Financial AccountingNon-Current Assets- Exercise

1. 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?

2. The carrying amount of a company’s non-current assets was $200,000 at 1 August 20X0.

During the year ended 31 July 20X1, the company sold non-current assets for $25,000 on which it made a loss of $5,000.

The depreciation charge for the year was $20,000. What was the carrying amount of noncurrent assets at 31 July 20X1?

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

5. 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?

6. A manufacturing company receives an invoice on 29 February 20X2 for work done on one of its machines.

$25,500 of the cost is actually for a machine upgrade, which will improve efficiency.

The accounts department do not notice and charge the whole amount to maintenance costs.

Machinery is depreciated at 25% per annum on a straight-line basis, with a proportional charge in the years of acquisition and disposal.

By what amount will the profit for the year to 30 June 20X2 be understated?

7. 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

8. 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?

9. 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?

10. A company bought a property four years ago on 1 January for $ 170,000. Since then property prices have risen substantially and the property has been revalued at $210,000. The property was estimated as having a useful life of 20 years when it was purchased. What is the balance on the revaluation surplus reported in the statement of financial position?