Financial Accounting: Prepayments & Accruals, Non current Assets

Which of the following would be classified as intangible non-current assets?

• Research expenditure
• Accounting software produced by the company
• Computer hardware
• Motor vehicle

Theta Co purchased a patent on 31 December 20X3 for $250,000. Theta Co expects to use the patent for ten years, after which it will be valueless. According to IAS 38 Intangible assets, what amount will be amortised in Theta Co’s statement of profit or loss and other comprehensive income for the year ended 31 December 20X4?

• $250,000
• $125,000
• $25,000
• $50,000

An aircraft requires a planned overhaul each year at a cost of $5,000. This is a condition of being allowed to fly. How should the cost of the overhaul be treated in the financial statements?

• Accrued for over the year and charged to maintenance expenses
• Provided for in advance and charged to maintenance expenses
• Capitalised and depreciated over the period to the next overhaul
• Charged to profit or loss when the expenditure takes place

On 1 April 20X0 ABC Co., Ltd. held non-current assets that cost $312,000 and had accumulated depreciation of $66,000 at this date. During the year ended 31 March 20X1, ABC Co., Ltd. disposed of non-current assets which had originally cost $28,000 and had a carrying amount of $11,200. ABC Co., Ltd.’s policy is to charge depreciation of 40% on the reducing balance basis, with no depreciation charged in the year of disposal. What is the depreciation charge to the statement of profit or loss for the year ended 31 March 20X1?

An entity purchased the property for $6 million on 1 July 20X3. The land element of the purchase was $1 million. The expected life of the building was 50 years and its residual value nil. On 30 June 20X5, the property was revalued to $7 million, of which the land element was $1.24 million and the buildings $5.76 million. On 30 June 20X7, the property was sold for $6.8 million. What is the gain on disposal of the property that would be reported in the statement of profit or loss for the year to 30 June 20X7?

• Gain $40,000
• Loss $200,000
• Gain $1,000,000
• Gain $1,240,000

In time of rising prices, what effect does the use of the historical cost concept have on the company’s asset value and profit?

• Asset values understated and profit overstated
• Asset values and profit both overstated
• Asset values overstated and profit understated
• Asset values and profit both understated

Company Z vacated an office building and let it out to a third party on 30 June 20X8. The building had an original cost of $900,000 on 1 January 20X0 and was being depreciated over 50 years. It was judged to have a fair value on 30 June 20X8 of $950,000. At the year-end date of 31 December 20X8, the fair value of the building was estimated at $1.2 million. Company Z uses the fair value model for investment property. What amount will be shown in the revaluation surplus on 31 December 20X8 in respect of this building?

Which of the following statements relating to intangible assets is true?

• All intangible assets must be carried at amortized cost or at an impaired amount, they cannot be revalued upwards.
• The development of a new process that is not expected to increase sales revenues may still be recognized as an intangible asset.
• Expenditure on the prototype of a new engine cannot be classified as an intangible asset because the prototype has physical substance.
• The title heading, font, and design of the front page of a major broadsheet newspaper are for capitalization as intangible assets

Amy Co carries out research and development. In the year ended 30 June 20X5 Amy Co incurred total costs in relation to project X of $750,000, spending the same amount each month up to 30 April 20X5, when the project was completed. The product produced by the project went on sale from 31 May 20X5. The project had been confirmed as feasible on 1 January 20X5, and the product produced by the project was expected to have a useful life of five years. What is the carrying amount of the development expenditure asset as at 30 June 20X5?

• $295,000
• $725,000
• $300,000
• $0

A non-current asset was purchased at the beginning of Year 1 for $2,400 and depreciated by 20% per annum by the reducing-balance method. At the beginning of Year 4 it was sold for $1,200. The result of this was:

• a loss on disposal of $240.00
• a loss on disposal of $28.80
• a profit on disposal of $28.80
• a profit on disposal of $240.00