Financial AccountingNon-Current Assets- Exercise

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

2. 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?

3. W bought a new printing machine. The cost of the machine was $80,000.

The installation costs were $5,000 and the employees received training on how to use the machine, at a cost of $2,000. Before using the machine to print customers’ orders, a test was undertaken and the paper and ink cost $1,000.

What should be the cost of the machine in the company’s statement of financial position?

4. 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?

5. 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

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?

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

8. 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?

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. 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?