MCQ questions on impairment loss based on US GAAP:
Section A...
1. Under US GAAP, an impairment loss is recognized when the carrying amount of an asset exceeds its:
A) Fair value
B) Book value
C) Recoverable amount
D) Undiscounted future cash flows
Answer:
2. Which of the following is a step in the impairment test for a long-lived asset under US GAAP?
A) Compare the carrying amount to the fair value
B) Compare the carrying amount to the undiscounted future cash flows
C) Recognize an impairment loss if the carrying amount exceeds the fair value
D) Recognize an impairment loss if the carrying amount exceeds the book value
Answer:
3. Under US GAAP, an impairment loss is calculated as the difference between the carrying amount and:
A) Fair value
B) Book value
C) Recoverable amount
D) Undiscounted future cash flows
Answer:
4. Which of the following is true regarding the recognition of impairment losses under US GAAP?
A) Impairment losses are recognized in other comprehensive income
B) Impairment losses are recognized in the income statement
C) Impairment losses are not recognized
D) Impairment losses are recognized in the balance sheet
Answer:
5. Under US GAAP, a company is required to test goodwill for impairment:
A) Annually
B) Quarterly
C) Monthly
D) Only when there is an indication of impairment
Answer:
6. Which of the following is a factor that indicates an impairment loss may have occurred?
A) Decrease in market value
B) Increase in market value
C) Increase in useful life
D) Decrease in residual value
Answer:
7. Under US GAAP, an impairment loss is reported in the income statement as:
A) A separate line item
B) A component of operating income
C) A component of non-operating income
D) A footnote disclosure only
Answer:
Section B...
illustration on impairment loss as per US GAAP:
*Illustration:*
Company A has a manufacturing equipment with a carrying amount of $100,000. The equipment was purchased 5 years ago and has a remaining useful life of 5 years. Due to technological advancements, the equipment's fair value has declined to $70,000. The company's management estimates that the equipment's undiscounted future cash flows are $80,000.
*Required:*
Determine if an impairment loss should be recognized and calculate the impairment loss, if any.
*Answer:*
*Step 1: Test for impairment*
*Step 2: Calculate the impairment loss*
*Journal Entry*
Section C....20 questions impairment loss as per US GAAP:
1. What is the primary objective of the impairment test under US GAAP?
A) To determine the fair value of an asset
B) To determine the recoverable amount of an asset
C) To determine if an asset's carrying amount exceeds its undiscounted future cash flows
D) To determine the asset's remaining useful life
Answer:
2. Which of the following is a step in the impairment test for a long-lived asset under US GAAP?
A) Compare the carrying amount to the fair value
B) Compare the carrying amount to the undiscounted future cash flows
C) Recognize an impairment loss if the carrying amount exceeds the fair value
D) Recognize an impairment loss if the carrying amount exceeds the book value
Answer:
3. Under US GAAP, an impairment loss is calculated as the difference between the carrying amount and:
A) Fair value
B) Book value
C) Recoverable amount
D) Undiscounted future cash flows
Answer:
4. Which of the following is true regarding the recognition of impairment losses under US GAAP?
A) Impairment losses are recognized in other comprehensive income
B) Impairment losses are recognized in the income statement
C) Impairment losses are not recognized
D) Impairment losses are recognized in the balance sheet
Answer:
5. Under US GAAP, a company is required to test goodwill for impairment:
A) Annually
B) Quarterly
C) Monthly
D) Only when there is an indication of impairment
Answer:
6. Which of the following is a factor that indicates an impairment loss may have occurred?
A) Decrease in market value
B) Increase in market value
C) Increase in useful life
D) Decrease in residual value
Answer:
7. Under US GAAP, an impairment loss is reported in the income statement as:
A) A separate line item
B) A component of operating income
C) A component of non-operating income
D) A footnote disclosure only
Answer:
8. Which of the following is a characteristic of an impaired asset under US GAAP?
A) The asset's carrying amount exceeds its fair value
B) The asset's carrying amount exceeds its undiscounted future cash flows
C) The asset's fair value exceeds its carrying amount
D) The asset's useful life has been extended
Answer:
9. Under US GAAP, an impairment loss is recognized when:
A) The asset's carrying amount exceeds its fair value
B) The asset's carrying amount exceeds its undiscounted future cash flows
C) The asset's fair value exceeds its carrying amount
D) The asset's useful life has been extended
Answer:
10. Which of the following is a method used to estimate the fair value of an asset under US GAAP?
A) Market approach
B) Income approach
C) Cost approach
D) All of the above
Answer:
11. Under US GAAP, an impairment loss is calculated using:
A) The asset's carrying amount and fair value
B) The asset's carrying amount and undiscounted future cash flows
C) The asset's fair value and residual value
D) The asset's carrying amount and residual value
Answer:
12. Which of the following is true regarding the reversal of impairment losses under US GAAP?
A) Impairment losses can be reversed
B) Impairment losses cannot be reversed
C) Impairment losses can be reversed only if the asset's fair value increases
D) Impairment losses can be reversed only if the asset's carrying amount decreases
Answer:
13. Under US GAAP, an impairment loss is recognized:
A) Immediately
B) Over the asset's remaining useful life
C) When the asset is sold
D) When the asset is abandoned
Answer:
14. Which of the following is a disclosure requirement for impairment losses under US GAAP?
A) The amount of the impairment loss
B) The reason for the impairment loss
C) The asset's carrying amount before and after the impairment loss
D) All of the above
Answer:
15. Under US GAAP, an impairment loss is calculated using:
A) The asset's carrying amount and fair value
B) The asset's carrying amount and undiscounted future cash flows
C) The asset's fair value and residual value
D) The asset's carrying amount and residual value
Answer:
16. Which of the following is true regarding the recognition of impairment losses for assets held for sale under US GAAP?
A) Impairment losses are recognized in the income statement
B) Impairment losses are recognized in other comprehensive income
C) Impairment losses are not recognized
D) Impairment losses are recognized in the balance sheet
Answer:
17. Under US GAAP, an impairment loss is recognized when:
A) The asset's carrying amount exceeds its fair value
B) The asset's carrying amount exceeds its undiscounted future cash flows
C) The asset's fair value exceeds its carrying amount
D) The asset's useful life has been extended
Answer:
18. Which of the following is a method used to estimate the fair value of an asset under US GAAP?
A) Market approach
B) Income approach
C) Cost approach
D) All of the above
19. Under US GAAP, an impairment loss is calculated using:
A) The asset's carrying amount and fair value
B) The asset's carrying amount and undiscounted future cash flows
C) The asset's fair value and residual value
D) The asset's carrying amount and residual value
Answer
20. Which of the following is true regarding the reversal of impairment losses under US GAAP?
A) Impairment losses can be reversed
B) Impairment losses cannot be reversed
C) Impairment losses can be reversed only if the asset's fair value increases
D) Impairment losses can be reversed only if the asset's carrying amount decreases
Answer:
www.gmsisuccess
Answers:
Section A....
Here are some MCQ questions with answers on impairment loss based on US GAAP:
1. Under US GAAP, an impairment loss is recognized when the carrying amount of an asset exceeds its:
A) Fair value
B) Book value
C) Recoverable amount
D) Undiscounted future cash flows
Answer: D) Undiscounted future cash flows
2. Which of the following is a step in the impairment test for a long-lived asset under US GAAP?
A) Compare the carrying amount to the fair value
B) Compare the carrying amount to the undiscounted future cash flows
C) Recognize an impairment loss if the carrying amount exceeds the fair value
D) Recognize an impairment loss if the carrying amount exceeds the book value
Answer: B) Compare the carrying amount to the undiscounted future cash flows
3. Under US GAAP, an impairment loss is calculated as the difference between the carrying amount and:
A) Fair value
B) Book value
C) Recoverable amount
D) Undiscounted future cash flows
Answer: A) Fair value
4. Which of the following is true regarding the recognition of impairment losses under US GAAP?
A) Impairment losses are recognized in other comprehensive income
B) Impairment losses are recognized in the income statement
C) Impairment losses are not recognized
D) Impairment losses are recognized in the balance sheet
Answer: B) Impairment losses are recognized in the income statement
5. Under US GAAP, a company is required to test goodwill for impairment:
A) Annually
B) Quarterly
C) Monthly
D) Only when there is an indication of impairment
Answer: A) Annually
6. Which of the following is a factor that indicates an impairment loss may have occurred?
A) Decrease in market value
B) Increase in market value
C) Increase in useful life
D) Decrease in residual value
Answer: A) Decrease in market value
7. Under US GAAP, an impairment loss is reported in the income statement as:
A) A separate line item
B) A component of operating income
C) A component of non-operating income
D) A footnote disclosure only
Answer: A) A separate line
Section B... Here is an illustration with answer on impairment loss as per US GAAP:
*Illustration:*
Company A has a manufacturing equipment with a carrying amount of $100,000. The equipment was purchased 5 years ago and has a remaining useful life of 5 years. Due to technological advancements, the equipment's fair value has declined to $70,000. The company's management estimates that the equipment's undiscounted future cash flows are $80,000.
*Required:*
Determine if an impairment loss should be recognized and calculate the impairment loss, if any.
*Answer:*
*Step 1: Test for impairment*
Compare the carrying amount ($100,000) to the undiscounted future cash flows ($80,000). Since the carrying amount exceeds the undiscounted future cash flows, an impairment loss is indicated.
*Step 2: Calculate the impairment loss*
Impairment loss = Carrying amount - Fair value
= $100,000 - $70,000
= $30,000
*Journal Entry:*
Loss on impairment (Income Statement) $30,000
Accumulated depreciation (Balance Sheet) $30,000
*Note:*
- The impairment loss is recognized in the income statement as a separate line item.
- The carrying amount of the equipment is reduced to its fair value of $70,000.
*US GAAP Reference:*
- ASC 360-10-35-17: Impairment or Disposal of Long-Lived Assets
Section C....
Here are 20 questions with answers on impairment loss as per US GAAP:
1. What is the primary objective of the impairment test under US GAAP?
A) To determine the fair value of an asset
B) To determine the recoverable amount of an asset
C) To determine if an asset's carrying amount exceeds its undiscounted future cash flows
D) To determine the asset's remaining useful life
Answer: C) To determine if an asset's carrying amount exceeds its undiscounted future cash flows
2. Which of the following is a step in the impairment test for a long-lived asset under US GAAP?
A) Compare the carrying amount to the fair value
B) Compare the carrying amount to the undiscounted future cash flows
C) Recognize an impairment loss if the carrying amount exceeds the fair value
D) Recognize an impairment loss if the carrying amount exceeds the book value
Answer: B) Compare the carrying amount to the undiscounted future cash flows
3. Under US GAAP, an impairment loss is calculated as the difference between the carrying amount and:
A) Fair value
B) Book value
C) Recoverable amount
D) Undiscounted future cash flows
Answer: A) Fair value
4. Which of the following is true regarding the recognition of impairment losses under US GAAP?
A) Impairment losses are recognized in other comprehensive income
B) Impairment losses are recognized in the income statement
C) Impairment losses are not recognized
D) Impairment losses are recognized in the balance sheet
Answer: B) Impairment losses are recognized in the income statement
5. Under US GAAP, a company is required to test goodwill for impairment:
A) Annually
B) Quarterly
C) Monthly
D) Only when there is an indication of impairment
Answer: A) Annually
6. Which of the following is a factor that indicates an impairment loss may have occurred?
A) Decrease in market value
B) Increase in market value
C) Increase in useful life
D) Decrease in residual value
Answer: A) Decrease in market value
7. Under US GAAP, an impairment loss is reported in the income statement as:
A) A separate line item
B) A component of operating income
C) A component of non-operating income
D) A footnote disclosure only
Answer: A) A separate line item
8. Which of the following is a characteristic of an impaired asset under US GAAP?
A) The asset's carrying amount exceeds its fair value
B) The asset's carrying amount exceeds its undiscounted future cash flows
C) The asset's fair value exceeds its carrying amount
D) The asset's useful life has been extended
Answer: B) The asset's carrying amount exceeds its undiscounted future cash flows
9. Under US GAAP, an impairment loss is recognized when:
A) The asset's carrying amount exceeds its fair value
B) The asset's carrying amount exceeds its undiscounted future cash flows
C) The asset's fair value exceeds its carrying amount
D) The asset's useful life has been extended
Answer: B) The asset's carrying amount exceeds its undiscounted future cash flows
10. Which of the following is a method used to estimate the fair value of an asset under US GAAP?
A) Market approach
B) Income approach
C) Cost approach
D) All of the above
Answer: D) All of the above
11. Under US GAAP, an impairment loss is calculated using:
A) The asset's carrying amount and fair value
B) The asset's carrying amount and undiscounted future cash flows
C) The asset's fair value and residual value
D) The asset's carrying amount and residual value
Answer: A) The asset's carrying amount and fair value
12. Which of the following is true regarding the reversal of impairment losses under US GAAP?
A) Impairment losses can be reversed
B) Impairment losses cannot be reversed
C) Impairment losses can be reversed only if the asset's fair value increases
D) Impairment losses can be reversed only if the asset's carrying amount decreases
Answer: B) Impairment losses cannot be reversed
13. Under US GAAP, an impairment loss is recognized:
A) Immediately
B) Over the asset's remaining useful life
C) When the asset is sold
D) When the asset is abandoned
Answer: A) Immediately
14. Which of the following is a disclosure requirement for impairment losses under US GAAP?
A) The amount of the impairment loss
B) The reason for the impairment loss
C) The asset's carrying amount before and after the impairment loss
D) All of the above
Answer: D) All of the above
15. Under US GAAP, an impairment loss is calculated using:
A) The asset's carrying amount and fair value
B) The asset's carrying amount and undiscounted future cash flows
C) The asset's fair value and residual value
D) The asset's carrying amount and residual value
Answer: A) The asset's carrying amount and fair value
16. Which of the following is true regarding the recognition of impairment losses for assets held for sale under US GAAP?
A) Impairment losses are recognized in the income statement
B) Impairment losses are recognized in other comprehensive income
C) Impairment losses are not recognized
D) Impairment losses are recognized in the balance sheet
Answer: A) Impairment losses are recognized in the income statement
17. Under US GAAP, an impairment loss is recognized when:
A) The asset's carrying amount exceeds its fair value
B) The asset's carrying amount exceeds its undiscounted future cash flows
C) The asset's fair value exceeds its carrying amount
D) The asset's useful life has been extended
Answer: B) The asset's carrying amount exceeds its undiscounted future cash flows
18. Which of the following is a method used to estimate the fair value of an asset under US GAAP?
A) Market approach
B) Income approach
C) Cost approach
D) All of the above
Answer: D) All of the above
19. Under US GAAP, an impairment loss is calculated using:
A) The asset's carrying amount and fair value
B) The asset's carrying amount and undiscounted future cash flows
C) The asset's fair value and residual value
D) The asset's carrying amount and residual value
Answer: A) The asset's carrying amount and fair value
20. Which of the following is true regarding the reversal of impairment losses under US GAAP?
A) Impairment losses can be reversed
B) Impairment losses cannot be reversed
C) Impairment losses can be reversed only if the asset's fair value increases
D) Impairment losses can be reversed only if the asset's carrying amount decreases
Answer: B) Impairment losses cannot be reversed
www.gmsisuccess.inFeel free 🆓 to write ✍️ your comments, querries in comments box below 👇
No comments:
Post a Comment