Book Title; Author

Chapter 21 - Multiple choice quiz


1.
The carrying amount of a depreciable, non-current asset is its:
A.
Historic cost
B.
Cost less residual amount
C.
Cost or revalued amount less accumulated depreciation
D.
Net realisable value


2.
Accounting standard IAS 16/AASB 116:
A.
Requires all assets to be revalued every five years
B.
Requires all assets to be revalued every three years
C.
Requires all assets to be revalued yearly
D.
Does not require an entity to revalue its assets


3.
Accounting standard IAS 16/AASB 116 require what basis of valuation to be used if assets are valued at other than cost?
A.
Market value
B.
Net realisable value
C.
Fair value
D.
The lower of cost and net realisable value


4.
The balance sheet of Big Brother Ltd at 31 December 2009 shows the following:                      
 
$
Equipment
30 000
Accumulated Depreciation  
7 000
 
23 000
                                                                                                          
On 1 January 2010 it is confirmed that the fair value of the equipment has fallen to $10000 less than its carrying amount. The equipment had previously been revalued upwards by $6 000. The correct entry to record the decrease in value is:
A.
Debit accumulated depreciation equipment $7 000, debit expense on revaluation of equipment $10 000, credit equipment $17 000
B.
Debit accumulated depreciation equipment $7 000, debit expense on revaluation of equipment $4 000, debit revaluation reserve $6 000; credit equipment $17 000
C.
Debit expense on revaluation of equipment $10 000; credit equipment $10 000
D.
None of the above


5.
FK Ltd's fleet of delivery trucks (original cost $850 000) had a carrying amount on 1 July 2009 of $470 000. On that date their value was revised to $500 000. Future depreciation charges will be based on which amount?
A.
$450 000
B.
$330 000
C.
$500 000
D.
None of the above


6.
Which of these is a requirement of IAS 16/AASB 116?
A.
An entire class of non-current assets must be revalued together
B.
If the revaluation model is adopted non-current assets should be revalued to fair value
C.
Before a depreciable asset is revalued accumulated depreciation should be written back to the asset account
D.
All are requirements


7.
The basic accounting entry for a revaluation decrement is:
A.
Debit expense on revaluation of asset; credit asset
B.
Debit asset; credit expense on the revaluation of asset
C.
Debit revaluation reserve; credit asset
D.
Debit asset; credit revaluation reserve


8.
On 31 December 2010 HiRise Ltd's balance sheet shows motor vehicles at a cost price of $200,000 less accumulated depreciation $50,000. On 31 December 2010 an estimate is made that the recoverable amount of the vehicles is only $120,000. Under IAS 36/AASB 136 the accounting entry to record the write down of the motor vehicles to recoverable amount is:
A.
Dr. Impairment loss on motor vehicles (expense) $80,000; cr. Accumulated Depreciation $80,000
B.
Dr. Impairment loss on motor vehicles (expense) $30,000; cr. Motor Vehicles $30,000
C.
Dr. Impairment loss on motor vehicles (expense) $30,000; cr. Accumulated Depreciation and Impairment losses $30,000
D.
Dr. Impairment loss on motor vehicles (expense) $80,000; cr. Accumulated Depreciation and Impairment losses $80,000


9.
When an asset is sold the gain or loss on disposal is the difference between:
A.
The proceeds of sale and the original cost of the asset
B.
The proceeds of sale and the carrying amount of the asset
C.
The proceeds of sale and the fair value of the asset
D.
The original cost and the accumulated depreciation of the asset


10.
The balance sheet of Marty Ltd at 31 December 2009 showed:                                          
 
$
Equipment  
50 000
Accumulated Depreciation of equipment
35 000
 
15 000
                       
On 1 January 2010 the equipment was sold for $10 000. The accounting entry to record the receipt of the proceeds from the sale of the equipment is:
A.
Debit bank $10 000; credit proceeds from sale of equipment $10 000
B.
Debit bank $15 000; credit proceeds from sale of equipment $15 000
C.
Debit proceeds from sale of equipment $10 000; credit bank $10 000
D.
None of the above


11.
If a computer with a fully depreciated cost of $30 000 is discarded as worthless, the accounting entry to record the scrapping is:
A.
Debit expense on disposal of asset $30 000; credit computer $30 000
B.
Debit expense on disposal of asset $30 000; credit accumulated depreciation computer $30 000
C.
Debit accumulated depreciation computer $30 000; credit computer $30 000
D.
None of the above


12.
On 31 December 2009 an aeroplane with a cost of $200 000 has accumulated depreciation written off of $90 000. If it is sold for $130 000 on 1 January 2010 what will be the net effect of the sale on the income statement?
A.
$20 000 profit
B.
$20 000 loss
C.
$70 000 loss
D.
$40 000 profit


13.
Proceeds from the sale of equipment is what type of account?
A.
Liability
B.
Income
C.
Expense
D.
Negative asset


14.
The statement that is correct is:
A.
If an asset is scrapped as worthless before it is fully depreciated, its original cost represents an expense on disposal
B.
If an asset is scrapped as worthless before it is fully depreciated, its carrying amount represents an expense on disposal
C.
An amount paid to remove an asset that is scrapped before it is fully depreciated is an addition to the expense recorded on its disposal
D.
Both B. and C. are correct


15.
The balance sheet of Marty Ltd at 31 December 2009 showed:                                                          
 
$
Equipment    
50 000
 Accumulated depreciation of equipment  
35 000
 
15 000
       
On 1 January 2010 the equipment was sold for $10 000. The accounting entry to record the closing of the equipment and the accumulated depreciation of equipment accounts, is:
A.
Debit accumulated depreciation equipment $35 000, credit equipment $35 000
B.
Debit accumulated depreciation equipment $35 000, debit carrying amount of equipment $15 000; credit equipment $50 000
C.
Debit bank $10 000, credit carrying amount of equipment $10 000
D.
None of the above


16.
Rachel's Gymnasium purchased some new gym equipment, trading in old equipment with a carrying amount of $5 000. Cash of $9 000 was paid to the supplier and a trade-in allowance of $3 000 was granted. The new equipment should be recorded at:
A.
$14 000
B.
$12 000
C.
$9 000
D.
$6 000


17.
The pair of terms that match is:
A.
Non-current fixed assets - depreciation
B.
Natural resources - amortisation
C.
Intangible assets - depletion
D.
All of the pairs match


18.
The statement relating to mineral resources that is untrue is:
A.
Accounting for mineral resources is governed by IAS 16/AASB 116
B.
The cost at which mineral resources are recorded may include amounts spent on exploration and development
C.
As the mineral resource asset is used up its cost is proportionately transferred to an amortisation (depletion) expense account
D.
The most common approach to the calculation of the depletion of mineral resources is the straight-line method


19.
Which of these are examples of biological assets and agricultural produce?
I.
Sheep and cattle
II   Wool and wine
III.
Wheat and rice
IV Oil and coal
V. Macadamia nuts
A.
I, II, III, IV
B.
I, II, III,IV,V
C.
I, II, IV, V
D.
I, II, III, V


20.
Under IAS 41/AASB 141 the basis for the measurement of biological assets and agricultural produce is:
A.
Historical cost less estimated point-of-sale costs
B.
Fair value less estimated point-of-sale costs
C.
Replacement value
D.
None of the above


21.
Which of these assets, all of which lack physical substance, is not regarded as an intangible asset?
A.
Trade marks
B.
Goodwill
C.
Brand names
D.
Accounts receivable


22.
Intangible assets may be further classified as:
A.
Identifiable and unidentifiable
B.
Current and non-current
C.
Living and non-living
D.
Physical and non-physical


23.
According to IFRS 3/AASB 3 purchased goodwill:
A.
Should be written off immediately on recognition
B.
Should be written off by a systematic charge against profits using the straight-line method, over a period not exceeding 20 years
C.
Should remain in the accounts at cost less any accumulated impairment losses
D.
Should be written off over the useful life of the asset


24.
L Ltd acquired the business of M Ltd for a cash payment of $750 000. The carrying amount of M Ltd's assets at the time of purchase was $410 000 while the independent fair value was $630 000. There were no liabilities. What is the value of the purchased goodwill recorded by L Ltd?
A.
$120 000
B.
$340 000
C.
$220 000
D.
None of the above


25.
Which of these does not contribute to the value of purchased goodwill?
A.
Superior management
B.
Favourable location
C.
Customer loyalty
D.
A franchise


26.
IFRS 3/AASB 3 requires that if the amount paid for a business is less than the sum of the fair value of the net identifiable assets acquired, and this is a genuine bargain purchase, then the difference be:
A.
Taken directly to an equity account
B.
Recognised immediately as income in the income statement
C.
Offset against any goodwill previously acquired
D.
Used to reduce the value of the monetary assets acquired


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