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The document provides information about non-current asset balances and depreciation charges for a company. It includes details on the cost and valuation of a building owned by the company, the balances of the plant and machinery account, depreciation policies and charges, and disposal of assets. Multiple choice questions are also included related to accounting for non-current assets, capitalization of expenditures, impairment of goodwill, and depreciation calculations.
The document provides information about non-current asset balances and depreciation charges for a company. It includes details on the cost and valuation of a building owned by the company, the balances of the plant and machinery account, depreciation policies and charges, and disposal of assets. Multiple choice questions are also included related to accounting for non-current assets, capitalization of expenditures, impairment of goodwill, and depreciation calculations.
The document provides information about non-current asset balances and depreciation charges for a company. It includes details on the cost and valuation of a building owned by the company, the balances of the plant and machinery account, depreciation policies and charges, and disposal of assets. Multiple choice questions are also included related to accounting for non-current assets, capitalization of expenditures, impairment of goodwill, and depreciation calculations.
01. At 31 December 2004 Q, a limited liability company, owned a building
that cost $800,000 on 1 anuary 1!!"# $t was being depreciated at two per cent per year# %n 1 anuary 200" a re&aluation to $1,000,000 was recogni'ed# At this date the building had a remaining use(ul li(e o( 40 years# )hat is the depreciation charge (or the year ended 31 December 200" and the re&aluation reser&e balance as at 1 anuary 200"* Depreciation charge +e&aluation reser&e (or year ended 31 December 200" as at 1 anuary 200" $ $ A 2",000 200,000 B 2",000 3,0,000 C 20,000 200,000 D 20,000 3,0,000 02. -he plant and machinery account .at cost/ o( a business (or the year ended 31 December 200" was as (ollows0 1lant and machinery 2 cost
200" 200" $ $ 1 an 3alance 240,000 31 4arch disposal account ,0,000 30 une 5ash 2 purchase o( plant 1,0,000 31 Dec 3alance 340,000
400,000 400,000
-he company6s policy is to charge depreciation at 207 per year on the straight line basis, with proportionate depreciation in the years o( purchase and disposal# )hat should be the depreciation charge (or the year ended 31 December 200"* A $68,000 B $64,000 C $61,000 D $55,000 03. )hich o( the (ollowing statements are correct* .1/ 5apitalised de&elopment e8penditure must be amorti'ed o&er a period not e8ceeding 9&e years# w w w . p a c d u b a i . c o m Page 7 Ali Sattars Non-Current Assets +971-55-1582821 .2/ 5apitalised de&elopment costs are shown in the balance sheet under the heading o( :on;current Assets .3/ $( certain criteria are met, research e8penditure must be recogni'ed as an intangible asset# A 2 only B 2 and 3 C 1 only D 1 and 3 04. <areth, a sales ta8 registered trader purchased a computer (or use in his business# -he in&oice (or the computer showed the (ollowing costs related to the purchase0
?ow much should <areth capitalise as a non;current asset in relation to the purchase* A $1,222 B $1,040 C $890 D $1,015 05. )hat is the correct double entry to record the depreciation charge (or a period* A D+ Depreciation e8pense 5+ Accumulated depreciation B D+ Accumulated depreciation 5+ Depreciation e8pense
06. A company6s motor &ehicles at cost account at 30 une 200, is as (ollows0
4otor &ehicles 2 cost
$ $ w w w . p a c d u b a i . c o m Page 7 Ali Sattars Non-Current Assets +971-55-1582821 3alance b@( 3",800 Disposal 12,000 Additions 12,!"0 3alance c@( 3,,>"0
48,>"0 48,>"0
)hat opening balance should be included in the (ollowing period6s trial balance (or motor &ehicles 2 cost at 1 uly 200,* A $3,,>"0 D+ B $48,>"0 D+ C $3,,>"0 5+ D $48,>"0 5+ 07. 3eta purchased some plant and eAuipment on 1 uly 2001 (or $40,000# -he estimated scrap &alue o( the plant in ten years6 time is estimated to be $4,000# 3eta6s policy is to charge depreciation on the straight line basis, with aproportionate charge in the period o( acAuisition# )hat should the depreciation charge (or the plant be in 3eta6s accounting period o( twel&e months to 30 =eptember 2001* A $>20 B $,00 C $!00 D $,>" 08. At 30 =eptember 2000, the (ollowing balances e8isted in the records o( Bambda0 $ 1lant and eAuipment0 5ost 8,0,000 Accumulated depreciation 3!>,000 During the year ended 30 =eptember 2001, plant with a written down &alue o( $3>,000 was sold (or $4!,000# -he plant had originally cost $80,000# 1lant purchased during the year cost $180,000# $t is the company6s policy to charge a (ull year6s depreciation in the year o( acAuisition o( an asset and none in the year o( sale, using a rate o( 107 on the straight line basis# )hat net amount should appear in Bambda6s balance sheet at 30 =eptember 2001 (or plant and eAuipment* A $",3,000 B $4,>,000 C $"10,000 D $,0,,000 09. )hich o( these statements about research and de&elopment e8penditure are correct* 1/ $( certain conditions are satis9ed, research and de&elopment e8penditure must be capitalised# w w w . p a c d u b a i . c o m Page 7 Ali Sattars Non-Current Assets +971-55-1582821 2/ %ne o( the conditions to be satis9ed i( de&elopment e8penditure is to be capitalised is that the technical (easibility o( the proCect is reasonably assured# 3/ $( capitalised, de&elopment e8penditure must be amorti'ed o&er a period not e8ceeding 9&e years# 4/ -he amount o( capitalised de&elopment e8penditure (or each proCect should be re&iewed each year# $( circumstances no longer Custi(y the capitalisation, the balance should be written oD o&er a period not e8ceeding 9&e years# "/ De&elopment e8penditure may only be capitalised i( it can be shown that adeAuate resources will be a&ailable to 9nance the completion o( the proCect# A 2 and " B 3, 4 and " C 2, 3 and " D 1, 2 and 3 10. A company6s plant and machinery ledger account (or the year ended 30 =eptember 2002 was as (ollows0 1lant and machinery 2 cost 2001 $ 2002 $ 1 %ctober 3alance 381,200 1 une Disposal account 3,,000 1 December 5ash 2 addition 18,000 30 =eptember 3alance 3,3,200 3!!,200 3!!,200 -he company6s policy is to charge depreciation at 207 per year on the straight line basis, with proportionate depreciation in years o( purchase and sale# )hat is the depreciation charge (or the year ended 30 =eptember 2002* A $>4,440 B $84,040 C $>2,,40 D $>,,840 11. )hich o( the (ollowing statements about research and de&elopment e8penditure are correct according to $A=38 $ntangible Assets* .1/ $( certain conditions are met, an enterprise may decide to capitalise de&elopment e8penditure# .2/ +esearch e8penditure, other than capital e8penditure on research (acilities, must be written oD as incurred# .3/ 5apitalised de&elopment e8penditure must be amortised o&er a period not e8ceeding " years# .4/ 5apitalised de&elopment e8penditure must be disclosed in the balance sheet under intangible non;current assets# w w w . p a c d u b a i . c o m Page 7 Ali Sattars Non-Current Assets +971-55-1582821 A 1, 2 and 4 only B 1 and 3 only C 2 and 4 only D 3 and 4 only# 12. A business purchased a motor car on 1 uly 2003 (or $20,000# $t is to be depreciated at 20 per cent per year on the straight line basis, assuming a residual &alue at the end o( 9&e years o( $4,000, with a proportionate depreciation charge in the year o( purchase# -he $20,000 cost was correctly entered in the cash booE but posted to the debit o( the motor &ehicles repairs account# ?ow will the business pro9t (or the year ended 31 December 2003 be aDected by the error* A Fnderstated by $18,400 B Fnderstated by $1,,800 C Fnderstated by $18,000 D %&erstated by $18,400 13. )hich o( the (ollowing statements about goodwill are correct* .1/ <oodwill may only be re&alued to a 9gure in e8cess o( cost i( there is rele&ant and reliable e&idence to support the re&aluation# .2/ $nternally generated goodwill may not be capitalised# .3/ $mpairment o( goodwill should always be shown separately on the (ace o( a company6s income statement# .4/ 1urchased goodwill is the diDerence between the cost o( acAuiring a company and the (air &alue o( its identi9able net assets# A 1 and 3 only B 2 and 3 only C 1 and 4 only D 2 and 4 only The following info!a"ion ela"e# "o $%e#"ion n%!&e 15 ' 16 Arnold bought a machine (or use in his business on 1 :o&ember 20G4# ?e ga&e the supplier a cheAue (or $11,">0 and traded in an old machine# -he supplier allowed him $4,430 in part e8change (or the old machine# Arnold depreciates machinery on the reducing balance basis at a rate o( 207 per annum# -he old machine had cost $12,000 and had been depreciated by $",8",# 14. )hat is the pro9t or loss on trade in o( the old machine* A A pro9t o( $1,42, B A pro9t o( $1,>14 C A loss o( $1,42, D A loss o( $1,>14 w w w . p a c d u b a i . c o m Page 7 Ali Sattars Non-Current Assets +971-55-1582821 15. )hat is the depreciation charge on the new machine (or the year to 31 %ctober 20G"* A $88, B $1,428 C $2,314 D $3,200 16. An asset cost $100,000# $t is e8pected to last (or ten years and ha&e a scrap &alue o( $10,000# -he company is going to depreciate this asset at 207 on the reducing balance basis# )hat will be the depreciation charge on this asset be in its second year* A $14,400 B $1,,000 C $18,000 D $20,000 17. %n 1 anuary 200" a company purchased some plant# -he in&oice showed $ 5ost o( plant 48,000 Deli&ery to (actory 400 %ne year warranty co&ering breaEdown during 200" 800 2222222 4!,200 2222222 4odi9cations to the (actory building costing $2,200 were necessary to enable the plant to be installed# )hat amount should be capitali'ed (or the plant in the company6s records* A $"1,400 B $48,000 C $"0,,00 D $48,400 18. -he opening balance on Der& plc6s motor &ehicles at cost account was $140,000# -he opening balance on depreciation o( motor &ehicles was $,0,000# -he company purchased new &ehicles costing $30,000 during the year# :o &ehicles were sold# -he company depreciates &ehicles at 2"7 on the reducing balance basis, with a (ull year6s depreciation in the year o( acAuisition and none in the year o( disposal# )hat is the closing balance on Der& plc6s depreciation o( motor &ehicles account*
19. )hen 4ichelle purchased a new car, she used her old car in part e8change# =he has made the correct entry (or the part e8change &alue o( $3,"00 in the non current asset disposal account# w w w . p a c d u b a i . c o m Page 7 Ali Sattars Non-Current Assets +971-55-1582821 )hat other entry is needed to complete the double entry (or the part e8change &alue o( $3,"00* A A debit entry in the motor &ehicles cost account B A credit entry in the motor &ehicles cost account C A debit entry in the banE account D A credit entry in the banE account 20# An organi'ation6s non;current assets register shows a net booE &alue o( $12",,00#-he non;current assets account in the general ledger shows a net booE &alue o( $13",,00# -he diDerence could be due to disposed asset not ha&ing been deducted (rom the 98ed asset ledger# A )ith disposal proceeds o( $1"000 and a pro9t on disposal o( $"000 B )ith disposal proceeds o( $1"000 and a net booE &alue o( $"000 C )ith disposal proceeds o( $1"000 and a loss on disposal o( $"000 D )ith disposal proceeds o( $"000 and a net booE &alue o( $"000 21. At 31 December 20G1# -ina owned eAuipment which had cost $1,8,"00# At that date $,,,"00 had been allowed in respect o( depreciation# -ina6s accounting policy is to allow depreciation in eAuipment at a rate o( 2"7 in the reducing balance method# -he depreciation charge to be included in -ina6s income statement (or the year ended 31 December 20G2 should be $ 22. A non current asset was disposed o( (or $2,200 during the last accounting year# $t had been purchased e8actly three years earlier (or $",000, with an e8pected residual &alue o( $"00, and had been depreciated on the reducing balance method, at 207 per annum, -he pro9t or loss on disposal was $ 23. Don has sold a machine (or $",300# -he machine had been bought three years pre&iously at a cost o( $10,000# At the date o( sale the machine had been depreciated by $4,800# )hat is the pro9t on disposal* 24. )hat is the purpose o( charging the depreciation in accounts* A -o allocate the cost less residual &alue o( a non current asset o&er the accounting periods e8pected to bene9t (rom its use B -o ensure that (unds are a&ailable (or the e&entual replacement o( the asset C -o reduce the cost o( the asset in the statement o( 9nancial position to its estimated marEet &alue D -o comply with the prudence concept 25. An asset register showed a net booE &alue o( $,>,4,0# A non;current asset costing $1",000 had been sold (or $4,000, maEing a loss on disposal w w w . p a c d u b a i . c o m Page 7 Ali Sattars Non-Current Assets +971-55-1582821 o( $1,2"0# :o entries had been made in the asset register (or this disposal# )hat is the correct balance on the asset register* A $42,>10 B $"1,210 C $"3,>10 D $,2,210 w w w . p a c d u b a i . c o m Page 7