Question 1

Which statement concerning revaluations that reverse prior adjustments in value is untrue?

Accepted Answer

A)  A revaluation decrease that reverses a previous increase should be recognised as a decrease in other comprehensive income to the extent of any credit balance existing in the revaluation surplus reserve account. 
B)  A revaluation increase that reverses a previous decrease should be recognised in the income statement to the extent that it reverses any previously downward revaluation of the same asset. 
C)  A debit to a revaluation surplus reserve account that is a reversal of a previous revaluation increase should not exceed the amount of the original credit. 
D)  When a change in valuation is a reversal of a previous revaluation accumulated depreciation does not have to be written off against the asset before the revaluation is recorded. 
A)  A revaluation decrease that reverses a previous increase should be recognised as a decrease in other comprehensive income to the extent of any credit balance existing in the revaluation surplus reserve account. 
B)  A revaluation increase that reverses a previous decrease should be recognised in the income statement to the extent that it reverses any previously downward revaluation of the same asset. 
C)  A debit to a revaluation surplus reserve account that is a reversal of a previous revaluation increase should not exceed the amount of the original credit. 
D)  When a change in valuation is a reversal of a previous revaluation accumulated depreciation does not have to be written off against the asset before the revaluation is recorded.

Question 2

King Ltd acquired the business of Prince Ltd for a cash payment of $480 000. The carrying amount of Prince Ltd's assets at the time of purchase was $490 000 while the independent fair value was $460 000. There were no liabilities. What is the value of the purchased goodwill recorded by King Ltd?

Accepted Answer

A)  $(10 000) 
B)  $0 
C)  $20 000 
D)  30 000 
A)  $(10 000) 
B)  $0 
C)  $20 000 
D)  30 000

Question 3

On 31 December 2014 an aeroplane with a cost of $200 000 has accumulated depreciation written off of $90 000. If it was sold for $130 000 on 1 January 2015 how much will be recorded as the expense carrying-value on the disposal of the plane?

Accepted Answer

A)  $200 000 
B)  $130 000 
C)  $110 000 
D)  $90 000 
A)  $200 000 
B)  $130 000 
C)  $110 000 
D)  $90 000

Question 4

A motor vehicle, which had a carrying amount at the end of the financial year 2011/12 of $18 000, was disposed of on 1 November 2012. Depreciation was calculated on the vehicle at 20% per annum using the diminishing-balance method. What was the depreciation expense charged for the first 4 months of the financial year 2012/13, before the asset was sold?

Accepted Answer

A)  $18 000 
B)  $0 
C)  $3600 
D)  $1200 
A)  $18 000 
B)  $0 
C)  $3600 
D)  $1200

Question 5

The pair of terms that match is:
i. Non-current fixed assets and depreciation
ii. Natural resources and amortisation
iii. Intangible assets and depletion
iv. Land and depreciation

Accepted Answer

A)  i, ii, iv 
B)  i, ii, iii, iv 
C)  ii, iii, 
D)  i 
A)  i, ii, iv 
B)  i, ii, iii, iv 
C)  ii, iii, 
D)  i

Question 6

Accepted Answer

A)  Debit gain on revaluation $70 000; credit buildings $70 000 
B)  Debit accumulated depreciation buildings $70 000; credit gain on revaluation $70 000 
C)  Debit accumulated depreciation buildings $120 000; credit gain on revaluation $70 000; credit buildings $50 000 
D)  Debit accumulated depreciation buildings $120 000; credit income account $70 000; credit buildings $50 000 
A)  Debit gain on revaluation $70 000; credit buildings $70 000 
B)  Debit accumulated depreciation buildings $70 000; credit gain on revaluation $70 000 
C)  Debit accumulated depreciation buildings $120 000; credit gain on revaluation $70 000; credit buildings $50 000 
D)  Debit accumulated depreciation buildings $120 000; credit income account $70 000; credit buildings $50 000

Question 7

Intangible assets may be further classified as:

Accepted Answer

A)  identifiable and unidentifiable. 
B)  cash and credit. 
C)  living and non-living. 
D)  physical and non-physical. 
A)  identifiable and unidentifiable. 
B)  cash and credit. 
C)  living and non-living. 
D)  physical and non-physical.

Question 8

The carrying amount of a depreciable, non-current asset is its:

Accepted Answer

A)  historic cost. 
B)  cost less residual amount. 
C)  cost or revalued amount less accumulated depreciation. 
D)  net realisable value. 
A)  historic cost. 
B)  cost less residual amount. 
C)  cost or revalued amount less accumulated depreciation. 
D)  net realisable value.

Question 9

Recoverable amount is the:

Accepted Answer

A)  higher of an asset's fair value less costs to sell, and its value in use. 
B)  amount expected to be received from the disposal of the asset. 
C)  amount expected to be recovered from the use of the asset. 
D)  trade-in or expected amount to be received from the disposal of the asset. 
A)  higher of an asset's fair value less costs to sell, and its value in use. 
B)  amount expected to be received from the disposal of the asset. 
C)  amount expected to be recovered from the use of the asset. 
D)  trade-in or expected amount to be received from the disposal of the asset.

Question 10

On 1 January 2015 the equipment was sold for $15 000. What is the accounting entry to record the receipt of the proceeds from the sale of the equipment?

Accepted Answer

A)  Debit bank $15 000; credit proceeds from sale of equipment $15 000 
B)  Debit bank $17 000; credit proceeds from sale of equipment $17 000 
C)  Debit bank $15 000; credit equipment $15 000 
D)  Debit bank $2000; credit proceeds from sale of equipment $2000 
A)  Debit bank $15 000; credit proceeds from sale of equipment $15 000 
B)  Debit bank $17 000; credit proceeds from sale of equipment $17 000 
C)  Debit bank $15 000; credit equipment $15 000 
D)  Debit bank $2000; credit proceeds from sale of equipment $2000

Question 11

Accepted Answer

A)  Accumulated depreciation - plant 30 000 Plant 15 000
Gain on revaluation plant 15 000 
B)  Plant 15 000 Gain on revaluation plant 15 000 
C)  Expense on revaluation of plant 15 000 Plant 15 000 
D)  Plant 15 000 Expense on revaluation of plant 15 000
Accumulated depreciation - plant 30 000 
A)  Accumulated depreciation - plant 30 000 Plant 15 000
Gain on revaluation plant 15 000 
B)  Plant 15 000 Gain on revaluation plant 15 000 
C)  Expense on revaluation of plant 15 000 Plant 15 000 
D)  Plant 15 000 Expense on revaluation of plant 15 000
Accumulated depreciation - plant 30 000

Question 12

IFRS 3/AASB 3 requires that if the amount paid for a business is less than the sum of the fair value of the net identifiable assets acquired, and this is a genuine bargain purchase, then the difference is to be:

Accepted Answer

A)  taken directly to an equity account. 
B)  recognised immediately as a gain in the income statement. 
C)  offset against any goodwill previously acquired. 
D)  used to reduce the value of the monetary assets acquired. 
A)  taken directly to an equity account. 
B)  recognised immediately as a gain in the income statement. 
C)  offset against any goodwill previously acquired. 
D)  used to reduce the value of the monetary assets acquired.

Question 13

Accounting standard IAS 16/AASB 116 requires what basis of valuation to be used if assets are valued at other than cost?

Accepted Answer

A)  Market value 
B)  Fair value 
C)  No basis of valuation is specified 
D)  The lower of cost and net realisable value 
A)  Market value 
B)  Fair value 
C)  No basis of valuation is specified 
D)  The lower of cost and net realisable value

Question 14

Which statement relating to mineral resources is untrue?

Accepted Answer

A)  Accounting for mineral resources is governed by IAS 16/AASB 116. 
B)  The cost at which mineral resources are recorded may include amounts spent on exploration and development. 
C)  As the mineral resource asset is used up its cost is proportionately transferred to an amortisation (depletion) expense account. 
D)  The most common approach to the calculation of the depletion of mineral resources is the reducing-balance method. 
A)  Accounting for mineral resources is governed by IAS 16/AASB 116. 
B)  The cost at which mineral resources are recorded may include amounts spent on exploration and development. 
C)  As the mineral resource asset is used up its cost is proportionately transferred to an amortisation (depletion) expense account. 
D)  The most common approach to the calculation of the depletion of mineral resources is the reducing-balance method.

Question 15

Which of these terms have the same meaning in accounting?
i. Carrying amount
ii. Book value
iii. Written down value

Accepted Answer

A)  i, ii 
B)  ii, iii 
C)  i, iii 
D)  i, ii, iii 
A)  i, ii 
B)  ii, iii 
C)  i, iii 
D)  i, ii, iii

Question 16

What is the accounting entry to amortise an intangible asset over its useful life?

Accepted Answer

A)  Debit amortisation expense; credit asset 
B)  Debit accumulated amortisation; credit amortisation of asset 
C)  Debit amortisation expense; credit accumulated amortisation 
D)  Debit amortisation expense; credit accumulated depreciation 
A)  Debit amortisation expense; credit asset 
B)  Debit accumulated amortisation; credit amortisation of asset 
C)  Debit amortisation expense; credit accumulated amortisation 
D)  Debit amortisation expense; credit accumulated depreciation

Question 17

Recoverable amount is the:

Accepted Answer

A)  higher of an asset's fair value less costs to sell, and its value in use. 
B)  amount expected to be received from the disposal of the asset. 
C)  amount expected to be recovered from the use of the asset. 
D)  lower of an assets fair value and its net realisable value. 
A)  higher of an asset's fair value less costs to sell, and its value in use. 
B)  amount expected to be received from the disposal of the asset. 
C)  amount expected to be recovered from the use of the asset. 
D)  lower of an assets fair value and its net realisable value.

Question 18

A revaluation surplus is what type of account?

Accepted Answer

A)  Asset 
B)  Liability 
C)  Income 
D)  Equity 
A)  Asset 
B)  Liability 
C)  Income 
D)  Equity

Question 19

Which statement is not correct?

Accepted Answer

A)  If an asset is scrapped as worthless before it is fully depreciated its original cost represents an expense on disposal. 
B)  If an asset is scrapped as worthless before it is fully depreciated its carrying amount represents an expense on disposal. 
C)  An amount paid to remove an asset that is scrapped before it is fully depreciated is an addition to the expense recorded on its disposal. 
D)  When an asset is scrapped during the year an entry should be made to record depreciation expense for the portion of the year before scrapping. 
A)  If an asset is scrapped as worthless before it is fully depreciated its original cost represents an expense on disposal. 
B)  If an asset is scrapped as worthless before it is fully depreciated its carrying amount represents an expense on disposal. 
C)  An amount paid to remove an asset that is scrapped before it is fully depreciated is an addition to the expense recorded on its disposal. 
D)  When an asset is scrapped during the year an entry should be made to record depreciation expense for the portion of the year before scrapping.

Question 20

In accounting standard IAS 16/AASB 116 a downward revaluation is now known as a:

Accepted Answer

A)  revaluation depletion. 
B)  revaluation increment. 
C)  revaluation decrease. 
D)  revaluation decrement. 
A)  revaluation depletion. 
B)  revaluation increment. 
C)  revaluation decrease. 
D)  revaluation decrement.

Exam 21: Non-Current Assets: Revaluation, Disposal and Other Aspects

Which statement concerning revaluations that reverse prior adjustments in value is untrue?

King Ltd acquired the business of Prince Ltd for a cash payment of $480 000. The carrying amount of Prince Ltd's assets at the time of purchase was $490 000 while the independent fair value was $460 000. There were no liabilities. What is the value of the purchased goodwill recorded by King Ltd?

On 31 December 2014 an aeroplane with a cost of $200 000 has accumulated depreciation written off of $90 000. If it was sold for $130 000 on 1 January 2015 how much will be recorded as the expense carrying-value on the disposal of the plane?

The pair of terms that match is: i. Non-current fixed assets and depreciation ii. Natural resources and amortisation iii. Intangible assets and depletion iv. Land and depreciation

Intangible assets may be further classified as:

The carrying amount of a depreciable, non-current asset is its:

Recoverable amount is the:

On 1 January 2015 the equipment was sold for $15 000. What is the accounting entry to record the receipt of the proceeds from the sale of the equipment?

IFRS 3/AASB 3 requires that if the amount paid for a business is less than the sum of the fair value of the net identifiable assets acquired, and this is a genuine bargain purchase, then the difference is to be:

Accounting standard IAS 16/AASB 116 requires what basis of valuation to be used if assets are valued at other than cost?

Which statement relating to mineral resources is untrue?

Which of these terms have the same meaning in accounting? i. Carrying amount ii. Book value iii. Written down value

What is the accounting entry to amortise an intangible asset over its useful life?

Recoverable amount is the:

A revaluation surplus is what type of account?

Which statement is not correct?

In accounting standard IAS 16/AASB 116 a downward revaluation is now known as a:

Decision Making and the Role of Accounting

Financial Statements for Decision Making

Recording Transactions

Adjusting the Accounts and Preparing Financial Statements

Completing the Accounting Cycle Closing and Reversing Entries

Accounting for Retailing

Accounting for Systems

Accounting for Manufacturing

Cost Accounting Systems

Cash Management and Control

Cost-Volume-Profit Analysis for Decision Making

Budgeting for Planning and Control

Performance Evaluation for Managers

Differential Analysis, Profitability Analysis and Capital Budgeting

Partnerships: Formation, Operation and Reporting

Companies: Formation and Operations

Regulation and the Conceptual Framework

Receivables

Inventories

Non-Current Assets: Acquisition and Depreciation

Liabilities

Presentation of Financial Statements

Statement of Cash Flows

Analysis and Interpretation of Financial Statements

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