Question 1

If an asset's carrying amount is increased due to an initial revaluation that increase shall be recognised in:

Accepted Answer

A) other comprehensive income. 
B) the profit and loss. 
C) in the disclosures. 
D) None of the given answers are correct.

Question 2

Cars and Trucks Plc owns an engine testing machine which was purchased for €120 000.After 3 years of use the machine had accumulated depreciation of €58 560 but was revalued to €80 000.Two years later the machine was sold for €60 000 and had accumulated depreciation at the time of sale of €36 800.What journal entries would be required to record the sale of the machine in accordance with IASB 16 requirements?

Accepted Answer

A)  $\begin{array}{|c|l|r|r|}
\hline \mathrm{Dr} & \text { Cash at bank } & 60000 & \
\hline \mathrm{Cr} & \text { Proceeds from testing machine sold } & & 60000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Accumulated depreciation } & 95360 & \
\hline \mathrm{Dr} & \text { Carrying amount of testing machine sold } & 24640 & \
\hline \mathrm{Cr} & \text { Testing machine } & & 120000 \
\hline
\end{array}$ 
B)  $$\begin{array} { | l | l | r | l | } 
\hline \mathrm { Dr } & \text { Cash at bank } & 60000 & \
\hline \mathrm { Cr } & \text { Profit on sale of land } & & 35360 \
\hline \mathrm { Cr } & \text { Testing machine } & & 24640 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | l | r | r | } 
\hline \mathrm { Dr } & \text { Cash at bank } & 60000 & \
\hline \mathrm { Cr } & \text { Proceeds from sale of land } & & 60000 \
\hline & & & \
\hline \mathrm { Dr } & \text { Carrying amount of land sold } & 43200 & \
\hline \mathrm { Dr } & \text { Accumulated depreciation } & 36800 & \
\hline \mathrm { Cr } & \text { Testing machine } & & 80000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | r | l | } 
\hline \mathrm { Dr } & \text { Cash at bank } & 60000 & \
\hline \mathrm { Dr } & \text { Accumulated depreciation } & 36800 & \
\hline \mathrm { Cr } & \text { Profit from sale of testing machine } & & 16800 \
\hline \mathrm { Cr } & \text { Testing machine } & & 80000 \
\hline
\end{array}$$

Question 3

Compare the accounting treatment for investment properties with that of property,plant and equipment using the valuation model.

Accepted Answer

The answer of Compare the accounting treatment for investment properties...

Question 4

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

Accepted Answer

A) to report relevant information 
B) to reduce taxes 
C) to properly match costs with expenses 
D) to simplify the measurement accounting policy

Question 5

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

Accepted Answer

A) When revaluing assets, the value of the asset base increases, consequently the return on assets will fall. 
B) A revaluation may result in a decrease in the value of the asset base. 
C) A revaluation that increases the value of the asset base will increase profit measures. 
D) When revaluing assets, the value of the asset base increases, consequently the debt to equity ratio will fall.

Question 6

According to Positive Accounting Theory,the size of the entity may have an impact on management's decision to revalue because of management's motivation to reduce political costs.There is more than one possible view regarding the effect of revaluation on political visibility,including which of the following?

Accepted Answer

A) Since revaluations may increase the variability of asset size, they will increase political costs. 
B) Where increases in asset size are expected to result from revaluations, the increase in the size of the entity may reduce political costs. 
C) Where revaluations increase the size of the asset base, the return on assets will be lower and this will potentially lower political costs. 
D) Where revaluations result in an increase in the asset base, depreciation expense will increase and lead to greater political costs.

Question 7

Differentiate depreciation expense from impairment loss.

Accepted Answer

The answer of Differentiate depreciation expense from impairment loss....

Question 8

IAS 16 provides guidance on fair values which states:

Accepted Answer

A) Where an active and liquid market exists for an asset, the market price represents evidence of the asset's fair value. 
B) Fair values are determined on the basis that an entity is a going concern. 
C) Where no market exists the price should be based on the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction. 
D) All of the given answers are correct.

Question 9

If an asset's carrying amount is impaired,IAS 16 requires all assets in the same class to be revalued.

Accepted Answer

A) True 
 B)False

Question 10

IAS 36 defines the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets as a:

Accepted Answer

A) class of assets. 
B) asset portfolio. 
C) value in use asset group. 
D) cash-generating unit.

Question 11

Explain the process that an entity must undertake when converting from the cost model to the valuation model basis of accounting for its non-current assets.

Accepted Answer

The answer of Explain the process that an entity must...

Question 12

Entities that elect to report plant and equipment at cost less accumulated depreciation are required to disclose a valuation of plant and equipment every 3 years in a note to the accounts.

Accepted Answer