Financial AccountingNon-Current Assets- Exercise

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

2. An asset register showed a carrying amount of $67,460.

A non-current asset costing $15,000 had been sold for $4,000, making a loss on disposal of $1,250. No entries had been made in the asset register for this disposal.

What is the correct balance on the asset register?

3. A car was purchased by a newsagent business in May 20X0 for:
Cost         $ 10,000
Road tax $       150
Total        $ 10,150
The business adopts a date of 31 December as its year end. The car was traded in for a replacement vehicle in August 20X3 at an agreed value of $5,000.

It has been depreciated at 25% per annum on the reducing balance method, charging a full year’s depreciation in the year of purchase and none in the year of sale.

What was the profit or loss on disposal of the vehicle during the year ended December 20X3?

4. 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?

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

                                                                  PLANT AND MACHINERY – COST

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?

6. B acquired a lorry on 1 May 20X0 at a cost of $30,000.

The lorry has an estimated useful life of four years, and an estimated resale value at the end of that time of $6,000.

B charges depreciation on the straight-line basis, with a proportionate charge in the period of acquisition.

What will the depreciation charge for the lorry be in B’s accounting period to 30 September 20X0?

7. Gusna Co purchased a building on 31 December 20X1 for $750,000.

At the date of acquisition, the useful life of the building was estimated to be 25 years and depreciation is calculated using the straight-line method.

At 31 December 20X6, an independent valuer valued the building at $1,000,000 and the revaluation was recognised in the financial statements.

Gusna’s accounting policies state that excess depreciation arising on revaluation of non-current assets can be transferred from the revaluation surplus to retained earnings.

What is the journal entry to record the transfer of excess depreciation from the revaluation surplus to retained earnings?

8. A business purchased a motor car on 1 July 20X3 for $20,000. It is to be depreciated at 20 per cent per year on the straight-line basis, assuming a residual value at the end of five years of $4,000, with a proportionate depreciation charge in the years of purchase and disposal.

The $20,000 cost was correctly entered in the cash book but posted to the debit of the motor vehicles repairs account.

How will the business profit for the year ended 31 December 20X3 be affected by the error?

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

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