Financial AccountingNon-Current Assets- Exercise

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

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

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

4. 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?

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. 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?

7. 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?

8. 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?

9. Which one of the following statements correctly defines non-current assets?

10. 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?