Unit 2 Outcome 3 Quiz

What is a non-current asset?

• An asset held for resale

• An asset used by the business for a number of years

• An asset that provides immediate economic benefits

• An asset that is intangible

What is fair value?

• The original cost of an asset

• The price received if the asset was sold at the time it was transferred to the business

• The estimated future economic benefit of an asset

• The cost of getting an asset ready for use

Which qualitative characteristic supports the use of fair values?

• Verifiability

• Relevance

• Understandability

• Comparability

Why might fair values be considered more relevant than original cost?

• They are easier to verify

• They provide an estimate of future economic benefits

• They are less subjective

• They are based on historical data

What is the effect of Georgia’s capital contribution on the accounting equation?

• Increase in assets and liabilities

• Increase in assets and owner’s equity

• No effect on liabilities and owner’s equity

• Decrease in assets and increase in liabilities

How should GST paid on a non-current asset be treated?

• Included in the cost of the asset

• Reported as a Prepaid Expense

• Deducted from the GST liability

• Added to the owner’s equity

What is the purpose of an asset register?

• To record all current assets

• To maintain an overview of non-current assets

• To calculate depreciation

• To track liabilities

What is depreciation?

• The process of selling non-current assets

• The allocation of the cost of a non-current asset over its useful life

• The increase in value of an asset over time

• The immediate expense of a non-current asset

Which method of depreciation assumes equal contribution to revenue each period?

• Reducing balance method

• Units of production method

• Straight line method

• Sum of the years’ digits method

What is the formula for calculating depreciation expense using the straight line method?

• (HC - RV) / Life

• HC / Life

• (HC + RV) / Life

• HC x Life