FDIC Bank Accounting: Subsidiaries, Audit & Other Assessments – Study Guide
straight line depreciation - correct answer ✔✔(cost - salvage value) / useful life
double declining balance depreciation - correct answer ✔✔(straight line rate% * 2) book value
each period
we do not take into account salvage value
sum-of-the-years'-digits depreciation method - correct answer ✔✔(year number/sum-of-the-
years'-digits) * depreciable base
Purchase value of fixed assets - correct answer ✔✔Purchase price - discount + costs related to
readying for intended use. Costs are depreciated to earnings over the useful life.
Costs to ready a fixed asset can include... - correct answer ✔✔shipping and handling,
acquisition costs, renovations, assumption of existing mortgages
Why do we record a building purchase separately from the land as a FV split? - correct answer
✔✔land does not have a useful life and is not depreciated
Do we depreciate land improvements? (fencing, sidewalks, lighting, parking lots and driveways)
- correct answer ✔✔yes
Do we depreciate asset maintenance? - correct answer ✔✔no - anything that does not improve
or extend life is not capitalized
, When do we start depreciating a fixed asset? - correct answer ✔✔Expenditures have been
made, activities that are necessary to get the asset ready are in progress, interest cost is being
incurred
When is an asset impaired? - correct answer ✔✔When its carrying amount is not recoverable &
carrying > FV
Is a gain on disposal of a fixed asset a debit or credit? - correct answer ✔✔credit to: Gain on
disposal of (asset)
What is a lease? - correct answer ✔✔contract that conveys right to control in exchange for
consideration
What is the commencement date? - correct answer ✔✔the date that the asset is available for
use by lessee
What is the difference between a finance lease and an operating lease? - correct answer
✔✔operating leases report expenses on the same line item (finance reports amortization and
interest exp separately), operating lease does not allow asset purchase at end of term.
initial direct costs - correct answer ✔✔associated directly with originating a lease and are
essential to acquire the lease
lease liability - correct answer ✔✔PV of lease payments not paid
Other Real Estate Owned - correct answer ✔✔Non-earning asset, can hold for max. 5-10 years.
Anything being converted to bank use is premises/fixed assets.
Can interest cost be capitalized? - correct answer ✔✔Yes, if it took a while to ready the building
after purchase (capitalization period has started)
straight line depreciation - correct answer ✔✔(cost - salvage value) / useful life
double declining balance depreciation - correct answer ✔✔(straight line rate% * 2) book value
each period
we do not take into account salvage value
sum-of-the-years'-digits depreciation method - correct answer ✔✔(year number/sum-of-the-
years'-digits) * depreciable base
Purchase value of fixed assets - correct answer ✔✔Purchase price - discount + costs related to
readying for intended use. Costs are depreciated to earnings over the useful life.
Costs to ready a fixed asset can include... - correct answer ✔✔shipping and handling,
acquisition costs, renovations, assumption of existing mortgages
Why do we record a building purchase separately from the land as a FV split? - correct answer
✔✔land does not have a useful life and is not depreciated
Do we depreciate land improvements? (fencing, sidewalks, lighting, parking lots and driveways)
- correct answer ✔✔yes
Do we depreciate asset maintenance? - correct answer ✔✔no - anything that does not improve
or extend life is not capitalized
, When do we start depreciating a fixed asset? - correct answer ✔✔Expenditures have been
made, activities that are necessary to get the asset ready are in progress, interest cost is being
incurred
When is an asset impaired? - correct answer ✔✔When its carrying amount is not recoverable &
carrying > FV
Is a gain on disposal of a fixed asset a debit or credit? - correct answer ✔✔credit to: Gain on
disposal of (asset)
What is a lease? - correct answer ✔✔contract that conveys right to control in exchange for
consideration
What is the commencement date? - correct answer ✔✔the date that the asset is available for
use by lessee
What is the difference between a finance lease and an operating lease? - correct answer
✔✔operating leases report expenses on the same line item (finance reports amortization and
interest exp separately), operating lease does not allow asset purchase at end of term.
initial direct costs - correct answer ✔✔associated directly with originating a lease and are
essential to acquire the lease
lease liability - correct answer ✔✔PV of lease payments not paid
Other Real Estate Owned - correct answer ✔✔Non-earning asset, can hold for max. 5-10 years.
Anything being converted to bank use is premises/fixed assets.
Can interest cost be capitalized? - correct answer ✔✔Yes, if it took a while to ready the building
after purchase (capitalization period has started)
