Financial AccountingNon-Current Assets- Exercise

1. 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?

2. 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?

3. 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?

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. 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?

7. 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?

8. 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?

9. Which one of the following would occur if the purchase of computer stationary was debited to the computer equipment at cost account?

10. 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?