1
|
What is the purpose of charging depreciation in financial
statements?
|
||||||||||||||
|
A
|
To allocate the cost of a non-current asset over the accounting
periods expected to benefits from its use
|
|||||||||||||
|
B
|
To ensure that funds are available for the eventual replacement
of the asset
|
|||||||||||||
|
C
|
To reduce the cost of the asset in the statement of financial
position to its estimated market value
|
|||||||||||||
|
D
|
To account for the ‘wearing-out’ of the asset over its life
|
|||||||||||||
|
|
|
|||||||||||||
2
|
Which of the statements below correctly states the purpose of
the asset register?
|
||||||||||||||
|
A
|
An internal control to ensure details of all assets are readily
available in the event of loss or theft
|
|||||||||||||
|
B
|
To ensure the organisation is aware of the age of plant and
machinery
|
|||||||||||||
|
C
|
An internal control to ensure information relating to
non-current assets in the nominal ledger and the financial statements is
correct
|
|||||||||||||
|
D
|
To enable the organisation to comply with IAS 16 Property, plant
and equipment
|
|||||||||||||
|
|
|
|||||||||||||
3
|
An asset register showed a carrying amount of $67,460. A
non-current asset costing $15,000 had been sold for $4,000, making a loss on
disposal of $1,250. No entries had been made in the asset register for this
disposal.
What is the correct balance on the asset register?
|
||||||||||||||
|
A
|
$42,710
|
|||||||||||||
|
B
|
$51,210
|
|||||||||||||
|
C
|
$53,710
|
|||||||||||||
|
D
|
$62,210
|
|||||||||||||
|
|
|
|||||||||||||
4
|
An organisation’s asset register shows a carrying amount of
4145,600. The non-current asset account in the nominal ledger shows a
carrying amount of $135,600. The difference could be due to a disposed asset
not having been deducted from the asset register. Which one of the following
could represent that asset?
|
||||||||||||||
|
A
|
Asset with disposal proceeds of $15,000 and a profit on disposal
of $5,000
|
|||||||||||||
|
B
|
Asset with disposal proceeds of $15,000 and a carrying amount of
$5,000
|
|||||||||||||
|
C
|
Asset with disposal proceeds of $15,000 and a loss on disposal
of $5,000
|
|||||||||||||
|
D
|
Asset with disposal proceeds of $5,000 and a carrying amount of
$5,000
|
|||||||||||||
|
|
|
|||||||||||||
5
|
Which one of the following would occur if the purchase of
computer stationary was debited to the computer equipment at cost account?
|
||||||||||||||
|
A
|
An overstatement of profit and an overstatement of non-current
assets
|
|||||||||||||
|
B
|
An understatement of profit and an overstatement of non-current
assets
|
|||||||||||||
|
C
|
An overstatement of profit and an understatement of non-current
assets
|
|||||||||||||
|
D
|
An understatement of profit and an understatement of non-current
assets
|
|||||||||||||
|
|
|
|||||||||||||
6
|
Which one of the following statements correctly defines
non-current assets?
|
||||||||||||||
|
A
|
Assets that are held for use in the production of goods or
services and are expected to be used during more than one accounting period
|
|||||||||||||
|
B
|
Assets which are intended to be used by the business on a
continuing basis, including both tangible and intangible assets that do not
meet the IASB definition of a current asset
|
|||||||||||||
|
C
|
Non-monetary assets without physical substance that are
controlled by the entity and from which future benefits are expected to flow
|
|||||||||||||
|
D
|
Assets in the form of materials or supplies to be consumed in
the production process
|
|||||||||||||
|
|
|
|||||||||||||
7
|
A company bought a property four years ago on 1 January for
$170,000. Since then property prices have risen substantially and the
property has been revalued at $210,000.
The property was estimated as having a useful life of 20 years
when it was purchased. What is the balance on the revaluation surplus
reported in the statement of financial position/.
|
||||||||||||||
|
A
|
$210,000
|
|||||||||||||
|
B
|
$136,000
|
|||||||||||||
|
C
|
$74,000
|
|||||||||||||
|
D
|
$34,000
|
|||||||||||||
|
|
|
|||||||||||||
8
|
A business purchased a motor car on 1 July 20x3 for $20,000. It
is to be depreciated at 20 percent per year on the straight line basis,
assuming a residual value at the end of five years of $4,000, with a
proportionate depreciation charge in the years of purchase and disposal.
The $20,000 cost was correctly entered in the cash book but
posted to the debit of the motor vehicles repairs account.
How will the business profit for the year ended 31 December 20x3
be affected by the error?
|
||||||||||||||
|
A
|
Understated by $18,400
|
|||||||||||||
|
B
|
Understated by $16,800
|
|||||||||||||
|
C
|
Overstated by $18,400
|
|||||||||||||
|
D
|
Overstated by $16,800
|
|||||||||||||
|
|
|
|||||||||||||
9
|
A company’s policy is to charge depreciation on plant and
machinery at 20% per year on cost, with proportional depreciation for items
purchased or sold during a year.
The company’s plant and machinery at cost account for the year
ended 30 September 20x3 is shown below.
|
||||||||||||||
|
PLANT AND
MACHINERY - COST
|
||||||||||||||
|
|
|
$
|
|
|
$
|
|||||||||
|
20x2
|
|
|
20x3
|
|
|
|||||||||
|
1 Oct
|
Balance
|
200,000
|
30 Jun
|
Transfer disposal account
|
40,000
|
|||||||||
|
20x3
|
|
|
30 Sep
|
Balance
|
210,000
|
|||||||||
|
1 Apr
|
Cash-purchase of plant
|
50,000
|
|
|
|
|||||||||
|
|
|
250,000
|
|
|
250,000
|
|||||||||
|
|
|
|
|
|
|
|||||||||
|
What should be the depreciation charge for plant and machinery
(excluding any profit or loss on the disposal) for the year ended 30
September 20x3?
|
||||||||||||||
|
A
|
$43,000
|
|||||||||||||
|
B
|
$51,000
|
|||||||||||||
|
C
|
$42,000
|
|||||||||||||
|
D
|
$45,000
|
|||||||||||||
|
|
|
|||||||||||||
10
|
The plant and machinery at cost account of a business for the
year ended 30 June 20x4 was as follows:
|
||||||||||||||
|
PLANT AND
MACHINERY - COST
|
||||||||||||||
|
|
|
$
|
|
|
$
|
|||||||||
|
20X3
|
|
|
20x3
|
|
|
|||||||||
|
1 Jul
|
Balance
|
240,000
|
30 Sep
|
Transfer disposal account
|
60,000
|
|||||||||
|
20x4
|
|
|
20x4
|
|
|
|||||||||
|
1 Jan
|
Cash – purchase of plant
|
160,000
|
30 Jun
|
Balance
|
340,000
|
|||||||||
|
|
|
400,000
|
|
|
400,000
|
|||||||||
|
The company’s policy is to charge depreciation at 20% per year
on the reducing balance basis, with proportionate depreciation in the years
of purchase and disposal.
|
||||||||||||||
|
What should be the depreciation charge for the year ended 30
June 20x4?
|
||||||||||||||
|
A
|
$68,000
|
|||||||||||||
|
B
|
$64,000
|
|||||||||||||
|
C
|
$61,000
|
|||||||||||||
|
D
|
$55,000
|
|||||||||||||
|
|
|
|||||||||||||
11
|
A manufacturing company receives an invoice on 29 February 20x2
for work done on one of its machines. $25,500 of the cost is actually for a
machine upgrade, which will improve efficiency. The accounts department do
not notice and charge the whole amount to maintenance costs. Machinery is
depreciated at 25% per annum on straight-line basis, with a proportional charge
in the years of acquisition and disposal. By what amount will the profit for
the year to 30 June 20x2 be understated?
|
||||||||||||||
|
A
|
$19,125
|
|||||||||||||
|
B
|
$25,500
|
|||||||||||||
|
C
|
$23,375
|
|||||||||||||
|
D
|
$21,250
|
|||||||||||||
|
|
|
|||||||||||||
12
|
W bought a new printing machine. The cost of the machine was
$80,000. The installation costs were $5,000 and the employees received
training on how to use the machine, at a cost of $2,000. Before using the
machine to print customers’ orders, a test was undertaken and the paper and
ink cost $1,000.
What should be the cost of the machine in the company’s
statement of financial position?
|
||||||||||||||
|
A
|
$80,000
|
|||||||||||||
|
B
|
$85,000
|
|||||||||||||
|
C
|
$86,000
|
|||||||||||||
|
D
|
$88,000
|
|||||||||||||
|
|
|
|||||||||||||
13
|
What are the correct ledger entries to record an acquisition of
a non-current asset on credit?
|
||||||||||||||
|
|
Debit
|
Credit
|
||||||||||||
|
A
|
Non-current assets – cost
|
Receivables
|
||||||||||||
|
B
|
Payables
|
Non-current assets - cost
|
||||||||||||
|
C
|
Non-current assets – cost
|
Payables
|
||||||||||||
|
D
|
Non-current assets – cost
|
Revaluation surplus
|
||||||||||||
|
|
|
|||||||||||||
14
|
Alpha sells machine B for $50,000 cash on 30 April 20x4. Machine
B cost $100,000 when it was purchased and has a carrying amount of $65,000 at
the date of disposal. What are the journal entries to record the disposal of
machine B?
|
||||||||||||||
|
A
|
Dr Accumulated depreciation
Dr Loss on disposal (SPL)
Dr Cash
Cr Non-current assets - cost
|
$35,000
$15,000
$50,000
|
$100,000
|
|||||||||||
|
B
|
Dr Accumulated depreciation
Dr Loss on disposal (SPL)
Cr Non-current assets- cost
|
$65,000
$35,000
|
$100,000
|
|||||||||||
|
C
|
Dr Accumulated depreciation
Dr Cash
Cr Non-current assets
Cr Profit on disposal (SPL)
|
$35,000
$50,000
|
$65,000
$20,000
|
|||||||||||
|
D
|
Dr Non-current assets
Dr Accumulated depreciation
Cr Cash
Cr Profit on disposal (SPL)
|
$65,000
$35,000
$50,000
|
$50,000
|
|||||||||||
|
|
|
|||||||||||||
15
|
Which of the following statements are correct?
|
||||||||||||||
|
1
|
IAS 16 Property, plant and equipment requires entities to
disclose the purchase date of each asset.
|
|||||||||||||
|
2
|
The carrying amount of a non-current asset is the cost or
valuation of that asset less accumulated depreciation.
|
|||||||||||||
|
3
|
IAS 16 Property, plant and equipment permits entities to make a
transfer from the revaluation surplus to retained earnings for excess
depreciation on revaluation assets.
|
|||||||||||||
|
4
|
Once decided, the useful life of a non-current asset should not
be changed.
|
|||||||||||||
|
A
|
1, 2 and 3
|
|||||||||||||
|
B
|
2 and 3 only
|
|||||||||||||
|
C
|
2 and 4 only
|
|||||||||||||
|
D
|
1, 2 and 4 only
|
|||||||||||||
|
|
|
|||||||||||||
|
The following information is relevant for
questions 16 and 17.
|
||||||||||||||
|
Gusna Co purchased a building on 31 December 20X1 for $750,000.
At the date of acquisition, the useful life of the building was estimated to
be 25 years and depreciation is calculated using the straight-line method. At
31 December 20X6, an independent valuer valued the building at $1,000,000 and
the revaluation was recognised in the financial statements. Gusna’s
accounting policies state that excess depreciation arising on revaluation of
non-current assets can be transferred from the revaluation surplus to
retained earnings.
|
||||||||||||||
16
|
What is the
depreciation charge on the building for the year ended 31 December 20X7?
|
||||||||||||||
|
A
|
$40,000
|
|||||||||||||
|
B
|
$50,000
|
|||||||||||||
|
C
|
$30,000
|
|||||||||||||
|
D
|
$42,500
|
|||||||||||||
|
|
|
|||||||||||||
17
|
What is the journal
entry to record the transfer of excess depreciation from the revaluation
surplus to retained earnings?
|
||||||||||||||
|
A
|
Dr Revaluation surplus
Cr Retained earnings
|
$20,000
|
$20,000
|
|||||||||||
|
B
|
Dr Revaluation surplus
Cr Retained earnings
|
$12,500
|
$12,500
|
|||||||||||
|
C
|
Dr Retained earnings
Cr Revaluation surplus
|
$20,000
|
$20,000
|
|||||||||||
|
D
|
Dr Retained earnings
Cr Revaluation surplus
|
$12,500
|
$12,500
|
|||||||||||
|
|
|
|||||||||||||
18
|
Which of the
following should be disclosed for tangible non-current assets according to
IAS 16 Property,
plant and equipment?
|
||||||||||||||
|
1
|
Depreciation methods
used and the total depreciation allocated for the period
|
|||||||||||||
|
2
|
A reconciliation of
the carrying amount of non-current assets at the beginning and end of the
period
|
|||||||||||||
|
3
|
For revalued assets,
whether an independent valuer was involved in the valuation
|
|||||||||||||
|
4
|
For revalued assets,
the effective date of the revaluation
|
|||||||||||||
|
A
|
1, 2 and 4 only
|
|||||||||||||
|
B
|
1 and 2 only
|
|||||||||||||
|
C
|
1, 2, 3 and 4
|
|||||||||||||
|
D
|
1, 3 and 4 only
|
|||||||||||||
|
|
|
|||||||||||||
19
|
Which of the
following should be included in the reconciliation of the carrying amount of
tangible non-current assets at the beginning and end of the accounting period?
|
||||||||||||||
|
1
|
Additions
|
|||||||||||||
|
2
|
Disposals
|
|||||||||||||
|
3
|
Depreciation
|
|||||||||||||
|
4
|
Increases/decreases from revaluations
|
|||||||||||||
|
A
|
1 and 3 only
|
|||||||||||||
|
B
|
A, 2 and 3 only
|
|||||||||||||
|
C
|
1, 3 and 4
|
|||||||||||||
|
D
|
1, 2, 3 and 4
|
|||||||||||||
|
|
|
Saturday, March 11, 2017
Tangible non-current assets I (Y7C6)
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can i get some help form you. I have exam in December and am not understanding much of what my lecturer teaching me
ReplyDeletewhat's the answer for number 13?
ReplyDelete