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WorksheetsModule Objectives
Total questions: 60
Worksheet time: 30mins
Which of the following is a method used to calculate depreciation?
Straight line method
Compound interest method with annual adjustments and revaluation
Simple addition method
Inventory turnover method
What is the main purpose of the non-current assets register?
To record and track the details of non-current assets owned by a business
To calculate the total sales revenue for the year including all assets
To list all current liabilities and their due dates
To summarize the cash flow from operating activities
What is the process called that allocates the cost of non-current assets to different financial years?
Depreciation
Amortization over a single year
Asset revaluation
Immediate expense recognition
Which of the following best describes the depreciable amount of an asset?
The cost of the asset less the residual value
The cost of the asset plus accumulated depreciation
The value at which the asset is shown in the SFP
The amount the asset is expected to be sold for at the end of its useful life
Which non-current asset is generally not depreciated and why?
Land, because it does not have a limited useful life
Buildings, because they are used for business operations
Vehicles, because they are used for transportation
Machinery, because it is used in production
Why should the cost of a non-current asset be spread over the periods in which the asset is used?
To match the cost to the financial periods expected to benefit from the asset’s use
To recognize all expenses in the year of purchase
To avoid calculating residual value
To increase the carrying amount each year
What is the carrying amount of an asset?
The value at which the asset is shown in the SFP, calculated as the cost of the asset less accumulated depreciation
The cost of the asset less the residual value
The amount the asset is expected to be sold for at the end of its useful life
The period of time the business expects to make use of the asset
What does the term 'useful life' refer to in relation to non-current assets?
The period of time the business expects to make use of the asset
The time until the asset is fully depreciated
The time until the asset is sold
The time until the asset is revalued
Which of the following are the two main methods for calculating depreciation?
Straight-line method and Diminishing balance method
Reducing balance method and Accelerated depreciation method
Sum-of-years-digits method and Units of production method
Revaluation method and Impairment method
What is the formula for calculating depreciation using the straight-line method?
Depreciation = (Cost - Residual value) / Useful life (years)
Depreciation = Depreciation rate (%) x Carrying amount
Depreciation = Cost x Useful life (years)
Depreciation = Carrying amount / Depreciation rate (%)
What is the formula for calculating depreciation using the diminishing balance method?
Depreciation = Depreciation rate (%) x Carrying amount
Depreciation = (Cost - Residual value) / Useful life (years)
Depreciation = Cost x Useful life (years)
Depreciation = Carrying amount / Depreciation rate (%)
Which depreciation method is described as the most common method?
Straight-line method
Diminishing balance method
Sum-of-years-digits method
Units of production method
Which statement best describes the straight-line method of depreciation?
The total amount is charged in equal instalments to each accounting period
The annual depreciation charge is a fixed percentage of the carrying amount
The depreciation charge increases each year
The asset is revalued at the end of each year
Which statement best describes the diminishing balance method of depreciation?
The annual depreciation charge is a fixed percentage of the carrying amount
The total amount is charged in equal instalments to each accounting period
The asset is revalued at the end of each year
The depreciation charge increases each year
A machine costs 10,000,hasaresidualvalueof 2,000, and a useful life of 4 years. Using the straight-line method, what is the annual depreciation charge?
$2,000
$1,000
$4,000
$8,000
A machine has a carrying amount of $5,000 and a depreciation rate of 20%. Using the diminishing balance method, what is the annual depreciation charge?
$1,000
$2,000
$500
$4,000
Which method of depreciation is most suitable for assets that are used up evenly over their useful life?
Straight-line method
Diminishing balance method
Sum-of-years-digits method
Units of production method
Which method of depreciation is most suitable for assets where productivity falls as the asset gets older?
Diminishing balance method
Straight-line method
Sum-of-years-digits method
Units of production method
Which of the following is a method for calculating depreciation for assets acquired part way through a year?
Charge 12 months worth of depreciation in the year of acquisition
Calculate depreciation on a pro rata basis for the number of months it was held
Both A and B
Only charge depreciation in the following year
A business bought a machine for £10,000 on 1 October 20x9. It charges straight line depreciation on a pro rata basis of 20% and has a year end of 31 December. How many months will depreciation be charged for in the year ended 31 December 20x9?
3 months
12 months
6 months
9 months
A business bought a machine for £10,000 on 1 October 20x9. It charges straight line depreciation on a pro rata basis of 20% and has a year end of 31 December. What is the depreciation charge for the year ended 31 December 20x9?
£2,000
£500
£1,000
£250
Which account is credited when recording accumulated depreciation for a non-current asset?
Depreciation charges (SPL)
Non-current asset accumulated depreciation (SFP)
Statement of Profit or Loss (SPL)
Asset cost account
What is the effect of depreciation on the carrying amount of a non-current asset?
It increases the carrying amount by reducing accumulated depreciation.
It reduces the carrying amount by increasing accumulated depreciation.
It does not affect the carrying amount.
It increases the carrying amount by increasing accumulated depreciation.
In accounting for depreciation, which account typically has a credit balance?
Depreciation charges (SPL)
Non-current asset accumulated depreciation
Asset cost account
Statement of Profit or Loss (SPL)
When recording depreciation, which account is debited?
Depreciation charges (SPL)
Non-current asset accumulated depreciation (SFP)
Asset cost account
Statement of Financial Position (SFP)
Why does the accumulated depreciation account offset the non-current asset cost account in the Statement of Financial Position?
To show the net book value of the asset by reducing its carrying amount.
To increase the profit for the period.
To eliminate the asset from the balance sheet.
To record a gain on disposal of the asset.
Which of the following is NOT one of the three main considerations when disposing of a non-current asset?
Gain or loss that will arise on the disposal
The accounting entries to record the disposal
Offering an asset in part exchange against the purchase of a new asset
Calculating the asset's original purchase price
What is the term for the amount of a non-current asset shown on the Statement of Financial Position (SFP)?
Carrying amount
Depreciation amount
Sales proceeds
Book value adjustment
When a business disposes of a non-current asset, what is the amount that needs to be removed from the accounts?
The carrying amount
The sales proceeds
The original purchase price
The accumulated depreciation
Why does a gain or loss on disposal of a non-current asset usually arise?
Because the sales proceeds are unlikely to be the same as the carrying amount
Because the asset was always fully depreciated
Because the asset was never used
Because the asset was purchased at a discount
Which formula is used to calculate the gain or loss on disposal of a non-current asset?
Sale Proceeds minus Carrying Amount
Carrying Amount minus Sale Proceeds
Sale Proceeds plus Depreciation
Original Cost minus Accumulated Depreciation
If an asset suffered too much depreciation, what does this result in when disposed of?
A gain
A loss
No adjustment
A higher carrying amount
If an asset was not depreciated enough, what does this result in when disposed of?
A loss
A gain
No adjustment
A lower carrying amount
Which of the following is the first step when recording the disposal of a non-current asset for cash?
Remove the cost of the asset.
Account for the sales proceeds and record the cash received in the bank account.
Remove the accumulated depreciation charged to date and update the disposals account.
Balance off the disposals account to determine the gain or loss on disposal.
When removing the cost of a non-current asset during its disposal, which account is credited?
Non-current asset at cost (SFP)
Disposals (SPL)
Bank (SFP)
Non-current asset accumulated depreciation (SFP)
When removing accumulated depreciation charged to date during the disposal of a non-current asset, which account is debited?
Non-current asset accumulated depreciation (SFP)
Disposals (SPL)
Bank (SFP)
Non-current asset at cost (SFP)
When accounting for the sales proceeds from the disposal of a non-current asset, which account is credited?
Disposals (SPL)
Bank (SFP)
Non-current asset at cost (SFP)
Non-current asset accumulated depreciation (SFP)
After balancing off the disposals account, how is a gain on disposal shown in the Statement of Profit or Loss (SPL)?
As sundry income.
As an expense.
As a liability.
As a reduction in assets.
Which step in the disposal process determines whether there is a gain or loss on disposal?
Balancing off the disposals account.
Removing the cost of the asset.
Accounting for the sales proceeds.
Removing accumulated depreciation charged to date.
Why is it necessary to remove both the cost of the asset and the accumulated depreciation when disposing of a non-current asset?
To ensure the asset and its related depreciation are no longer shown on the Statement of Financial Position.
To record the cash received from the sale in the bank account and update the disposals account.
To calculate the total depreciation expense for the period and report it in the Statement of Profit or Loss.
To increase the value of assets and reduce liabilities on the financial statements.
What is a part exchange allowance in the context of asset disposal?
It is an amount offered against the cost of a new asset instead of receiving sale proceeds as cash.
It is a discount given on the purchase of any asset.
It is a tax benefit received when disposing of an asset.
It is a penalty charged for disposing of an asset early.
When disposing of a non-current asset in part exchange for a new asset, what does the part exchange allowance replace in the disposals account?
It replaces the sale proceeds.
It replaces the accumulated depreciation.
It replaces the original cost of the asset.
It replaces the gain or loss on disposal.
Which of the following is the first step in disposing of a non-current asset in part exchange for a new asset?
Remove the original cost of the asset.
Account for the part exchange allowance.
Remove the accumulated depreciation charged to date.
Record any additional payment made for the part-exchanged asset.
In the process of disposing of a non-current asset, which account is credited when removing the original cost of the asset?
Non-current asset at cost (SFP)
Disposals (SPL)
Bank (SFP)
Non-current asset accumulated dep’n (SFP)
Which account is debited when removing the accumulated depreciation charged to date during asset disposal?
Non-current asset accumulated dep’n (SFP)
Disposals (SPL)
Bank (SFP)
Non-current asset at cost (SFP)
What is the correct double entry to account for the part exchange allowance when acquiring a new asset?
Debit Non-current asset at cost (new asset) (SFP), Credit Disposals (SPL)
Debit Disposals (SPL), Credit Non-current asset at cost (SFP)
Debit Bank (SFP), Credit Non-current asset at cost (new asset) (SFP)
Debit Non-current asset accumulated dep’n (SFP), Credit Disposals (SPL)
Which step involves balancing off the disposals account to determine the gain or loss on disposal?
Step 4
Step 2
Step 1
Step 5
When an additional payment is made for a part-exchanged asset, which account is credited?
Bank (SFP)
Disposals (SPL)
Non-current asset at cost (new asset) (SFP)
Non-current asset accumulated dep’n (SFP)
Which of the following best describes the purpose of the disposals account in the part exchange process?
It is used to record the removal of the asset's original cost, accumulated depreciation, and the part exchange allowance.
It is used to record only the sale proceeds from asset disposal.
It is used to record the purchase of new assets.
It is used to record tax benefits from asset disposal.
In the five-step process for disposing of a non-current asset in part exchange, which step records any additional payment made for the new asset?
Step 5
Step 3
Step 2
Step 1
Which of the following is a method a business can use when disposing of assets part way through the year?
Charge a full year’s depreciation in the year of acquisition and none in the year of disposal
Charge depreciation for half the year in both acquisition and disposal years
Do not charge any depreciation in the year of acquisition
Only charge depreciation in the year of disposal
A business disposes of an asset in the middle of the year. What does it mean to charge depreciation on a pro rata basis in the year of disposal?
Depreciation is calculated only for the portion of the year the asset was owned before disposal
Depreciation is calculated for the entire year regardless of disposal date
No depreciation is charged in the year of disposal
Depreciation is doubled in the year of disposal
When a business disposes of an asset part way through the year, what are the two main options for charging depreciation?
Charge a full year’s depreciation in the year of acquisition and none in the year of disposal, or charge depreciation on a pro rata basis in the year of disposal
Charge depreciation only in the year of disposal or not at all
Charge double depreciation in the year of acquisition or disposal
Charge depreciation every month regardless of disposal
Which of the following best describes the purpose of a non-current assets register in a business?
It records all tangible non-current assets owned by the business, including details on acquisitions, depreciation, and disposal.
It tracks only the financial transactions related to current assets.
It is used exclusively for external reporting to shareholders.
It lists only the assets that have been disposed of during the year.
What type of information is typically included in a non-current assets register?
Details on acquisitions, depreciation, and disposal of assets.
Only the purchase price of assets.
Names of employees responsible for each asset.
Future projections of asset values.
Why should periodic physical checks be carried out on the non-current assets register?
To verify the accuracy of the register and report any discrepancies.
To update the register with future asset purchases.
To calculate the total depreciation for the year.
To prepare the register for external audits only.
Which format is commonly used for maintaining a non-current assets register?
Spreadsheet or database format.
Handwritten notes in a ledger.
Verbal reports during meetings.
Printed brochures for customers.
Which of the following methods can be used to calculate depreciation?
Straight line and diminishing balance methods
Only the straight line method and the reducing balance method with adjustments
Diminishing balance method and revaluation method
Straight line method and accelerated depreciation method
What is the main purpose of the non-current assets register?
To identify and record the details of non-current assets
To calculate annual profits for the business
To record only the disposals of assets
To track inventory levels of consumable goods
When recording acquisitions and disposals of non-current assets, which of the following is most important?
Ensuring all transactions are correctly recorded
Recording only acquisitions and ignoring disposals
Estimating values without documentation
Recording transactions at the end of the financial year only
