Deck 10: Noncurrent Assets

Question 1

Which of the following is NOT depreciated under GAAP?

A) a computer
B) a motor vehicle
C) land
D) office premises.

Answer 1

C

Question 2

What was the balance of accumulated depreciation at 31 December 2012?

A) $84 000
B) $93 600
C) $97 440
D) $60 000.

Answer 2

B

Question 3

The equipment is to be depreciated by the reducing balance method (at twice the straight-line rate).What is the amount of depreciation for the first full year?

A) $40 000
B) $85 000
C) $75 000
D) $80 000.

Answer 3

D

Question 4

Which piece of information is NOT necessary in order to compute straight-line depreciation?

A) estimated useful life
B) current market value
C) estimated salvage value
D) cost of the asset.

Question 5

What was the balance of accumulated depreciation at 30 June 2012?

A) $3000
B) $4500
C) $5000
D) $1500.

Question 6

What was the accumulated depreciation at 31 December 2012?

A) $42 000
B) $31 500
C) $21 000
D) $52 500.

Question 7

A used machine with a purchase price of $75 000,requiring an overhaul costing $8000,installation costs of $4000 and testing costs of $2000,would have a cost basis of:

A) $89 000
B) $75 000
C) $83 500
D) $87 000.

Question 8

A building with a cost of $500 000,an estimated residual value of $50 000,and an estimated useful life of 20 years was depreciated by the straight-line method for 10 years.In the eleventh year,it was determined that the useful life should be extended by 10 years (i.e.from 20 years to 30 years).The residual value was to remain the same.The depreciation expense for the current and future years is:

A) $15 000
B) $11 250
C) $13 750
D) $12 500.

Question 9

What was the depreciation expense for year ended 31 December 2011?

A) $60 000
B) $24 000
C) $9600
D) $40 000.

Question 10

What was the depreciation expense for the year ended 31 December 2010?

A) $50 000
B) $80 000
C) $150 000
D) $225 000.

Question 11

What was the depreciation expense for year ended 31 December 2011?

A) $5250
B) $10 500
C) $13 500
D) $21 000.

Question 12

Consider the following transactions: (i)Equipment with a book value of $100 000 is sold for $130 000 cash.
(ii)Land is revalued upwards from $1m to $1.5m.The land has not previously been revalued downwards.
Which of the above transactions increases or decreases profits?

A) (i)only
B) (ii)only
C) (i)and (ii)only
D) Neither.

Question 13

What was the net book value at 31 December 2012?

A) $42 000
B) $22 500
C) $12 500
D) $43 500.

Question 14

What was the net book value at 30 June 2011?

A) nil
B) $1500
C) $3000
D) $4500.

Question 15

Accumulated depreciation is a(n):

A) shareholders' equity account
B) liability
C) expense
D) contra asset.

Question 16

The purpose of depreciation is to:

A) allocate cost in order to measure profit
B) track value changes in the assets
C) measure the current value of assets in the balance sheet
D) record the fair value of the asset.

Question 17

Which of the following would NOT be included in the cost of a new building?

A) demolition of old building
B) excavation costs
C) installation costs
D) building insurance

Question 18

Which of the following should NOT be included in the cost of a new machine?

A) delivery of machine to factory
B) repair costs to existing equipment
C) cost of testing machine
D) installation costs.

Question 19

Squires Ltd purchased equipment for $90 000 on 1 July 2011.It had an estimated life of 200 000 units.The machine was depreciated using the units of production method.The financial period of Squires Ltd ends on 30 June.The estimated number of kilometers travelled was 26,000.What was the depreciation expense for year ended 30 June 2012?

A) $35 100
B) $11 700
C) $23 400
D) $11 000.

Question 20

Using the straight-line method,what is the amount of depreciation for the first full year?

A) $37 500
B) $42 500
C) $41 250
D) $40 000.

Question 21

What was the depreciation expense for year ended 31 December 2010?

A) $10 500
B) $9250
C) $8500
D) $8000.

Question 22

Assuming Norman Ltd used the reducing balance method of depreciation and a rate of 40%,the balance of the accumulated depreciation account at 30 June 2011 was:

A) $28 800
B) $18 000
C) $10 800
D) none of the above.

Question 23

A machine purchased on 1 July 2010 cost $100 000 and has a zero estimated salvage value.The useful life of the machine is 5 years.What is the balance of accumulated depreciation at 30 June 2012?

A) $20 000
B) $40 000
C) $60 000
D) $80 000.

Question 24

When a company sells machinery at a price equal to its book value,this transaction will be recorded with an entry that would include which of the following?

A) DR Cash and accumulated depreciation
CR Machinery
B) DR Machinery
CR Cash and accumulated depreciation
C) DR Cash and machinery
CR Accumulated depreciation
D) DR Cash and depreciation expense
CR Accumulated depreciation

Question 25

Assuming Norman Ltd used the reducing balance method of depreciation and a rate of 40%,the net book value at 30 June 2012 was:

A) $9720
B) $16 200
C) $35 280
D) none of the above.

Question 26

When a company discards machinery that is fully depreciated,this transaction will be recorded with which of the following entries?

A) DR Accumulated depreciation
CR Machinery
B) DR Machinery
CR Accumulated depreciation
C) DR Cash
CR Accumulated depreciation
D) DR Depreciation expense
CR Accumulated depreciation

Question 27

What was the depreciation expense for year ended 30 June 2011?

A) $15 000
B) $10 000
C) $7500
D) $5000.

Question 28

Assuming Norman Ltd used the straight-line method of depreciation,the accumulated depreciation at 30 June 2011 was:

A) $8000
B) $16 000
C) $22 500
D) $24 000.

Question 29

Assuming Norman Ltd used the straight-line method of depreciation,the net book value at 30 June 2012 was:

A) $8000
B) $11 250
C) $21 000
D) $29 000.

Question 30

Alby Ltd sold the machine on 1 January 2012 for $14 000.What was the gain or loss on sale?

A) gain $14 000
B) gain $6000
C) loss $6000
D) loss $14 000.

Question 31

Which method can result in annual depreciation expense going up and down from period to period?

A) reducing balance
B) units-of-production
C) fair value method
D) no depreciation method.

Question 32

When the accumulated depreciation is deducted from the long-term asset account,the figure is known as the:

A) market value
B) replacement value
C) net book value
D) realisable value.

Question 33

A machine purchased on 1 July 2010 cost $100 000 and has a zero estimated salvage value.The useful life of the machine is 5 years.If the machine was sold on 30 September 2012,what would its net book value be?

A) $45 000
B) $50 000
C) $55 000
D) $60 000.

Question 34

If the machine was sold for $65 000,what was the gain or loss on disposal?

A) gain of $14 000
B) gain of $10 000
C) loss of $7000
D) gain $7000.

Question 35

What was the balance of accumulated depreciation at 31 December 2011?

A) $300 000
B) $280 000
C) $80 000
D) $230 000

Question 36

B Ltd purchased a machine for $96 000 on 1 July 2011.The machine was expected to have a useful life of 4 years.The financial year ends on 30 June.The straight-line method of depreciation is employed.What was the depreciation expense for year ended 30 June 2012?

A) $31 500
B) $27 750
C) $25 500
D) $24 000.

Question 37

What was the balance of the accumulated depreciation account at 31 December 2011?

A) $24 000
B) $27 750
C) $31 500
D) $16 000.

Question 38

What was the net book value of the machine at 31 December 2010?

A) $13 000
B) $16 000
C) $21 000
D) $24 000.

Question 39

Equipment that cost $500 000 and had accumulated depreciation of $300 000,was sold for $180 000.This results in a:

A) $320 000 loss
B) $20 000 loss
C) $180 000 gain
D) $20 000 gain.

Question 40

What was the balance of the accumulated depreciation account at 30 June 2012?

A) $10 000
B) $15 000
C) $20 000
D) $25 000.

Question 41

A truck that cost $250 000 and had accumulated depreciation of $180 000 was sold for $50 000 cash in June 2012.This transaction will:

A) increase assets and decrease profits
B) increase assets and increase profits
C) decrease assets and decrease profits
D) decrease assets and increase profits.

Question 42

Where there is an asset revaluation increment that does not reverse a previous decrement,the amount of the increment is credited to:

A) retained profits
B) accumulated depreciation
C) asset revaluation reserve
D) capital.

Question 43

Equipment with a cost of $15 000 and accumulated depreciation of $12 500 was sold for $1700.The journal entry to record the disposal would include:

A) CR Cash,$1700
B) CR Loss on sale,$800
C) DR Accumulated depreciation,$12 500
D) CR Equity $15 000.

Question 44

If the machine was sold for $59 000 on 1 July 2011,what was the gain or loss on disposal?

A) loss of $21 000
B) loss of $59 000
C) loss of $61 000
D) loss of $13 000.

Question 45

Which of the following statements about the capitalisation of goodwill is true?

A) Neither internally generated nor purchased goodwill may be capitalised.
B) Both internally generated and purchased goodwill may be capitalised.
C) Internally generated goodwill is never capitalised,but purchased goodwill is capitalised.
D) Internally generated goodwill may be capitalised,but purchased goodwill is never capitalised.

Question 46

Which of the following do NOT need to be disclosed in financial statements?

A) details concerning revaluations
B) cost and accumulated depreciation by major classes of assets
C) a description of the enterprise's accounting policies with respect to depreciation/amortisation
D) reasons for assets not being revalued.

Question 47

X buys Y for $1 million.The fair value of the following items is: property,plant and equipment $800 000; accounts receivable $160 000; loan from the bank $60 000; and provision for employee entitlements $80 000.The value of goodwill is:

A) $40 000
B) $10 000
C) $180 000
D) $820 000.

Question 48

If equipment that cost $100 000 and has accumulated depreciation of $70 000,is sold for $20 000,the journal entry to record the sale would include:

A) CR Loss on sale $10 000
B) DR Gain on sale $10 000
C) DR Accumulated depreciation $70 000
D) CR Equipment $20 000.

Question 49

Where there is an asset revaluation decrement that does not reverse a previous increment,the amount is debited to:

A) expense
B) retained profits
C) revaluation surplus
D) capital.

Question 50

Which of the following assets can be revalued upwards

A) deferred charges
B) buildings
C) goodwill
D) small tools.

Question 51

Bully Ltd acquires all the business assets and liabilities of Small Ltd for $700,000 cash. The best estimates of the fair market values of the assets and liabilities are:
$$\begin{array} { l r } & \$ \\\text { Receivables } & 180000 \\\text { Payables } & 90000 \\\text { Inventories } & 120000 \\\text { Property } & 210000 \\\text { Equipment } & 80000\end{array}$$
What is the value of goodwill acquired by Bully Ltd?

A) $20 000
B) $110 000
C) $200 000
D) $500 000.

Question 52

Which of the following statements regarding leased assets is incorrect?

A) Accrual accounting recognises the economic value of the asset.
B) Lease assets are amortised.
C) The principal portion is deducted from the lease and the interest is an expense.
D) The cost of the lease asset is not recorded in the balance sheet.

Question 53

If the machine was sold for $60 000,what was the gain or loss on disposal?

A) loss of $20 000
B) loss of $40 000
C) gain of $60 000
D) gain of $20 000.

Question 54

If the machine was sold for $70 000 on 1 July 2012,what was the gain or loss on disposal?

A) gain of $6000
B) loss of $10 000
C) gain of $10 000
D) loss 0f $6000.