Financial AccountingNon-Current Assets- Exercise

1. 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

2. 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?

3. 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?

4. 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?

5. 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?

6. Which of the following costs would be classified as capital expenditure for a restaurant business?

7. 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

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?

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

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

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?