Palm Beach Ltd has elected to adopt the allowed alternative treatment to account for some of its property,plant and equipment.The information available for the class of assets the entity wishes to covert to revaluation model follows. \[\begin{array} { | l | r | r | r | } \hline { \text { Asset class } } & { \text { Cost } } & \begin{array} { c } \text { Accumulated } \\ \text { depreciation } \end{array} & \text { Fair value } \\ \hline & & & \\ \hline \text { Machinery } & 45000 & 35000 & 7500 \\ \hline \text { Motor vehicles } & 64000 & 8000 & 40000 \\ \hline \text { Office equipment } & 25000 & 5000 & 30000 \\ \hline & & & \\ \hline \end{array}\] Which of the following statements is correct if Palm Beach Ltd is to comply with AASB 116?

A) When office equipment is revalued, net profit will increase $10 000. B) When machinery is revalued, net profit will increase by $2500. C) When motor vehicles are revalued, net profit will decrease by $16 000. D) When all assets are revalued, net profit will increase by $8500. A) When office equipment is revalued, net profit will increase $10 000. B) When machinery is revalued, net profit will increase by $2500. C) When motor vehicles are revalued, net profit will decrease by $16 000. D) When all assets are revalued, net profit will increase by $8500.

Exam 6: Revaluations and Impairment Testing of Non-Current Assets

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Palm Beach Ltd has elected to adopt the allowed alternative treatment to account for some of its property,plant and equipment.The information available for the class of assets the entity wishes to covert to revaluation model follows. Asset class Cost Accumulated depreciation Fair value Machinery 45000 35000 7500 Motor vehicles 64000 8000 40000 Office equipment 25000 5000 30000 Which of the following statements is correct if Palm Beach Ltd is to comply with AASB 116?

(Multiple Choice)

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Question 61

Explain why the accounting treatment from increments and decrements are not symmetrical with respect to the revaluation of property,plant and equipment.

(Short Answer)

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Question 62

Where an asset's carrying amount based on its cost is written down to its recoverable amount,AASB 136 specifies that:

(Multiple Choice)

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Question 63

Burchells Ltd owns a machine that originally cost $36 000.It has been depreciated using the straight-line method for 3 years,giving an accumulated depreciation of $15 000 (the salvage value was estimated at $6000 and the useful life at 6 years).At the beginning of the current financial year its carrying value is therefore $21 000.It has been decided by the directors to revalue it to fair value,which is assessed to be $38 000.The salvage value and useful life are considered to be unchanged.What are the appropriate entries to record the revaluation using the net method and the depreciation expense for the current year (rounded to the nearest dollar)?

(Multiple Choice)

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Question 64

Staples Ltd has invested in two parcels of land that are treated as belonging to the same class of assets.The first parcel of land was purchased for $500 000 and has been valued this period at $650 000.The second parcel of land has a carrying value of $340 000 and has been valued this period at $100 000.What is the appropriate journal entry to record the revaluations?

(Multiple Choice)

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Question 65

AASB 116 requires that if it has been decided to revalue a class of non-current assets,the valuations must be kept up to date.

(True/False)

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Question 66

Where management's bonuses are tied to profit-based performance measures management may have an incentive not to revalue assets because:

(Multiple Choice)

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Question 67

Positive Accounting Theory suggests that the revalution model is income increasing because the credit is asset revaluation reserve.

(True/False)

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Question 68

Which of the following statements is a valid reason to select cost model over the revaluation model?

(Multiple Choice)

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Question 69

Which of the following statement is true of accumulated depreciation?

(Multiple Choice)

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Question 70

AASB 136 does not require the use of present values when determining the recoverable amount of an asset.

(True/False)

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Question 71

The concept of conservatism requires that if a class of non-current assets is revalued a revaluation decrement should be treated as an expense of the period,whereas a revaluation increment should be treated as an increase in a reserve.

(True/False)

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Question 72

AASB 116 requires that revaluation increments and decrements must be offset recorded directly to equity and not be recorded as a gain or loss.

(True/False)

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Question 73

Peters Ltd has a machine that originally cost $20 000 and has accumulated depreciation of $5000.Its remaining life is assessed to be 5 years with no salvage value.The directors of Peters Ltd decide on 1 July 2003 to revalue the machine.They are unable to find market information on a machine in a similar state to theirs,so the market value of a new machine of the same type,$30 000,is used as a basis.What is/are the appropriate journal entry(ies)using the gross method to record the revaluation?

(Multiple Choice)

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Question 74

AASB 136 requires that:

(Multiple Choice)

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Question 75

Which of the following statements is true of revaluation model in AASB 116?

(Multiple Choice)

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Question 76

Showing 61 - 76 of 76

Exam 6: Revaluations and Impairment Testing of Non-Current Assets

Explain why the accounting treatment from increments and decrements are not symmetrical with respect to the revaluation of property,plant and equipment.

Where an asset's carrying amount based on its cost is written down to its recoverable amount,AASB 136 specifies that:

AASB 116 requires that if it has been decided to revalue a class of non-current assets,the valuations must be kept up to date.

Where management's bonuses are tied to profit-based performance measures management may have an incentive not to revalue assets because:

Positive Accounting Theory suggests that the revalution model is income increasing because the credit is asset revaluation reserve.

Which of the following statements is a valid reason to select cost model over the revaluation model?

Which of the following statement is true of accumulated depreciation?

AASB 136 does not require the use of present values when determining the recoverable amount of an asset.

The concept of conservatism requires that if a class of non-current assets is revalued a revaluation decrement should be treated as an expense of the period,whereas a revaluation increment should be treated as an increase in a reserve.

AASB 116 requires that revaluation increments and decrements must be offset recorded directly to equity and not be recorded as a gain or loss.

AASB 136 requires that:

Which of the following statements is true of revaluation model in AASB 116?

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Accounting

An Overview of Accounting for Assets

Depreciation of Property, plant and Equipment

Inventory

Accounting for Intangibles

Accounting for Heritage Assets and Biological Assets

An Overview of Accounting for Liabilities

Accounting for Leases

Accounting for Employee Benefits

Share Capital and Reserves

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Share-Based Payments

Accounting for Income Taxes

The Statement of Cash Flows

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After the End of the Reporting Period

Segment Reporting

Related Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues IV: Accounting for Changes in the Degree of Ownership of a Subsidiary

Accounting for Equity Investments,including Investments in Associates and Joint Arrangements

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

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