Question 1

Grover Inc wishes to use the revaluation model for this property:  The fair value for the property is $100,000. Assuming this is the first year of using the revaluation model, what amount would be booked to the "other comprehensive income" account if Grover chooses to use the proportional method to record the revaluation?

Accepted Answer

A) $0 
B) $10,000 debit 
C) $10,000 credit 
D) $20,000 credit

Question 2

Information about the PPE for Jeffery Inc. is provided below. Determine the balance sheet presentation under the cost and fair value model for each year. Ignore the impact of income taxes and assume that a full year depreciation is taken each year using the straight-line method.

Accepted Answer

The answer of Information about the PPE for Jeffery Inc....

Question 3

Smith Inc wishes to use the revaluation model for this property:  The fair value for the property is $150,000. What amount would be booked to the "accumulated depreciation" account if Smith chooses to use the proportional method to record the revaluation?

Accepted Answer

A) $0 
B) $35,000 debit 
C) $35,000 credit 
D) $70,000 credit

Question 4

Which of the following is correct with respect to when the impairment test must be performed?

Accepted Answer

A) An annual test is required for long-lived assets under IFRS. 
B) An annual test is required for long-lived assets under ASPE. 
C) Under IFRS, a test is required for long-lived assets only when there are indications an asset may be impaired. 
D) Under ASPE, a test is required for long-lived assets only when there are indications an asset may be impaired.

Question 5

When is a "disposal group" classified as held for sale?

Accepted Answer

A) When a component of an entity either has been disposed of or is classified as held for sale. 
B) When the group of assets is both available for sale and expected to sell within a year. 
C) When a group of assets and liabilities are to be disposed in several transactions. 
D) When the carrying value for a group of current assets will be recovered through sale rather than continuing use.

Question 6

Which statement is not correct?

Accepted Answer

A) Accounting for biological assets is covered by the requirements of IAS 41. 
B) Biological assets include grapes, milk, wine, cheese and lumber. 
C) End of processing activities are covered under the requirements of IAS 18. 
D) Post harvesting processing activities are covered under the requirements of IAS 2.

Question 7

Based on the following information, what is the impairment booked at December 31, 2012?

Accepted Answer

A) $150,000 
B) $185,000 
C) $300,000 
D) $450,000

Question 8

Wilson Inc wishes to use the revaluation model for this property:  The fair value for the property is $20,000. What amount would be booked to the "accumulated depreciation" account if Wilson chooses to use the proportional method to record the revaluation?

Accepted Answer

A) $0 
B) $30,000 debit 
C) $30,000 credit 
D) $60,000 debit

Question 9

Which is correct with respect to the accounting treatment under the cost or revaluation model?

Accepted Answer

A) Companies can choose to apply the revaluation model to each individual PPE or intangible asset under IFRS. 
B) Companies can choose to apply the revaluation model to each class of PPE or intangible asset under IFRS. 
C) Companies can choose to apply the revaluation model to each individual PPE or intangible asset under ASPE. 
D) Companies can choose to apply the revaluation model to each class PPE or intangible asset under ASPE.

Question 10

Which of the following is correct with respect to the "fair value model"?

Accepted Answer

A) Depreciation is required annually. 
B) Depreciation is optional. 
C) Depreciation is not required. 
D) Depreciation is required annually when there has been a decline in fair value.

Question 11

Which statement is correct about using the "fair value less point of sale costs" approach for biological assets?

Accepted Answer

A) The exception to "cost less depreciation" can be made at any subsequent measurement date. 
B) Fair value may not be available for initial recognition, but could be used for subsequent measurement. 
C) Fair value may be available for initial recognition, but then not be used for subsequent measurement. 
D) Under this accounting method, fair value can only be higher than cost.

Question 12

Company Twelve purchased land for $900,000 some years ago. Fair value was $800,000 at the beginning of this year and $1,000,000 at the end of this year.
Prepare the journal entry to record this year's revaluation adjustment.

Accepted Answer

The answer of Company Twelve purchased land for $900,000 some...

Question 13

Company One purchased land for $900,000 some years ago. Fair value was $450,000 at the beginning of this year and $340,000 at the end of this year.
Prepare the journal entry to record this year's revaluation adjustment.

Accepted Answer

The answer of Company One purchased land for $900,000 some...

Question 14

Based on the following information, what is the net amount that this equipment should be reported at in the balance sheet at December 31, 2012?

Accepted Answer

A) $230,000 
B) $240,000 
C) $250,000 
D) $270,000

Question 15

How is revaluation of non-current assets accounted for?

Accepted Answer

A) Revaluation surplus is always booked to profit and loss. 
B) Revaluation loss is booked to other comprehensive income. 
C) Cumulative revaluation loss is booked to profit and loss. 
D) Revaluation surplus is not recognized in other comprehensive income.

Question 16

What is a "discontinued operation"?

Accepted Answer

A) A component of an entity that either has been disposed of or is classified as held for sale. 
B) A component of an entity that has been disposed of or will be sold within one year. 
C) A component with operations and cash flows that are not distinguishable from the rest of the entity. 
D) A group of assets and liabilities to be disposed of together in separate transactions.

Question 17

Which is not a source of information that would be used as an indicator of impairment?

Accepted Answer

A) Adverse changes in the technological competitive or legal environment of the entity. 
B) Market value of asset has increased more than would be expected from normal aging. 
C) Market value of asset has decreased more than would be expected from normal aging. 
D) The market value of the entity as a whole is less than the carrying value of its net assets.

Question 18

Wallace Inc wishes to use the revaluation model for this property:  The fair value for the property is $60,000. Using straight-line depreciation and assuming that the property has a remaining depreciable life of 5 years, how much depreciation expense would be recorded in the year subsequent to the revaluation?

Accepted Answer

A) $12,000 debit 
B) $12,000 credit 
C) $16,000 credit 
D) $16,000 debit

Question 19

Which of the following is correct with respect to "investment properties"?

Accepted Answer

A) These are land or buildings used for production or administrative purposes of the business. 
B) These are land, buildings or machinery used for production or administrative purposes of the business. 
C) These are land or buildings used for rental income purposes of the business. 
D) These are land, buildings or machinery used for rental income purposes of the business.

Question 20

Explain the meaning of biological assets and agricultural produce. Classify each of the following items as: biological asset, agricultural produce, or neither.

Accepted Answer

The answer of Explain the meaning of biological assets and...

Exam 10: Applications of Fair Value to Non-Current Assets