Non-Current Assets- Exercise – Excel Accountancy

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

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

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

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

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

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

3. A company’s policy is to charge depreciation on plant and machinery at 20% per year on cost, with proportional depreciation for items purchased or sold during a year.

The company’s plant and machinery at cost account for the year ended 30 September 20X3 is shown below;

PLANT AND MACHINERY – COST

Debit	$	Credit	$
20X2		20X3
1 Oct Balance	200,000	30 Jun Transfer disposal account	40,000
		30 Sep Balance	210,000
20X3
1 Apr Cash-purchase of plant	50,000
Total	250,000	Total	250,000

What should be the depreciation charge for plant and machinery (excluding any profit or loss on the disposal) for the year ended 30 September 20X3?

$51,000

$45,000

$42,000

$43,000

4. Which one of the following would occur if the purchase of computer stationary was debited to the computer equipment at cost account?

An overstatement of profit and an understatement of non-current assets

An understatement of profit and an overstatement of non-current assets

An understatement of profit and an understatement of non-current assets

An overstatement of profit and an overstatement of non-current assets

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

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

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

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

6. An organisation’s asset register shows a carrying amount of $145,600. The non-current asset account in the nominal ledger shows a carrying amount of $135,600.

The difference could be due to a disposed asset not having been deducted from the asset register. Which one of the following could represent that asset?

Asset with disposal proceeds of $5,000 and a carrying amount of $5,000

Asset with disposal proceeds of $15,000 and a profit on disposal of $5,000

Asset with disposal proceeds of $15,000 and a carrying amount of $5,000

Asset with disposal proceeds of $15,000 and a loss on disposal of $5,000

7. 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?

$61,000

$64,000

$55,000

$68,000

8. Which one of the following assets may be classified as a non-current asset in the financial statements of a business?

A computer used in the office

Cleaning products used to clean the office floors

A tax refund due next year

A motor vehicle held for resale

9. 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 information relating to non-current assets in the nominal ledger and the financial statements is correct

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

10. Pinato Co purchased a building on 30 June 20X8 for $1,250,000. At acquisition, the useful life of the building was 50 years. Depreciation is calculated on the straight-line basis.

10 years later, on 30 June 20Y8 when the carrying amount of the building was $1,000,000, the building was revalued to 20Y9?

Assuming no further revaluations take place, what is the balance on the revaluation surplus at 30 June?

$335,000

$585,000

$560,000

$310,000

	$
Plant held all year (200,000 – 40,000) ´ 20%	32,000
Disposal 40,000 ´ 20% ´ 9/12	6,000
Additions 50,000 ´ 20% ´ 6/12	5,000
	43,000

	$
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

Leave a Reply Cancel Reply

GET IN TOUCH

STAY TUNED

AVANTAGEHeadquarters

OUR LOCATIONSWhere to find us

GET IN TOUCHSocial links

	$		$
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