Financial AccountingNon-Current Assets- Exercise

1. 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

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

3. Which of the following items should be included in current assets?
(i) Assets which are not intended to be converted into cash
(ii) Assets which will be converted into cash in the long term
(iii) Assets which will be converted into cash in the near future

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. 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?

6. 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?

7. 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?

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. 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?

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