FA - Tangible Non Current Assets

What is the purpose of charging depreciation in financial statements?

• To allocate the cost of a non-current asset over the accounting periods expected to benefit from its use

• To ensure that funds are available for the eventual replacement of the asset

• To reduce the cost of the asset in the statement of financial position to its estimated market value

• To account for the ‘wearing-out’ of the asset over its life

Which of the statements below correctly states the purpose of the asset register?

• An internal control to ensure details of all assets are readily available in the event of loss or theft

• To ensure the organisation is aware of the age of plant and machinery

• An internal control to ensure information relating to non-current assets in the nominal ledger and the financial statements is correct

• To enable the organisation to comply with IAS 16 Property, plant and equipment

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?

• $42,710

• $51,210

• $53,710

• $62,210

An organisation's asset register shows a carrying amount of $145,600. 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?

• Asset with disposal proceeds of $15,000 and a profit on disposal of $5,000

• Asset with disposal proceeds of $15,000 and a carrying amount of $5,000

• Asset with disposal proceeds of $15,000 and a loss on disposal of $5,000

• Asset with disposal proceeds of $5,000 and a carrying amount of $5,000

Which one of the following would occur if the purchase of computer stationary was debited to computer equipment at cost account?

• An overstatement of profit and an overstatement of non-current assets

• An understatement of profit and an overstatement of non-current assets

• An overstatement of profit and an understatement of non-current assets

• An understatement of profit and an understatement of non-current assets

Which one of the following statements correctly defines non-current assets?

• 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

• 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

• Non-monetary assets without physical substance that are controlled by the entity and from which future benefits are expected to flow

• Assets in the form of materials or supplies to be consumed in the production process

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?

• $210,000

• $136,000

• $74,000

• $34,000

A business purchased a motor car on 1 July 20X3 for $20,000. It is to be depreciated at 20 per cent 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?

• Understated by $18,400

• Understated by $16,800

• Overstated by $18,400

• Overstated by $16,800

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 a 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?

• $19,125

• $25,500

• $23,375

• $21,250

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?

• $80,000

• $85,000

• $86,000

• $88,000