Assuming a company uses the 150% declining balance method, complete each of the following sentences: What are the three general approaches frequently used in practice to allocate the cost of depreciable assets? The 2-Fund Portfolio Assuming it has already been established a plant asset is impaired, which of the following statements best describes how the loss is measured? Clayton Mining Company purchased a coal mine for $1M cash on 5/1/X4. total capitalized cost of the machine; goes in GL, estimates cash amount the company expects to realize from sale of the asset at the end of useful life, asset's cost account - accumulated depreciation. The exact impairment analysis will depend on what? the asset's cost less its estimated residual value. List the components of asset retirement obligation (ARO) costs. A retirement … Start studying Asset Retirement Obligation - Ch 11. The asset retirement cost increases the carrying amount of the fixed asset for which the ARO was created. These repairs are estimated to extend the useful life by an additional 4 years (to a total of 9 years). Such future costs include the cost of dismantling an asset, removal, site reclamation, nuclear decommissioning and closing mines. Purchased a machine on 1/1/X3 for $1K. We may fantasize about international adventures or beachside escapes, but rarely do we lay the groundwork for realizing our retirement dreams financially. For a working person, the golden years of retirement can be both easy and difficult to imagine. After the asset and ARO are increased by the initial fair value (present value) of future payments to retire the asset. What costs will you incur when you are retired? The retirement quantity is 50 percent of the asset quantity, and the system uses this percentage to calculate the asset's retirement amount. (Check all that apply), time-based methods, activity-based methods, group or composite methods, more in the earlier years of its useful life than in its later years. Assuming a company uses the double-declining balance method, complete each of the following sentences: 1) If the useful life is 6 years, the double-declining balance rate is: → 33.33%. With extra-ordinary repairs for an asset, the amount of depreciation is affected how? All other costs related to the retirement unit should be expensed. The cost to remove the asset is $500. Get all of Hollywood.com's best Celebrities lists, news, and more. What should be the fraction used to compute depreciation expense in the first year of the asset's life? If the fair value can be measured, the loss is the difference in the asset's book value over its fair value. Fundamentals of Asset Management 5 Concepts of cost particularly useful to AM Current replacement cost - The full cost to replace an asset in its current operating environment Life cycle cost - The total cost of an item throughout its life, including the costs of planning, design, acquisition, operations, maintenance, and no; asset's cost is being used up (NOT market value), False; allocation of cost over to income statement. Any asset retirement costs capitalized pursuant to Statement 143 are subject to the full cost ceiling limitation under Rule 4-10(c)(4) of Regulation S-X. When asset retirement obligations are recorded in PeopleSoft, an asset cost adjustment recognizes the increase in the carrying value of the related long-lived asset. Such future costs include the cost of dismantling an asset, removal, site reclamation, nuclear decommissioning and closing mines. Does depreciation represent a decrease in FMV in such cases? The asset cost is $4,000, the life is 4 years, and you are using straight-line depreciation. An asset with low specificity is a more flexible resource, and therefore a more valuable one. What does the double declining balance method assume? The present value of the estimated future payments (initial fair value). How much is capitalized to the asset retirement obligation? Construction cost of the item, which can include labor and employee benefits In other words, when the liability is incurred and is estimable, the ARO is recognized. Costs to Consider. Chapter 9: Accounting for Asset Retirement Obligations and Asset Impairment Accounting for Asset Retirement Obligations SFAS 143 applies to SE and FC. Asset Retirement Obligations. An environmental obligation stems from a legal action in violation of one of various Environmental Protection Acts (i.e., Clean Air Act). When the liabilities are both probable and reasonably estimable. The depreciation charge is calculated as the increased asset base divided by the asset’s useful life on the date of adopting SFAS 143. The obligation must stem from a legal obligation--one that the firm is required to settle as a result of a law or contract. Asset-based fees cost more than any other expense associated with the management of a retirement plan, according to the Multnomah Group, a retirement plan consulting group. The costs to assign to a fixed asset are its purchase cost and any costs incurred to bring the asset to the location and condition needed for it to operate in the manner intended by management. Part of the purchase agreement requires Clayton to restore the site to a condition suitable for recreational use at the end of its life, which is estimated to be in four years. Even the most thoughtful investor may overlook certain costs that will affect their retirement strategy and overall income needs. For most of the assets Statement no. 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