Edwards Ltd has two pieces of equipment in its balance sheet as follows: $\begin{array} { l c c c c c } \begin{array} { l } \text { Item } \\ \text { no. } \end{array} & \begin{array} { c } \text { Cost or } \\ \text { revalued } \\ \text { amount } \end{array} & \begin{array} { c } \text { Accumulated } \\ \text { Depreciation } \end{array} & \text { Value in Use } & \text { Fair value } & \begin{array} { c } \text { Estimated } \\ \text { cost to sell } \end{array} \\ 1 & \$ 600000 & \$ 100000 & \$ 600000 & \$ 450000 & \$ 20000 \\ 2 & \$ 800000 & \$ 400000 & \$ 450000 & \$ 500000 & \$ 25000 \\ \text { Total } & \$ \mathbf { 4 0 0 0 0 0 } & \$ \mathbf { 5 0 0 0 0 0 } & & & \end{array}$ -If Edwards Ltd applies the revaluation model to the assets, at what amount will asset 1 be reported in the balance sheet?

A) $600,000 B) $430,000 C) $500,000 D) $450,000 A) $600,000 B) $430,000 C) $500,000 D) $450,000

Edwards Ltd has two pieces of equipment in its balance sheet as follows: $\begin{array} { l c c c c c } \begin{array} { l } \text { Item } \\ \text { no. } \end{array} & \begin{array} { c } \text { Cost or } \\ \text { revalued } \\ \text { amount } \end{array} & \begin{array} { c } \text { Accumulated } \\ \text { Depreciation } \end{array} & \text { Value in Use } & \text { Fair value } & \begin{array} { c } \text { Estimated } \\ \text { cost to sell } \end{array} \\ 1 & \$ 600000 & \$ 100000 & \$ 600000 & \$ 450000 & \$ 20000 \\ 2 & \$ 800000 & \$ 400000 & \$ 450000 & \$ 500000 & \$ 25000 \\ \text { Total } & \$ \mathbf { 4 0 0 0 0 0 } & \$ \mathbf { 5 0 0 0 0 0 } & & & \end{array}$ -If Edwards Ltd applies the revaluation model to the assets, at what amount will asset 2 be reported in the balance sheet?

A) $400,000 B) $475,000 C) $500,000 D) $450,000 A) $400,000 B) $475,000 C) $500,000 D) $450,000

Edwards Ltd has two pieces of equipment in its balance sheet as follows: $\begin{array} { l c c c c c } \begin{array} { l } \text { Item } \\ \text { no. } \end{array} & \begin{array} { c } \text { Cost or } \\ \text { revalued } \\ \text { amount } \end{array} & \begin{array} { c } \text { Accumulated } \\ \text { Depreciation } \end{array} & \text { Value in Use } & \text { Fair value } & \begin{array} { c } \text { Estimated } \\ \text { cost to sell } \end{array} \\ 1 & \$ 600000 & \$ 100000 & \$ 600000 & \$ 450000 & \$ 20000 \\ 2 & \$ 800000 & \$ 400000 & \$ 450000 & \$ 500000 & \$ 25000 \\ \text { Total } & \$ \mathbf { 4 0 0 0 0 0 } & \$ \mathbf { 5 0 0 0 0 0 } & & & \end{array}$ -If Edwards Ltd applies the cost model to the assets, at what amount will asset 2 be reported in the balance sheet?

A) $400,000 B) $450,000 C) $500,000 D) $475,000 A) $400,000 B) $450,000 C) $500,000 D) $475,000

Exam 8: Advanced Asset and Liability Issues

It is stated in AASB 116 that under the revaluation model an asset's fair value is determined by its selling price in current condition; that is, it is an exit measure.

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(True/False)

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Question 1

Correct Answer:

Verified

False

Platypus Ltd has an item of plant with a cost of $4 200,000, and at 30 June 20X5 the accumulated depreciation was $600,000 and its estimated residual amount $200,000.Platypus Ltd has adopted the revaluation model for the class of assets, but the asset has not previously been revalued. -At reporting date, the directors determined that the asset's fair value was $3,750,000 and the estimated cost to sell it was $250,000.The assets value in use (ViU) was estimated to be $3,400,000.What is the carrying amount of the asset at 30 June 20X5, and what type of revaluation - if any - was carried out during the reporting period and how was it recognised?

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(Multiple Choice)

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Question 2

Correct Answer:

Verified

C

Under certain circumstances, a choice exists between using the primary method or the exception method when revaluing property, plant and equipment under AASB 116.All other things being equal, which statement is incorrect?

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(Multiple Choice)

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Question 3

Correct Answer:

Verified

A

For a depreciable asset, when the cost model is adopted under AASB 116, it is impossible for the full amount of impairment recognised in earlier reporting periods to be reversed in subsequent reporting periods.

(True/False)

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Question 4

Which of the following is not true of a provision:

(Multiple Choice)

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Question 5

It is possible to measure assets in several ways: the possible ways include: I. $\quad$ cost – an input or entry measure II. $\quad$ replacement cost – an input or entry measure for a equivalent asset in new condition (an input or entry measure) III. $\quad$ value in use (present value of future cash flows) IV. $\quad$ current cost – the cost of replacing the production capacity that an asset had when new (an input or entry measure) V. $\quad$ fair value less cost to sell VI. $\quad$ fair value used under revaluation model -Under AASB 136 the following measures are used to estimate recoverable amount:

(Multiple Choice)

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Question 6

Edwards Ltd has two pieces of equipment in its balance sheet as follows: Item no. Cost or revalued amount Accumulated Depreciation Value in Use Fair value Estimated cost to sell 1 \ 600000 \ 100000 \ 600000 \ 450000 \ 20000 2 \ 800000 \ 400000 \ 450000 \ 500000 \ 25000 Total \ \ -If Edwards Ltd applies the revaluation model to the assets, at what amount will asset 1 be reported in the balance sheet?

(Multiple Choice)

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Question 7

The carrying amount of an asset is:

(Multiple Choice)

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Question 8

When a class of assets is revalued under AASB 116, in all cases we must net-off the increments and decrements in determining if there is a debit/credit to the asset revaluation reserve or an item of expense or income to be included in period profit or loss.

(True/False)

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Question 9

Otter Ltd has an item of plant with a cost of $4,200,000, and at 30 June 20X4 the accumulated depreciation was $600,000 and its estimated residual amount $200,000; its accumulated impairment was $150,000 at the beginning of the reporting period. -Otter Ltd has adopted the cost model for the class of assets.What is the carrying amount of the asset at 30 June 20X4?

(Multiple Choice)

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Question 10

The recoverable amount of an asset is:

(Multiple Choice)

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Question 11

A contingent liability is one for which:

(Multiple Choice)

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Question 12

Edwards Ltd has two pieces of equipment in its balance sheet as follows: Item no. Cost or revalued amount Accumulated Depreciation Value in Use Fair value Estimated cost to sell 1 \ 600000 \ 100000 \ 600000 \ 450000 \ 20000 2 \ 800000 \ 400000 \ 450000 \ 500000 \ 25000 Total \ \ -If Edwards Ltd applies the revaluation model to the assets, at what amount will asset 2 be reported in the balance sheet?

(Multiple Choice)

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Question 13

An item classified contingent asset can only be reclassified and recognised as an asset when the benefits from that asset are:

(Multiple Choice)

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Question 14

It is possible to measure assets in several ways: the possible ways include: I. $\quad$ cost – an input or entry measure II. $\quad$ replacement cost – an input or entry measure for a equivalent asset in new condition (an input or entry measure) III. $\quad$ value in use (present value of future cash flows) IV. $\quad$ current cost – the cost of replacing the production capacity that an asset had when new (an input or entry measure) V. $\quad$ fair value less cost to sell VI. $\quad$ fair value used under revaluation model -When the revaluation model is adopted, the carrying amount at reporting date is measured by:

(Multiple Choice)

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Question 15

Under AASB 116 the usual treatment for an upward revaluation increment amount is to credit:

(Multiple Choice)

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Question 16

Platypus Ltd has an item of plant with a cost of $4 200,000, and at 30 June 20X5 the accumulated depreciation was $600,000 and its estimated residual amount $200,000.Platypus Ltd has adopted the revaluation model for the class of assets, but the asset has not previously been revalued. -At reporting date, the directors determined that the asset's fair value was $3,750,000.What is the carrying amount of the asset at 30 June 20X4 and what type of revaluation - if any - was carried out during the reporting period and how was it recognised?

(Multiple Choice)

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Question 17

Edwards Ltd has two pieces of equipment in its balance sheet as follows: Item no. Cost or revalued amount Accumulated Depreciation Value in Use Fair value Estimated cost to sell 1 \ 600000 \ 100000 \ 600000 \ 450000 \ 20000 2 \ 800000 \ 400000 \ 450000 \ 500000 \ 25000 Total \ \ -If Edwards Ltd applies the cost model to the assets, at what amount will asset 2 be reported in the balance sheet?

(Multiple Choice)

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Question 18

When an entity classifies a non-current asset as "held for sale":

(Multiple Choice)

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Question 19

In measuring recoverable amount under AASB 136, the future net cash flows from an asset are:

(Multiple Choice)

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Question 20

It is stated in AASB 116 that under the revaluation model an asset's fair value is determined by its selling price in current condition; that is, it is an exit measure.

Under certain circumstances, a choice exists between using the primary method or the exception method when revaluing property, plant and equipment under AASB 116.All other things being equal, which statement is incorrect?

For a depreciable asset, when the cost model is adopted under AASB 116, it is impossible for the full amount of impairment recognised in earlier reporting periods to be reversed in subsequent reporting periods.

Which of the following is not true of a provision:

The carrying amount of an asset is:

When a class of assets is revalued under AASB 116, in all cases we must net-off the increments and decrements in determining if there is a debit/credit to the asset revaluation reserve or an item of expense or income to be included in period profit or loss.

The recoverable amount of an asset is:

A contingent liability is one for which:

An item classified contingent asset can only be reclassified and recognised as an asset when the benefits from that asset are:

Under AASB 116 the usual treatment for an upward revaluation increment amount is to credit:

When an entity classifies a non-current asset as "held for sale":

In measuring recoverable amount under AASB 136, the future net cash flows from an asset are:

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