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Question;Multiple Choice1. Sentosa has acquired manufacturing equipment and incurred these expenses in doing so.$Gross invoice price, net of GST, subject to terms of 2/10, n/30) 9000Transportation costs to get equipment to factory 1000Special permit to allow wide load on freeway 300Speeding ticket incurred by company driver while delivering equipment to the factory 100Cost to repair wall damaged during installation 500The equipment should be recorded in Sentosa?s records at:a. $10 900b. $10 300c. $10 120d. $10 0002. On what basis would the costs of several items of property, plant and equipment, acquired for a lump-sum payment, normally be allocated?a. Net realisable value at acquisition dateb. Replacement cost at acquisition datec. Independent valuation at acquisition dated. Fair value at acquisition date3. Kamp Gravel Co purchased three trucks for $50 000 each plus GST by making a $20 000 down payment and agreeing to pay the balance at the end six months. The journal entry to record the acquisition is:$ $a. Trucks 150 000GST Outlays 15 000Sundry creditor 165 000b. Trucks 150 000GST Outlays 15 000Cash 20 000Sundry creditor 145 000c. Cash 20 000Sundry creditor 130 000Trucks 150 000d. Trucks 20 000Cash 20 0004. In the financial statements prepared at the end of the accounting period the item Accumulated Depreciation appears:a. On the income statement as an expenseb. On the balance sheet as a liabilityc. On the balance sheet as a deduction from the related assetd. On both the balance sheet and the income statement5. The statement that best describes the nature of accounting depreciation is:a. A charge representing the change in the asset?s market value b. A charge representing the decline in the physical efficiency of the assetc. The amount that can be claimed as a tax deductiond. An allocation of the cost of the asset over its estimated useful life6. The statement relating to depreciation that is true is:a. Accumulated depreciation represents the amount of an asset's cost that has been transferred to depreciation expenseb. The cash account is affected by charging depreciation c. Accumulated depreciation is a contra-expense accountd. Depreciation represents cash that can be used to replace assets when they wear out7. Which factor will affect the amount of depreciation charged on an asset in a particular accounting period? a. Estimated useful life b. Historical cost c. Estimated residual value d. All of the above8. On 31 December 2009 a new motor vehicle with a life of five years and an estimated residual value of $3000 was purchased by a business at a cost of $23 000, net of GST. The straight-line depreciation method is employed. What is the carrying value of the motor vehicle at 31 December 2012 (after charging depreciation for that year)?a. $23 000b. $11 000c. $12 000d. $15 0009. The Delivery Equipment account in the ledger of A co has a balance of $17 600 which is the cost of two trucks purchased on 1 January 2007. The Accumulated Depreciation Delivery Equipment account has a balance on 31 December 2009 of $8000, before adjusting entries. No additional delivery trucks have been acquired or sold. The residual value of each truck is estimated to be $800 and the straight-line depreciation method is used. The necessary adjusting entry to record annual depreciation on 31 December 2009 is:Debit Credit a. Depreciation Exp $8000 Delivery Equipment $8000b. Accumulated Deprecn $4000 Delivery Equipment $4000c. Depreciation Exp $8000 Cash at Bank $8000d. Depreciation Exp $4000 Accumulated Deprecn $400010. On 1 January 2009 Dee Ltd acquired electronic equipment for $10 000, net of GST. If depreciation is provided at 10% p.a. on the diminishing-balance basis, the depreciation charge for the year ended 31 December 2011 is:a. $700b. $729c. $810d. $80011. The statement concerning the diminishing-balance method of depreciation that is true is:a. It charges the same amount of depreciation each periodb. It applies a declining percentage factor to the asset?s original costc. It is also known as the units-of-production methodd. It is an appropriate method when proportionately more of the asset?s benefits are consumed in the early years of its life12. NG Ltd purchased a sprinkler system on 1 January of Year 1.Cost (net of GST) $6500Residual $1500Estimated Useful Life 4 yearsUnder the diminishing-balance method, using a rate of 50%, the depreciation expense for year 2 will be:a. $3250b. $1625c. $1500d. $125013. On 1 July 2006 a retailer purchased a delivery truck for $21 000, net of GST. It has an estimated trade-in-value of $6000 and is expected to last for a total of 60 000 kilometres.A schedule of distance travelled is set out below:30/6/07 20 000 km30/6/08 15 000 km30/6/09 15 000 km30/6/10 10 000 kmUsing the units-of-production method the amount of depreciation charged for the year ended 30 June 2010 is:a. $3750b. $3500c. $2500d. $500014. A machine was purchased on 3 January 2009 for $48 000, net of GST. The machine had an estimated residual value of $6000 and an estimated useful life of 5 years. Depreciation expense for 2009, using sum-of-the-years'-digits method, is:a. $8400b. $14 000c. $19 200d. $16 00015. Which of the following is an advantage of the use of accelerated depreciation methods for tax purposes as opposed to the straight-line method?a. The total amount of tax paid over the lifetime of the asset is reducedb. The business has the interest-free use of deferred tax dollars until the later years of the asset's lifec. Lower tax payments are made during the early years of the asset's lifed. B. and C.16. Wong purchased a computer for $15 000, net of GST. Originally it had an estimated useful life of 4 years and a residual value of $3000. The straight-line method is used. At the start of the third year of usage Wong revised the life of the computer to a total life of 6 years. What depreciation expense should be recorded for the computer for year 3?a. $1000b. $1500c. $3000d. $400017. When estimates of useful life and residual value, made for the purposes of calculating depreciation, in later years turn out to be materially incorrect and the asset has not reached the end of its useful life, the procedure to be followed is to:a. Issue corrected financial statements for all prior yearsb. Issue corrected financial statements for only the most recent three yearsc. Ignore the problem since estimates are not expected to be exact anywayd. Spread the remaining depreciable amount over the remaining useful life18. An advantage of maintaining a subsidiary ledger for depreciable assets is:a. It provides information for the preparation of income tax returnsb. It provides information to support insurance claims in the event of loss from theft or accidentc. It provides information concerning servicing of the assetsd. All are advantages19. The information to be disclosed about property, plant and equipment in the financial statements prepared for external reporting includes:a. Costb. Accumulated Depreciationc. Details of useful livesd. All of the aboveChapter 15Multiple Choice1. The balance sheet of Brown Ltd at 31 December 2009 shows the following:$Plant 50 000Accumulated Depreciation-Plant 30 000 20 000On 1 January 2010, based on a valuer?s estimate of fair value, it was decided to revalue the plant to $35 000. The journal entry to record the revaluation is:a. Accumulated Depreciation-Plant 30 000Plant 15 000Revaluation reserve 15 000b. Plant 15 000Revaluation reserve 15 000c. Expense on Revaluation of Plant 15 000Plant 15 000d. Plant 15 000Expense on Revaluation of Plant 15 000Accumulated Depreciation-Plant 30 0002. The balance sheet of Brown Ltd at 31 December 2009 shows the following:$Plant 50 000Accumulated Depreciation-Plant 30 00020 000On 1 January 2010, based on a valuer?s estimate of fair value, it was decided to revalue the plant to $35 000. The plant was then assessed to have a further useful life of 3 years and an expected residual amount of $5000. The journal entry in the books of Brown Ltd to record depreciation on plant on a straight-line basis for the half-year ending 30 June 2010 (balance date) is:a. Depreciation Expense-Plant 10 000Accumulated Depreciation-Plant 10 000b. Depreciation Expense-Plant 5 000Accumulated Depreciation-Plant 5 000c. Accumulated Depreciation-Plant 5 000Depreciation Expense-Plant 5 000d. Depreciation Expense-Plant 7 500Accumulated Depreciation-Plant 7 5003. The statement relating to revaluations of non-current assets that is not true is:a. Before assets are revalued any existing accumulated depreciation must be written off against the asset accountb. A revaluation increment should be credited directly to a revaluation reservec. A revaluation increment is regarded as income to be added to the firm's profit for the yeard. Future depreciation charges will be based on the revalued carrying amount4. The true statement is:a. A revaluation decrement occurs if a non-current asset's carrying amount is less than its fair valueb. An initial revaluation decrement should be treated as a debit to the revaluation reservec. An initial revaluation decrement should be treated as a debit against the current period?s profit or loss d. None of the statements is true.5. When a non-current asset is sold the gain or loss on disposal is the difference between:a. Fair market value and accumulated depreciationb. Selling price and accumulated depreciationc. Fair value and selling priced. Selling price and carrying amount6. Assume that a machine with a cost of $3000 has accumulated depreciation of $1400 on the date of its disposal. If it was traded-in for $2000 on a new machine and the balance of $1500 was paid in cash what is the profit or loss on disposal of the old machine? (Ignore GST).a. $1000 lossb. $600 gainc. $400 gaind. $1200 loss7. The basic accounting entry for a revaluation decrement is:a. Debit expense on revaluation of asset, credit assetb. Debit asset, credit expense on the revaluation of assetc. Debit revaluation reserve, credit assetd. Debit asset, credit revaluation reserve8. Under IAS 36/AASB 136 ?Impairment of Assets? it is true that:a. When an asset?s carrying amount exceeds its recoverable amount the asset is said to suffer impairmentb. Impairment losses are accounted for as decrements under the revaluation modelc. Accumulated depreciation is written off against the asset before the write down to recoverable amountd. All are true statements9. The statement relating to the composite-rate depreciation approach that is not true is:a. It is often used in practice by business entities with many similar assets in the one class b. A single average depreciation rate is applied to the cost of a functional group of assets c. It is only used for items valued at less than $500 eachd. None of the above, i.e. all are true statements10. Under IAS 38/AASB 138 the statement concerning internally generated intangible assets that is not true is:a. They can only be recognised if their cost can be measured reliablyb. It is likely that the cost of internally generated brand names, mastheads and customer lists can be measured reliablyc. The tests for recognising internally generated intangibles are more stringent than for recognising internally generated property, plant and equipmentd. None of the above, i.e. all are true statements11. The excess of the purchase price of a business over the fair values of the identifiable net assets acquired is a measure of:a. Fair valueb. Revaluation reservec. Purchased goodwilld. Improvements12. The statement about goodwill that is true is:a. Goodwill can be purchased or sold as a separate itemb. Goodwill arises from many factors, such as customer confidence, superior management and a favourable locationc. Under IFRS 3/AASB 3 goodwill must be amortisedd. Goodwill is classified as a current asset13. On 1 June 2009 S Company acquired for $145,000 cash the business of G Ltd. The carrying amount of G Ltd's net assets at the time of the transaction was $110 000 while independent valuers calculated their fair value at $130 000. S Company should debit ?Goodwill? for the amount of:a. $0b. $15 000c. $20 000d. $35 00014. In rare cases the cost of purchasing a business combination may be genuinely less than the sum of the fair values of the identifiable assets and liabilities acquired (bargain purchase). If so IFRS 3/AASB 3 requires:a. The acquirer to initially review the measurement of the cost and the fair values of the assets and liabilities acquiredb. Refer to the difference between the cost and the sum of the fair values as an ?excess?c. Recognise the excess immediately as incomed. All of the above15. Which pairing of non-current assets and acquisition value does not match?A. Mineral resources - costb. Biological assets and agricultural produce - costc. Identifiable intangible assets - cost d. Goodwill - cost of the business combination less the sum of the fair values of the net assets acquired

 

Paper#42482 | Written in 18-Jul-2015

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