Chapter 3- KTQT

1 : Depreciation is a process of:

• A. valuation.

• B. cost allocation

• C. cash accumulation

• D. appraisal

2. 2. Additions to plant assets are:

• A. revenue expenditures.

• B. debited to the Maintenance and Repairs Expense account.

• C. debited to the Purchases account.

• D. capital expenditures.

3. 3. Which of the following statements is false?

• A. If an intangible asset has a finite life, it should be amortized DA.

• B. The amortization period of an intangible asset can exceed 20 years.

• C. Goodwill is recorded only when a business is purchased.

• D. Research and development costs are expensed when incurred, except when the research and development expenditures result in a successful patent.

4. 4. What are the correct ledger entries to record an acquisition of a non-current asset on credit?

• A. Debit Non-current asset – Cost/ Credit Receivables

• B. Debit Payables/ Credit Non-current asset – Cost

• C. Debit Non-current asset – Cost/ Credit Payables

• D. Debit Non-current asset – Cost/ Credit Revaluation Surplus

5. 5. Which of the following best explains what is meant by 'capital expenditure'?

• A. Expenditure on non-current assets, including repairs and maintenance

• B. Expenditure on expensive assets

• C. Expenditure relating to the issue of share capital

• D. Expenditure relating to the acquisition or improvement of non-current assets

6. 6. Expenditure relating to the acquisition or improvement of non-current assets

• A. A replacement for a broken window

• B. Repainting the restaurant

• C. An illuminated sign advertising the business name

• D. Cleaning of the kitchen floors

7. 7. Which one of the following costs would be classified as revenue expenditure on the invoice for a new company car?

• A. Road tax

• B. Number plates

• C.Fitted stereo radio

• D. Delivery costs

8. 8. Which one of the following assets may be classified as a receivable in the financial statements of a business?

• A. A tax refund due next year

• B. A motor vehicle held for resale

• C. A computer used in the office

• D. Cleaning products used to clean the office floors

9. 9. According to IAS 38 Intangible assets, which of the following statements are correct?

10. (1) Research expenditure should not be capitalised.

11. (2) Intangible assets are never amortised.

12. (3) Development expenditure must be capitalised if certain conditions are met.

• A. 1 and 3 only

• B. 1 and 2 only

• C. 2 and 3 only

• D. All three statements are correct

10. 10. What is the purpose of amortisation?

• A. To allocate the cost of an intangible non-current asset over its useful life

• B. To ensure that funds are available for the eventual purchase of a replacement non-current asset

• C. To reduce the cost of an intangible non-current asset in the statement of financial position to its estimated market value

• D. To account for the risk associated with intangible assets