asset is revalued, any increase in carrying amount is reported as miscellaneous revenue. c. After initial recognition, the revalued amount is fair value less subsequent depreciation and impairment losses. d. Revaluations must be made regularly to ensure that the carrying value is not materially different from fair value.
When the auditor wants to test the asset for impairment, the auditor would most likely be concerned with the recoverable amount of an intangible asset. For this purpose, the recoverable amount of an intangible asset is not: a. Fair value less cost to sell b. Value in use c. Fair value less cost to sell or value in use, whichever is lower d. Fair value less cost to sell or value in use, whichever is higher
Which of the following statements about the recoverable amount used in the IFRS impairment test of a long-lived asset is false? Group of answer choices The recoverable amount is the lesser of the fair value of the asset less costs to sell or the asset's value in use. If an asset's recoverable amount is higher than the carrying amount, no impairment loss will be reported. After recognizing an impairment of an asset, the firm carries the asset at its recoverable amount. The recoverable amount may be calculated as the discounted value of expected future cash flows from the asset.
Which of the following best describes an accelerated depreciation method? A. A method by which an equal amount of expense is assigned for every full year of use. B. A method by which depreciation is based on the level of actual usage rather than the passage of time. C. A method of determining depreciation which assigns larger expenses to the initial years of an asset’s service and smaller expenses to the later years. D. A method of allocating the cost of a wasting asset to expense over the periods during which the value is removed from the property.