61) What is the nature o f the recoverability test for indefinite-life intangibl
ID: 2594938 • Letter: 6
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61) What is the nature o f the recoverability test for indefinite-life intangibl assets? re undiscounted cash A) Is the carrying value of the asset greater than futu flows generated by the asset? o ws the caryýing value of the asset greater than future discounted cash flows generated by the asset? C) Is the carrying value of the asset greater than the fair value of the asset? D) There is no recoverability test for indefinite-life intangible assets. 62) When computing the amount of interest cost to be capitalized, the concept of "avoidable interest" refers to A) that portion of average accumulated expenditures on which no interest cost was incurred B) that portion of total interest cost which would not have been incurred if expenditures for asset construction had not been made C) the amount of interest cost actually incurred on financing undertaken specifically for the acquisition of the asset D) a cost of capital charge for equity restricted to the acquisition of the specific asset 63) Use of the double-declining balance method A) ignores the scrap value of the asset for all purposes B) results in twice the depreciation expense that would be recognized by the straight-line method each period C) means that amount of depreciation expense decreases year after year D) All of the above are true. indicates whether financial information depicts an econom 64) event in a way that is complete, neutral, and free from error A) Relevance B) Faithful representation C) Verifiability D) TruthfulnessExplanation / Answer
61. A) Recoverability test for indefinite life intangible asset is is the carrying value of assets greater than future undiscounted cash. Flows generated by asset.
Recoverability test to determine whether an impairment of a long-lived asset has occurred. If the sum of the expected future net cash flows (undiscounted) is less than the carrying amount of the asset, the asset is considered impaired. If the test indicates impairment has occurred, the company then computes the amount of the impairment loss to record, based on a fair value test.
62) When computing the amount of interest cost to be capitalised,theconcept of avoidable interest refers to
B. That portion of total interest cost which would not have been incurred if expenditures for asset construction had not been made.
63. Use of the double declining method
C. Means that amount of depreciation expenses decreases year after year.
64. FAITHFUL REPRESENTATION indicates whether financial information depicts the substance of an economic event in a manner that is complete, neutral and free from error.
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