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In cases where a capital expenditure subsequent to acquisition does not enhance either the quantity of output or the quality of the asset, but instead increases the useful life of the asset, how should accounting for the expenditure to be handled?

a.Remove the cost of the old asset and replace it with the complete cost of the new asset (carrying value plus capital expenditure).

b.Debit the capital expenditure to Accumulated Depreciation.

c.Keep the cost of the old asset on the books and records and add the new capital expenditures cost as a new asset.

d.None of the above answers is correct.

When an impaired asset is held for sale, rather than for use within the company, then according to GAAP,

a.depreciation on the asset should be reported in the operations section of the income statement.

b.an unlimited amount of impairment reversal is allowed by GAAP until the asset is sold.

c.yearly impairment reversals can be made as long as the new carrying value does not exceed the carrying value of the asset before the impairment.

d.no further impairment may be made to the assets carrying value beyond the original impairment.

Which of the following is the major difference between impairment of a fixed asset and impairment of goodwill?

a.The fixed asset is first subjected to a recoverability test, whereas impairment of goodwill does not use the recoverability test.

b.Goodwill is first subjected to a recoverability test, whereas a fixed asset impairment does not use the recoverability test.

c.The impairment of a fixed asset is limited to maximum amount of $100,000, whereas the impairment of goodwill is unlimited.

d.The impairment of goodwill is limited to a maximum amount of $100,000, whereas the impairment of a fixed asset is unlimited.

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