Accounting Quiz

A company sells machine B for $50,000 cash on 30 Apr 20X4. Machine B cost $100,000 when it was purchased and has a carrying value of $65,000 at the date of disposal. What are the journal entries to record the disposal of machine B?

• a. Dr Accumulated depreciation: $35,000; Dr Loss on disposal (SPL): $15,000; Dr Cash: $50,000 / CrNon-current assets - cost: $100,000

• b. Dr Accumulated depreciation: $65,000; Dr Loss on disposal (SPL): $35,000 / Cr Non-current assets- cost: $100,000

• c. Dr Accumulated depreciation: $35,000; Dr Non-current assets - cost: $65,000 / Cr Profit on disposal (SPL): $50,000; Cr Cash: $50,000

• d. Dr Accumulated depreciation: $35,000; Dr Cash: $50,000 / Cr Non-current assets - cost: $65,000;Cr Profit on disposal (SPL): $20,000

What is the purpose of charging depreciation in accounts?

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

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

• 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

B acquired a lorry on 1 May 20X0 at a cost of $30,000. The lorry has an estimated useful life of four years, and an estimated resale value at the end of that time of $6,000. B charges depreciation on the straight line basis, with a proportionate charge in the period of acquisition. What will the depreciation charge for the lorry be in B’s accounting period to 30 Sept 20X0?

• a. $2,500

• b. $3,000

• c. $5,000

• d. $2,000

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

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

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

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

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

The carrying value of a company’s non-current assets was $200,000 at August 20X0. During the year ended 31 Jul 20X1, the company sold non-current assets for $25,000 on which it made a loss of $5,000. The depreciation charge for the year was $20,000. What was the carrying value of non-current assets at 31 Jul 20X1?

• a. $180,000

• b. $155,000

• c. $160,000

• d. $150,000

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-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 revalued assets.

• 4/ Once decided, the useful life of a non-current asset should not be changed.

A company bought a property 4 years ago from 1 Jan 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. $74,000

• b. $210,000

• c. $34,000

• d. $136,000

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 for the revaluation

 W bought a new printing machine. The cost of machine was $80,000. The installation cost was $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 customer’s order, 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. $86,000

• b. $80,000

• c. $88,000

• d. $85,000

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

• a. Assets which are intended to be used by the business on a continuing basic, including both tangible and intangible assets that do not meet the IASB definition of a current asset

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

• c. 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

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