Question 1

Wilson Inc wishes to use the revaluation model for this property: $$\begin{array} { | l | r | } 
\hline & \text { Before Revaluation } \
\hline \text { Building Gross Value } & 120,000 \
\hline \text { Building Accumulated Depreciation } & 40,000 \
\hline \text { Net carrying value } & 80,000 \
\hline
\end{array}$$ The fair value for the property is $20,000. Assuming this is the first year of using the revaluation model, what amount would be booked to the "other comprehensive income" 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 2

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

Accepted Answer

A) Under ASPE, either the cost or fair value model may be used. 
B) Under IFRS, either the cost or fair value model may be used. 
C) Under ASPE, either the revaluation or fair value model may be used. 
D) Under IFRS, either the revaluation or fair value model may be used.

Question 3

Wilson Inc wishes to use the revaluation model for this property: $$\begin{array} { | l | r | } 
\hline & \text { Before Revaluation } \
\hline \text { Building Gross Value } & 120,000 \
\hline \text { Building Accumulated Depreciation } & 40,000 \
\hline \text { Net carrying value } & 80,000 \
\hline
\end{array}$$ The fair value for the property is $40,000. Assuming this is the first year of using the revaluation model, which of the following amounts will be booked?

Accepted Answer

A) $40,000 debit to profit and loss. 
B) $40,000 credit to profit and loss. 
C) $40,000 debit to OCI. 
D) $40,000 credit to OCI.

Question 4

Which statement is not correct?

Accepted Answer

A) Agricultural activity involves growth, degeneration and reproduction. 
B) Agricultural activity includes processing into the final product. 
C) Revenue recognition for agricultural produce is covered under the requirements of IAS 18. 
D) Inventory valuation for agricultural produce is covered under the requirements of IAS 2.

Question 5

Wallace Inc wishes to use the revaluation model for this property: $$\begin{array} { | l | r | } 
\hline & \text { Before Revaluation } \
\hline \text { Building Gross Value } & 150,000 \
\hline \text { Building Accumulated Depreciation } & 70,000 \
\hline \text { Net carrying value } & 80,000 \
\hline
\end{array}$$ The fair value for the property is $60,000. What amount would be booked to the "accumulated depreciation" account if Wallace chooses to use the elimination method to record the revaluation?

Accepted Answer

A) $20,000 debit. 
B) $70,000 credit. 
C) $70,000 debit. 
D) $60,000 credit.

Question 6

Which of the following is correct with respect to the "recoverable amount"?

Accepted Answer

A) It is defined as the lower of the value in use or fair value less cost to sell under IFRS. 
B) It is defined as the lower of the value in use or fair value less cost to sell under ASPE. 
C) Under IFRS, it is defined as the sum of the undiscounted cash flows expected from use of the asset. 
D) Under ASPE, it is defined as the sum of the undiscounted cash flows expected from use of the asset.

Question 7

Wilson Inc wishes to use the revaluation model for this property: $$\begin{array} { | l | r | } 
\hline & \text { Before Revaluation } \
\hline \text { Building Gross Value } & 120,000 \
\hline \text { Building Accumulated Depreciation } & 40,000 \
\hline \text { Net carrying value } & 80,000 \
\hline
\end{array}$$ The fair value for the property is $140,000. What amount would be booked to the "accumulated depreciation" account if Wilson chooses to use the elimination method to record the revaluation?

Accepted Answer

A) $40,000 debit. 
B) $40,000 credit. 
C) $60,000 debit. 
D) $140,000 credit.

Question 8

Wilson Inc wishes to use the revaluation model for this property: $$\begin{array} { | l | r | } 
\hline & \text { Before Revaluation } \
\hline \text { Building Gross Value } & 120,000 \
\hline \text { Building Accumulated Depreciation } & 40,000 \
\hline \text { Net carrying value } & 80,000 \
\hline
\end{array}$$ The fair value for the property is $140,000. Using straight-line depreciation and assuming that the property has a remaining depreciable life of 5 years, how much would be booked to accumulated depreciation in the year subsequent to the revaluation?

Accepted Answer

A) $16,000 debit. 
B) $16,000 credit. 
C) $28,000 credit. 
D) $28,000 debit.

Question 9

Explain how non-current assets that are held for sale should be accounted for.

Accepted Answer

The answer of Explain how non-current assets that are held...

Question 10

Explain the meaning of biological assets and agricultural produce. Classify each of the following items as: biological asset, agricultural produce, or neither.
 $$\begin{array} { | c | l | c | c | c | } 
\hline &\text { Item } & \text { Biological asset } & \begin{array} { c } 
\text { Agricultural } \
\text { produce }
\end{array} & \text { Neither } \
\hline  \text { i. }&\text { Salmon in the ocean } & & & \
\hline  \text { i. }&\text { Farmed salmon } & & & \
\hline \text { iii. } & \text { Wheat } & & & \
\hline \text { iv. }& \text { Potted tropical plants in nursery } & & & \
\hline \text { v. } &\text { Cattle used in breeding } & & & \
\hline
\end{array}$$

Accepted Answer

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

Question 11

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 12

Compare the proportional method and the elimination method for recording the revaluation entry. Contrast the benefits and drawbacks of each method.

Accepted Answer

The answer of Compare the proportional method and the elimination...

Question 13

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 14

How should a discontinued operation be presented in the financial statements?

Accepted Answer

A) Summary information is presented as well as a subsequent provision of more extensive breakdowns of revenues, expenses, taxes, and financing cash flow figures. 
B) Separate discussion is not required in the financial statement notes. 
C) Presentation of separate amounts in the statement of comprehensive income, net of tax. 
D) Presentation of a single amount in the statement of comprehensive income, before tax.

Question 15

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

Accepted Answer

A) Under IFRS, fair values must be disclosed if the cost model is used. 
B) Under ASPE, fair values must be disclosed if the cost model is used. 
C) Under IFRS, either the revaluation or fair value model may be used. 
D) Under ASPE, either the revaluation or fair value model may be used.

Question 16

Which statement is correct?

Accepted Answer

A) Agricultural activity relates to the point of harvest and beyond. 
B) Agricultural activity includes fishing from the open ocean. 
C) Agricultural activity includes logging from unmanaged forests. 
D) Agricultural activity involves transforming biological assets.

Question 17

Explain the accounting for assets related to the agricultural industry.

Accepted Answer

The answer of Explain the accounting for assets related to...

Question 18

What is "fair value"?

Accepted Answer

A) The present value of the future cash flows expected to be derived from an asset. 
B) The amount obtainable from the sale of an asset in an arm's-length transaction less the costs of disposal. 
C) The higher of an asset's fair value less costs to sell and its value in use. 
D) The amount obtainable from the sale of an asset in an arm's-length transaction between knowledgeable, willing parties.

Question 19

Wallace Inc wishes to use the revaluation model for this property: $$\begin{array} { | l | r | } 
\hline & \text { Before Revaluation } \
\hline \text { Building Gross Value } & 120,000 \
\hline \text { Building Accumulated Depreciation } & 40,000 \
\hline \text { Net carrying value } & 80,000 \
\hline
\end{array}$$ 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 would be booked to accumulated depreciation 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 20

Based on the following information, what is the impairment amount to be recorded? $$\begin{array} { | l | r | } 
\hline \text { Cost } & \$ 750,000 \
\hline \text { Accumulated depreciation } & 530,000 \
\hline \text { Value in use (sum of discounted cash flows) } & 130,000 \
\hline \text { Fair value } & 140,000 \
\hline \text { Disposal costs } & 15,000 \
\hline
\end{array}$$

Accepted Answer

A) $90,000 
B) $125,000 
C) $130,000 
D) $220,000

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

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

Which statement is not correct?

Which of the following is correct with respect to the "recoverable amount"?

Explain how non-current assets that are held for sale should be accounted for.

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.

Compare the proportional method and the elimination method for recording the revaluation entry. Contrast the benefits and drawbacks of each method.

How is revaluation of non-current assets accounted for?

How should a discontinued operation be presented in the financial statements?

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

Which statement is correct?

Explain the accounting for assets related to the agricultural industry.

What is "fair value"?