Page 483 - Accounting Principles (A Business Perspective)

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what alternatives were considered and why did the board conclude that all research and development costs should
be expensed when incurred?
Group project G In a group of one or two other students, go to the library and locate Statement of Financial

Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of", published by the Financial Accounting Standards Board. Write a report to your instructor giving
the highlights of the standard. For instance, what does "impairment" mean and what are its causes? How can one
determine that impairment of an asset has possibly occurred? Also review some of the background information as
to why this was important enough for the FASB to act.

Using the Internet—A view of the real world
Visit the Accounting News Network at Microsoft's website:
http://sba.microsoft.com/apnews/default.asp
Click on each icon to investigate the information available at this site. Browse any of the areas that look
interesting. How would accounting practitioners make good use of this site? In a report to your instructor,
summarize the features available at this site.
Visit the Small Business Administration site at:
http://www.sba.gov

Suppose you wanted to start a small business. What helpful information would you find at this site? Would this
site provide information on how to finance the business? Browse around this site to see what it offers. Then write a
report to your instructor summarizing the types of helpful information this site provides.
Answers to self-test

True-false
False. No more depreciation can be taken on a fully depreciated plant asset.
True. The new asset is recorded at the fair market value of the asset received or given up, whichever is more
clearly evident.
False. The residual value of land should be deducted from total costs subject to depletion.
False. Only intangible assets with finite useful lives should be amortized.
Multiple-choice
d. The cost and accumulated depreciation should not be removed from the accounts until the disposal of the
asset.

a. On the date of exchange, the book value of the old truck is USD 20,700 (USD 45,000 minus accumulated
depreciation of USD 24,300). The trade-in allowance of USD 22,500 indicates a gain on exchange of USD 1,800. In
an exchange of nonmonetary assets not having commercial substance, a gain is not recognized, but reduces the cost
of a new asset. Therefore, the cost of the new truck is USD 55,200 (USD 57,000 minus USD 1,800), and no gain is
recognized.
c. The depletion charge for the first year is:

USD375,000– USD75,000
Depletion charger per ton=
1,000,000
= USD 0.30
Depletion chargefor theyear=USD 0.30×100,000
= USD 30,000

Accounting Principles: A Business Perspective 484 A Global Text