F4 - Fixed Asset.

Question 1

what’s the formula of NBV (net book value) in fixed asset?

Answer 1

in AR, we recognize NRV(net realize value, selling price-cost).
In fixed asset, we recognize NBV(net book value, cost-accumulated depreciation).

Question 2

what types of category need to capitalize as a cost?

Answer 2

down payment, PV of the note payable, and shipping and installation charges.

Question 3

under IFRS, how to record gain for re evauation fix asset?

Answer 3

first, calculate fix asset’s carring value (historical cost less accumulated depreciation less impairment),
second, use fair value less the resullt of step 1 = the gain or loss and report in other comprehensive income.

Question 4

2 ways to use in investment property (IFRS only), 1. cost method 2. Fair Value Mehod. How to use cost method?

Answer 4

when investment property is used as cost method ( cost less accumulated depreciation), fir value must also be disclosured.

Question 5

Only under IFRS, valuation of fixed assets use 2 methond?

Answer 5

1. Cost Model = fixed assets (carrying value) are reported at historical less accumulated depreciation less impairment.
2. Revaluation Model = a CLASS of fixed assets is revalued to FAIR value and reported at fair value less subsequent accumulated depreciation and impairment.
   revaluation must be made frequently to ensure that carrying value does not differ materially from fair value at the end of reporting period.
   When fixed assets are reported at fair value, the historical cost equivalent (cost - accu. depre. - impairment) must be discosed.

Question 6

Classify PP&E and land costs?

Answer 6

Property (land), Plant (building), and Equipment are fixed assets if a firm. 
Cost of land(not depreciable):
1. purchase price
2. Broker's commision
3. title and recording fees
4. clearing tree and brush
5. razing (tear down) old building
6. Less: proceeds from sale of existing building, standing timber, etc.

Question 7

Explain land improvement?

Answer 7

Land improvements are depreciable.

1. Fence
2. Water system
3. Sidewalks.
4. Paving.
5. Landscaping.
6. Lighting.

Question 8

How to treat interest cost during construction period?

Answer 8

Interest costs during construction period should be added to cost of land improvement based on weighted average of accumulated expenditured.
Interest should be ONLY capitalized in “discrete manufacturing activity”, so interest incurred to acquire land should be expensed.

Question 9

What 2 rules of capitalized interest?

Answer 9

1. Only capitalized interest on actual expenditure, not whole money borrowed.
2. The amount of capitalized interest must in a lower of :
   - Actual interest cost incurred,
   - Computed capitalized cost(Avoidable cost).

Question 10

What is avoidable interest?

Answer 10

Weighted average amount of accumulated expenditures in a particular period (not total amount borrowed).

Question 11

How to calculate the capitalize interest?

Answer 11

First calculate the total average expenditure (e,g, if they are uniformed , then just divide by 2. If not, then divide by the month and then add them up).
Second, compare the average total expenditure to the borrowing fund. If the average expenditure is greater than the amount of borrowing, then the difference should apply to other interest rate plus the interest rate of amount of borrowing.