Deck 10: Noncurrent Assets

Question 1

Jacques Ltd purchased a computer for $4500 on 1 July 2015.It had an estimated useful life of three years.It was depreciated using the straight-line method.The financial year ends on 30 June.

- What was the balance of accumulated depreciation at 30 June 2018?

A) $0
B) $1500
C) $3000
D) $4500

Answer 1

$4500

Question 2

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.

Answer 2

A

Question 3

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 eleventh year is:

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

Answer 3

A

Question 4

Squires Ltd purchased equipment for $90 000 on 1 July 2015.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.What was the depreciation expense for year ended 30 June 2016 if 26 000 units were produced in that year?

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

Question 5

Consider the following transactions: Which of the above transactions increases profits?

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

Question 6

On 1 January 2015,a new motor vehicle with a useful life of four years and an estimated trade-in value of $12 000 was purchased by a business for $54 000.The straight-line method is employed and the financial year ends on 31 December.

- What was the accumulated depreciation at 31 December 2017?

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

Question 7

Equipment with a cost of $160 000 has an estimated residual value of $10 000 and an estimated useful life of four years.

-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) $75 000
C) $80 000
D) $85 000

Question 8

Which of the following would NOT be included in property,plant and equipment?

A) Land
B) Buildings
C) Furniture
D) Inventory

Question 9

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

Question 10

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 11

On 1 January 2015,a new motor vehicle with a useful life of four years and an estimated trade-in value of $12 000 was purchased by a business for $54 000.The straight-line method is employed and the financial year ends on 31 December.

- What was the net book value at 31 December 2017?

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

Question 12

On 1 January 2015,a new motor vehicle with a useful life of four years and an estimated trade-in value of $12 000 was purchased by a business for $54 000.The straight-line method is employed and the financial year ends on 31 December.

-What was the depreciation expense for year ended 31 December 2016?

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

Question 13

Creep Ltd purchased a machine for $100 000 on 1 January 2016.It has an estimated useful life of five years.Creep Ltd's financial period ends on 31 December.The machine was depreciated using the reducing balance method at 60 per cent.

-What was the balance of accumulated depreciation at 31 December 2018?

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

Question 14

Accumulated depreciation is:

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

Question 15

Which of the following is NOT depreciated under GAAP?

A) An aircraft
B) A motor vehicle
C) Land
D) Office premises

Question 16

Equipment with a cost of $160 000 has an estimated residual value of $10 000 and an estimated useful life of four years.

-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 17

Creep Ltd purchased a machine for $100 000 on 1 January 2016.It has an estimated useful life of five years.Creep Ltd's financial period ends on 31 December.The machine was depreciated using the reducing balance method at 60 per cent.

-What was the depreciation expense for year ended 31 December 2017?

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

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

Jacques Ltd purchased a computer for $4500 on 1 July 2015.It had an estimated useful life of three years.It was depreciated using the straight-line method.The financial year ends on 30 June.

-What was the accumulated depreciation at 30 June 2017?

A) $0
B) $1500
C) $3000
D) $4500

Question 20

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 21

A company purchases equipment on 1 January 2016.The following costs are incurred: The equipment has an estimated life of five years and no salvage value.What is the depreciation expense in 2016 if the straight-line method is used?

A) $28 000
B) $36 000
C) $40 000
D) $30 000

Question 22

Tanner Ltd purchased an item of equipment on the first day of the financial period,1 July 2015,for $200 000.The equipment was depreciated using the reducing balance method and a rate of 40 per cent.It was sold on 1 July 2017.

-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 of $7000

Question 23

Delta Ltd purchased a motor vehicle for $45 000 on 1 January 2016.The vehicle was expected to have a life of three years and an estimated disposal value of $15 000.The straight-line method of depreciation is employed and the financial year ends on 30 June.

-What was the depreciation expense for year ended 30 June 2016?

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

Question 24

Norman Ltd purchased a motor vehicle for $45 000 on 1 July 2015.The vehicle was expected to have a four-year life span.The financial period ends on 30 June.

-Assuming Norman Ltd used the straight-line method of depreciation,the accumulated depreciation at 30 June 2017 was:

A) $0.
B) $11 250.
C) $22 500.
D) none of the answers provided.

Question 25

Norman Ltd purchased a motor vehicle for $45 000 on 1 July 2015.The vehicle was expected to have a four-year life span.The financial period ends on 30 June

-Assuming Norman Ltd used the reducing balance method of depreciation and a rate of 40 per cent,the depreciation expense for the year ending 30 June 2017 is:

A) $9720.
B) $10 800.
C) $11 800.
D) none of the answers provided.

Question 26

Tanner Ltd purchased an item of equipment on the first day of the financial period,1 July 2015,for $200 000.The equipment was depreciated using the reducing balance method and a rate of 40 per cent.It was sold on 1 July 2017.

-If the machine was sold for $59 000 on 1 July 2016,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 27

Brown Ltd purchased a machine on the first day of the financial period,1 July 2015,for $100 000.The machine was depreciated using the reducing balance method and a rate of 20 per cent.

-It was sold on 1 July 2016.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 28

Brown Ltd purchased a machine on the first day of the financial period,1 July 2015,for $100 000.The machine was depreciated using the reducing balance method and a rate of 20 per cent.

-It was sold on 1 July 2016.If the machine was sold for $70 000 on 1 July 2017,what was the gain or loss on disposal?

A) Gain of $6000
B) Loss of $10 000
C) Gain of $10 000
D) Loss of $6000

Question 29

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 30

Speedy Ltd purchased a delivery truck on 1 July 2014 for $450 000.It had an estimated salvage value of $150 000.The estimated number of kilometres to be driven was 150 000 km.The truck was depreciated using the units-of-production method.Speedy Ltd's financial period ends on 31 December.The truck was driven the following distances: during 6 months to 31 December 2014,25 000 km;during 12 months to 31 December 2015,75 000 km;and during 12 months to 31 December 2016,40 000 km.

-What was the balance of accumulated depreciation at 31 December 2015?

A) $300 000
B) $200 000
C) $80 000
D) $230 000

Question 31

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

A) Dr Accumulated depreciation $\quad$ $\quad$ $\quad$ Cr Machinery
B) Dr Machinery $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cr Accumulated depreciation
C) Dr Cash $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cr Accumulated depreciation
D) Dr Depreciation expense $\quad$ $\quad$ $\quad$ $\quad$ Cr Accumulated depreciation

Question 32

Speedy Ltd purchased a delivery truck on 1 July 2014 for $450 000.It had an estimated salvage value of $150 000.The estimated number of kilometres to be driven was 150 000 km.The truck was depreciated using the units-of-production method.Speedy Ltd's financial period ends on 31 December.The truck was driven the following distances: during 6 months to 31 December 2014,25 000 km;during 12 months to 31 December 2015,75 000 km;and during 12 months to 31 December 2016,40 000 km.

-What was the depreciation expense for the year ended 31 December 2014?

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

Question 33

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 34

A machine purchased on 1 July 2016 cost $100 000 and has a zero estimated salvage value.The useful life of the machine is five years.If the machine was sold on 30 September 2018,what would its net book value be?

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

Question 35

Delta Ltd purchased a motor vehicle for $45 000 on 1 January 2016.The vehicle was expected to have a life of three years and an estimated disposal value of $15 000.The straight-line method of depreciation is employed and the financial year ends on 30 June.

- What was the balance of the accumulated depreciation account at 30 June 2017?

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

Question 36

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 $\quad$ $\quad$ $\quad$ Cr Machinery
B) Dr Machinery $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Cr Cash and accumulated depreciation
C) Dr Cash and machinery $\quad$ $\quad$ $\quad$ $\quad$ Cr Accumulated depreciation
D) Dr Cash and depreciation expense $\quad$ $\quad$ Cr Accumulated depreciation

Question 37

A truck that cost $250 000 and had accumulated depreciation of $180 000 was sold for $50 000 cash in June 2017.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 38

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

A) Reducing balance
B) Units-of-production
C) Straight line
D) No depreciation method

Question 39

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

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

Question 40

Norman Ltd purchased a motor vehicle for $45 000 on 1 July 2015.The vehicle was expected to have a four-year life span.The financial period ends on 30 June.

-Assuming Norman Ltd used the reducing balance method of depreciation and a rate of 40 per cent,the balance of the accumulated depreciation account at 30 June 2017 was:

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

Question 41

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 42

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 43

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 44

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

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

Question 45

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 46

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: What is the value of goodwill acquired by Bully Ltd?

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

Question 47

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) revaluation surplus.
D) capital.