WorksheetsFR - Ch-2 (Tangible Non Current Assets)
Total questions: 26
Worksheet time: 27mins
What will be the total amount capitalised in respect of the factory?
$6,112,000
$6,950,000
$7,112,000
$7,100,000
Carriageways Co had the following bank loans outstanding during the whole of 20X8 which form the company's general borrowings for the year:
$m
9% loan repayable 20X9 15
11% loan repayable 20Y2 24
Carriageways Co began construction of a qualifying asset on 1 April 20X8 and withdrew funds of $6 million on that date to fund construction. On 1 August 20X8 an additional $2 million was withdrawn for the same purpose.
Calculate the borrowing costs which can be capitalised in respect of this project for the year ended 31 December 20X8.
$549,333
$411,999
$750,000
$350,000
Leclerc Co has borrowed $2.4 million to finance the building of a factory. Construction is expected to take two years. The loan was drawn down on 1 January 20X9 and work began on 1 March 20X9. $1 million of the loan was not utilised until 1 July 20X9 so Leclerc was able to invest it until needed.
Leclerc Co is paying 8% on the loan and can invest surplus funds at 6%.
Calculate the borrowing costs to be capitalised for the year ended 31 December 20X9 in respect of this project.
$140,000
$192,000
$100,000
$162,000
Which of the following would be recognised as an investment property under IAS 40 Investment Property in the consolidated financial statements of Build Co?
A property intended for sale in the ordinary course of business
A property being constructed for a customer
A property held by Build Co as a right-of-use asset and leased out under a six-month lease
A property owned by Build Co and leased out to a subsidiary
Fido Feed Ltd has the following loans in place throughout the year ended 31 December 20X8 which constitute its general borrowings for the period.
$m
10% bank loan 140
8% bank loan 200
On 1 July 20X8 $50 million was drawn down for construction of a qualifying asset which was completed during 20X9.
What amount should be capitalised as borrowing costs at 31 December 20X8 in respect of this asset?
$5.6 million
$2.8 million
$4.4 million
$2.2 million
Wetherby Co purchased a machine on 1 July 20X7 for $500,000. It is being depreciated on a straight-line basis over its useful life of ten years. Residual value is estimated at $20,000. On 1 January 20X8, following a change in legislation, Wetherby Co fitted a safety guard to the machine. The safety guard cost $25,000 and has a useful life of five years with no residual value. What amount will be charged to profit or loss for the year ended 31 March 20X8 in respect of depreciation on this machine?
Rs.36,250
Rs.37,200
Rs.37,000
Rs.37,250
Auckland Co purchased a machine for $60,000 on 1 January 20X7 and assigned it a useful life of 15 years. On 31 March 20X9 it was revalued to $64,000 with no change in useful life.
What will be depreciation charge in relation to this machine in the financial statements of Auckland Co for the year ending 31 December 20X9
Rs.4700
Rs.4760
Rs.4765
Rs.4766
Carter Co vacated its head 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.
Carter Co uses the fair value model for investment property.
What amount will be shown in revaluation surplus at 31 December 20X8 in respect of this building?
Rs.2,0300
Rs.2,00,000
Rs.2,03,000
None of them
Which of the following conditions must be met in order to classify an asset as held for sale?
(i) The asset is expected to be sold within 12 months
(ii) The asset will definitely be sold
(iii) The asset is available for immediate sale in its present condition
(iv) The asset is due to be marketed in the next month
(i), (ii) and (iii)
(i), (iii) and (iv)
(i) and (iii)
(ii) and (iv)
On 1 January 20X5, Ness revalued its head office to $21m, creating a revaluation surplus of $7m.
At this date, the office had a 35 year remaining life. On 1 January 20X9, property prices crashed and the head office was revalued to $11m.
Ness makes an annual reserves transfer for excess depreciation.
What loss on revaluation will be taken to the statement of profit or loss at the date of the revaluation on 1 January 20X9?
Nil
$1,400,000
$600,000
$7,600,000
Wether by purchased a machine on 1 July 20X7 for $500,000. It is being depreciated on a straight line basis over its expected life of ten years. Residual value is estimated at $20,000. On 1 January 20X8, following a change in legislation, Wether by fitted a safety guard to the machine. The safety guard cost $25,000 and has a useful life of five years with no residual value.
What amount will be charged to profit or loss for the year ended 31 March 20X8 in respect of depreciation on this machine?
49,250
37,250
41,000
40,000
An aircraft reqires 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
Capitalized and depreciated over the period to the next overhaul
Charged to profit or loss when the expenditure takes place
Auckland purchased a machine for $60,000 on 1 January 20X7 and assigned it a useful life of 15 years. On 31 March 20X9 it was revalued to $64,000 with no change in useful life.
What will be depreciation charge in relation to this machine in the financial statements of Auckland for the year ending 31 December 20X9?
4,000
3,765
4,765
5,000
On 1 October 20X5 Dearing acquired a machine under the following terms. $
Manufacturer’s base price 1,050,000
Trade discount (applying to base price only) 20%
Early settlement discount taken (on the payable 5%
amount of the base cost only)
Freight charges 30,000
Electrical installation cost 28,000
Staff training in use of machine 40,000
Pre-production testing 22,000
Purchase of a three-year maintenance contract 60,000
On 1 October 20X7 Dearing decided to upgrade the machine by adding new components at a cost of $200,000. This upgrade led to a reduction in the production time per unit of the goods being manufactured using the machine.
What amount should be recognized under non-current assets as the cost of the machine?
$840,000
$920,000
$898,000
$870,000
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
Which one of the following would occur if the purchase of computer stationary was debited to the
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
What are the correct ledger entries to record an acquisition of a non-current asset on credit?
Dr. Non-current assets – Cr. cost Receivables
Dr. Payables Non-current assets – Cr. cost
Dr. Non-current assets – Cr. cost Payables
Dr. Non-current assets – Cr. cost Revaluation surplus
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-current 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.
1, 2 and 3
2 and 3 only
2 and 4 only
1, 2 and 4 only
What is the journal entry to record the transfer of excess depreciation from the revaluation surplus to
retained earnings?
Dr Revaluation surplus $20,000 Cr Retained earnings $20,000
Dr Revaluation surplus $12,500 Cr Retained earnings $12,500
Dr Retained earnings $20,000 Cr Revaluation surplus $20,000
Dr Revaluation surplus $12,500 Cr Retained earnings $12,500
Gusna Co purchased a building on 31 December 20X1 for $750,000. At the date of acquisition, the useful life of the building was estimated to be 25 years and depreciation is calculated using the straight-line method. At31 December 20X6, an independent valuer valued the building at $1,000,000 and the revaluation was recognised in the financial statements. Gusna’s accounting policies state that excess depreciation arising on revaluation of non-current assets can be transferred from the revaluation surplus to retained earnings.
What is the depreciation charge on the building for the year ended 31 December 20X7?
$40,000
$50,000
$30,000
$42,500
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 of the revaluation
1, 2 and 4 only
1 and 2 only
1, 2, 3 and 4
1, 3 and 4 only
Which of the following should be included in the reconciliation of the carrying amount of tangible noncurrent assets at the beginning and end of the accounting period?
1 Additions
2 Disposals
3 Depreciation
4 Increases/decreases from revaluations
1 and 3 only
1, 2, and 3 only
1, 3 and 4
1, 2, 3 and 4
The components of the cost of a major item of equipment are given below: $
Purchase price 780,000
Import duties 117,000
VAT (refundable) 78,000
Site preparation 30,000
Installation 28,000
Testing 10,000
Initial losses before asset reaches planned performance 50,000
Discounted cost of dismantling and removal at end of useful life 40,000
1,133,000
$1,005,000
$1,005,00
$9,65,000
$9,5,000
