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ACF 100 General qs/ misc L11-21 |Que &Answers
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ACF 100 General qs/ misc L11-21 |Que &Answers1. How do you recognise if something is part of PP&E?: -used in production or supply of goods or services,
rental or admin
-Expected to be used for more than 1 year,
-Has physical substance
-Includes assets constructed by the enterprise
-Probable that future economic benefits will flow to the company
-Cost can be measured reliably
2. When do you recognise Expense of PP&E- DEPRECIATION?: Initial costs: Purchase price, Delivery
and import duties & taxes, Bringing asset to working condition for intended use
Include later improvements in asset cost only if increase originally estimated eco- nomic
benefits
e.g.- Extends useful life
-Substantially improves quality of output
-Enables substantial reduction in operating costs Otherwise
expense as maintenance & repairs
Which costs should be PP&E depreciation and which are repairs to be expensed immediately?
3. Problems of WorldCom & PP&E: -Aggressive expansion & stock market perfor- mance under Bernie
Ebbers (CEO) and Scott Sullivan (CF0)
-Profits peaked in 2000, declined in 2001
-Increased profit by accounting for $3,800 million as new PP&E or improvements (added to PP&E cost),
not expensed as repairs & maintenance
=July 2002 bankrupt
-Today perpetrators are in jail
4. The depreciation method should...: -reflect the pattern in which the asset's economic benefits are
consumed
- It affects timing when depreciation expensed - matching concept
5. What are the two most common depreciation methods?: -Straight line method
-Reducing balance method
6. Reducing balance method: Carrying amount x constant %
7. What do you do to calculate depreciation if estimated useful life or residual value changes part way
through?: Straight line depreciation can always be cal- culated as:
opening carrying amount - Residual value / useful life
8. How does disposal of PP&E affect the BS and IS?: You take the amount the asset will be sold for
(disposal proceeds) - the current carrying expense.
For assistance with your assignments, discussions or any revision materials contact informationhimher@gmail.com
, ACF 100 General qs/ misc L11-21 |Que &Answers
If it is a gain, cash flow is increased on BS (and PP&E reduced). Reduction of Expense on IS.
9. How is the carrying amount shown on the BS?: Comibined Carrying amounts are stored in PP&E under
fixed assets
10.Name examples of intangible assets that could be included on BS: -Intel- lectual property rights
(patents)
-Development costs (products/ tangible assets)
11.What is usually excluded from the balance sheet that are intangible as- sets?: -Human capital
-Customer lists
-Brands
-Research
-Any knowledge economy value
12.How can not having intangible assets on the balance sheet cause prob- lems?: Omission of intangible
assets from accounts leads to less informed deci- sions, so poor allocation of capital
13.Can you name key intangible assets from LANCASTER UNIVERSITY :)?: -
-Reputation: attracting students and employers, 'number 1 university in the North West'
-Top quality research, boosting the reputation and as potential for patents and spin-off businesses.
Some of this research may be represented by patents and copyrights
-Logo
-Staff - their knowledge and skills
-Students: impress employers with knowledge and education?, Qualifications, sources of tuition fees,
alumni donations
- Employers- customers employing graduates, executive training, R&D
14.When can you recognise something as an intangible asset?: -Can measure cost reliably (so has been
purchased)
-Expect future benefits controlled by the enterprise
-So could be development phase of R&D project (as long as feasibility, intention to complete project,
expenditure can be demonstrated)
The Dilemma is to choose either relevance (decision making) or reliability(not entirely sure whether it
actually has that value)?
15.How do you measure intangible assets?: -initially at cost (directly attributed to bring to intended use)
- THEN current cost- amortisation (like depreciation)- impairment losses (unforseen)
For assistance with your assignments, discussions or any revision materials contact informationhimher@gmail.com
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