Non-Current Assets- Exercise – Excel Accountancy

1. David is entering an invoice for a new item of equipment in the accounts. The invoice shows the following costs:
Water treatment equipment $ 39,800
Delivery $ 1,100
Maintenance charge $ 3,980
Sales tax $ 7,854
Invoice total $ 52,734

David is registered for sales tax. What is the total value of capital expenditure on the invoice?

$52,734

$39,800

$40,900

$44,880

2. What is the purpose of charging depreciation in financial statements?

To account for the ‘wearing-out’ of the asset over its life

To allocate the cost of a non-current asset over the accounting periods expected to benefit from its use

To reduce the cost of the asset in the statement of financial position to its estimated market value

To ensure that funds are available for the eventual replacement of the asset

3. The plant and machinery at cost account of a business for the year ended 30 June 20X4 was as follows:

PLANT AND MACHINERY – COST

Debit	$	Debit	$
20X3		20X3
1 Jul Balance	240,000	30 Sep Transfer disposal account	60,000
20X4		20X4
1 Jan Cash – purchase of plant	160,000	30 Jun Balance	340,000
Total	400,000	Total	400,000

The company’s policy is to charge depreciation at 20% per year on the reducing balance basis, with proportionate depreciation in the years of purchase and disposal.
What should be the depreciation charge for the year ended 30 June 20X4?

$64,000

$68,000

$61,000

$55,000

4. Which of the statements below correctly states the purpose of the asset register?

To ensure the organisation is aware of the age of plant and machinery

An internal control to ensure details of all assets are readily available in the event of loss or theft

To enable the organisation to comply with IAS 16 Property, plant and equipment

An internal control to ensure information relating to non-current assets in the nominal ledger and the financial statements is correct

5. Which of the following best explains what is meant by ‘capital expenditure’?

Expenditure on expensive assets

Expenditure on non-current assets, including repairs and maintenance

Expenditure relating to the acquisition or improvement of non-current assets

Expenditure relating to the issue of share capital

6. Which one of the following statements correctly defines non-current assets?

Non-monetary assets without physical substance that are controlled by the entity and from which future benefits are expected to flow

Assets that are held for use in the production of goods or services and are expected to be used during more than one accounting period

Assets which are intended to be used by the business on a continuing basis, including both tangible and intangible assets that do not meet the IASB definition of a current asset

Assets in the form of materials or supplies to be consumed in the production process

7. Alpha sells machine B for $50,000 cash on 30 April 20X4.

Machine B cost $100,000 when it was purchased and has a carrying amount of $65,000 at the date of disposal.

What are the journal entries to record the disposal of machine B?

Dr Non-current assets $65,000
Dr Accumulated depreciation $35,000
Cr Cash $500,00
Cr Profit on disposal (SPL) $50,000

Dr Accumulated depreciation $65,000
Dr Loss on disposal (SPL) $35,000
Cr Non-current assets – cost $ 100,000

Dr Accumulated depreciation $35,000
Dr Cash $50,000
Cr Non-current assets $65,000
Cr Profit on disposal (SPL) $ 20,000

Dr Accumulated depreciation $35, 000
Dr Loss on disposal (SPL) $ 15,000
Dr Cash $ 50,000
Cr Non-current assets – cost $ 100,000

8. What are the correct ledger entries to record an acquisition of a non-current asset on credit?

Debit: Non-current assets – cost
Credit: Payables

Debit: Non-current assets – cost
Credit: Receivables

Debit: Payables
Credit: Non-current assets – cost

Debit: Non-current assets – cost
Credit: Revaluation surplus

9. Which of the following should be included in the reconciliation of the carrying amount of tangible non-current assets at the beginning and end of the accounting period?

1. Additions
2. Disposals
3. Depreciation
4. Increases/decreases from revaluations

1 and 3 only

1, 2, and 3 only

1, 2, 3 and 4

1, 3 and 4

10. Which of the following should be disclosed for tangible non-current assets according to IAS 16 Property, plant and equipment?

1. Depreciation methods used and the total depreciation allocated for the period
2. A reconciliation of the carrying amount of non-current assets at the beginning and end of the period
3. For revalued assets, whether an independent valuer was involved in the valuation
4. For revalued assets, the effective date of the revaluation

1 and 2 only

1, 2 and 4 only

1, 2, 3 and 4

1, 3 and 4 only

	$
Plant held all year (240,000 – 60,000) X 20%	36,000
Addition 160,000 X 20% X 6/12	16,000
Disposal 60,000 X 20% X 3/12	3,000
	55,000

Financial AccountingNon-Current Assets- Exercise

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	$		$
Balance b/d	100,000	Plant and machinery disposals a/c	100,000

	$		$
Plant and machinery account	100,000	Accumulated depreciation	35,000
		Cash	50,000
		SPL (loss on sale)	15,000
	100,000		100,000