Non Current Assets

At 1 April 20X4, Jolly owned a property with a carrying amount of $800,000 which had a remaining estimated life of 16 years. The property had not been revalued. On 1 October 20X4, Jolly decided to sell the property and correctly classified it as being ‘held-for-sale’. A property

agent reported that the property’s fair value less costs to sell at 1 October 20X4 was expected

to be $790,500 which had not changed at 31 March 20X5.

What should be the carrying amount of the property in Jolly’s statement of financial position as

at 31 March 20X5?

• 775,000

• 765,000

• 790,500

• 750,000

Orient Co acquired a property on 1 January 20X4. The property cost $5.5m of which $2.2m

related to land. On 1 January 20X9, the property was revalued to $7.6m of which $3.1m related

to land. On 1 January 20X4 the property had a useful life of 25 years and this did not change as a

result of the revaluation.

• 380,000

• 304,000

• 180,000

• 225,000

On 1 August 20X4, Flash Co received a $12 million training grant from the government on

condition that it employed ten graduates from local universities in each of the next four years.

If the condition were to be broken, the full amount of the grant would be repayable. On the

date the grant was received it was considered virtually certain that the condition would be met.

However, during August 20X6, it became apparent that the economy was entering a severe

recession. In that month Flash Co decided it would not employ any further graduates for the

foreseeable future.

By how much would Flash Co’s profit for the year ended 31 July 20X7 be reduced as a result of

the repayment of the grant?

• It would not be reduced

• $4 million

• $8 million

• $6 million

On 1 January 20X6, Gardenbugs Co received a $30,000 government grant relating to equipment

which cost $90,000 and had a useful life of six years. The grant was netted off against the cost of

the equipment. On 1 January 20X7, when the equipment had a carrying amount of $50,000, its

use was changed so that it was no longer being used in accordance with the grant. This meant

the grant needed to be repaid in full, but by 31 December 20X7 this had not yet been done.

Which journal entry is required to reflect the correct accounting treatment of the government

grant and the equipment in the financial statements of Gardenbugs Co for the year ended

31 December 20X7?

• Dr Property, plant and equipment $10,000; Dr Depreciation expense $20,000: Cr Liability

  $30,000

• Dr Property, plant and equipment $10,000; Dr Depreciation expense $15,000: CR

  
  

  Retained earnings $5,000; Cr Liability $30,000

• Dr Property, plant and equipment $15,000; Dr Depreciation $15,000; Cr Liability $30,000

• Dr Property, plant and equipment $20,000; Dr Depreciation expense $10,000: Cr Liability

  
  

  $30,000

An entity has decided to adopt the revaluation model for the first time from 31 December 20X6.

At that date, details relating to two properties were as follows:

Asset at 31 December 20X6

Head Office

Carrying Value : 10,200

Fair Value: 10,500

Factory

Carrying Value : 7,975

Fair Value : 7,700

• 225,000

• 25,000

• 600,000

• 300,000

Aphrodite Co has a year end of 31 December and operates a factory which makes computer chips for mobile phones.

It purchased a machine on 1 July 20X3 for $80,000 which had a useful life of ten years and is depreciated on the

straight-line basis, time apportioned in the years of acquisition and disposal.

The machine was revalued to $81,000 on 1 July 20X4.

There was no change to its useful life at that date.

A fire at the factory on 1 October 20X6 damaged the machine leaving it with a lower operating capacity.

The accountant considers that Aphrodite Co will need to recognise an impairment loss in relation to this damage.

The accountant has ascertained the following information at 1 October 20X6:

(1)The carrying amount of the machine is $60,750.

(2)An equivalent new machine would cost $90,000.

(3)The machine could be sold in its current condition for a gross amount of $45,000. Dismantling costs would amount to $2,000.

(4)In its current condition, the machine could operate for three more years which gives it a value in use figure of$38,685.

In accordance with IAS 16 Property, Plant and Equipment, what is the depreciation charged to Aphrodite Co’s

profit or loss in respect of the machine for the year ended 31 December 20X4?

• 9,000

• 8,000

• 8,263

• 8,500

The following trial balance extract relates to a property which is owned by Sehwag as at 1 April 2014:

Property at cost (20 year original life) $12,000,000

Accumulated depreciation as at 1 April 2014 $3,600,000

On 1 October 2014, following a sustained increase in property prices, Sehwag revalued its property to $10·8 million.

What will be the depreciation charge in Veeton’s statement of profit or loss for the year ended 31 March 2015?

• $540,000

• $570,000

• $700,000

• $800,000