Deck 10: Noncurrent Assets

Question 1

Equipment that cost $550 000 and had accumulated depreciation of $300 000 was sold for $180 000. This results in a:

A) $70 000 gain.
B) $70 000 loss.
C) $180 000 gain.
D) $370 000 loss.

Answer 1

B

Question 2

On 1 January 2018, a new motor vehicle with a useful life of four years and an estimated trade-in value of $12 000 was purchased by a business for $54 000. The straight-line method is employed and the financial year ends on 31 December. What was the depreciation expense for year ended 31 December 2019?

A) $5 250
B) $10 500
C) $13 500
D) None of the above

Answer 2

B

Question 3

A used machine with a purchase price of $85 000, requiring an overhaul costing $8 000, installation costs of $4 000 and testing costs of $2 000, would have a cost basis of:

A) $85 000.
B) $93 000.
C) $97 000.
D) $99 000.

Answer 3

D

Question 4

Tanner Ltd purchased an item of equipment on the first day of the financial period, 1 July 2018, for $200 000. The equipment was depreciated using the reducing balance method and a rate of 40 per cent. It was sold on 1 July 2020. If the machine was sold for $59 000 on 1 July 2019, what was the gain or loss on disposal?

A) Loss of $21 000.
B) Loss of $59 000.
C) Loss of $61 000.
D) Loss of $13 000.

Question 5

Brown Ltd purchased a machine on the first day of the financial period, 1 July 2018, for $100 000. The machine was depreciated using the reducing balance method and a rate of 20 per cent. It was sold on 1 July 2019. If the machine was sold for $60 000, what was the gain or loss on disposal?

A) Loss of $20 000
B) Loss of $40 000
C) Gain of $60 000
D) Gain of $20 000

Question 6

When a company discards machinery that is fully depreciated, this transaction will be recorded with which of the following entries?

A) DR Accumulated depreciation
CR Machinery
B) DR Machinery
CR Accumulated depreciation
C) DR Cash
CR Accumulated depreciation
D) DR Depreciation expense
CR Accumulated depreciation

Question 7

Which of the following should NOT be included in the cost of a new machine?

A) Delivery of machine to factory
B) Repair costs for existing equipment
C) Cost of testing machine
D) Installation costs

Question 8

A truck that cost $250 000 and had accumulated depreciation of $180 000 was sold for $50 000 cash in June 2020. This transaction will:

A) increase assets and decrease profits.
B) increase assets and increase profits.
C) decrease assets and decrease profits.
D) decrease assets and increase profits.

Question 9

A company purchases equipment on 1 January 2019. The following costs are incurred: The equipment has an estimated life of five years and no salvage value. What is the depreciation expense in 2019 if the straight-line method is used?

A) $28 000
B) $36 000
C) $40 000
D) None of the above

Question 10

Equipment with a cost of $160 000 has an estimated residual value of $10 000 and an estimated useful life of four years. Using the straight-line method, what is the amount of depreciation for the first full year?

A) $37 500
B) $42 500
C) $41 250
D) $40 000

Question 11

When the accumulated depreciation is deducted from the long-term asset account, the figure is known as the:

A) market value.
B) net realisable value.
C) net book value.
D) None of the above.

Question 12

Jacques Ltd purchased a truck for $45 000 on 1 July 2018. It had an estimated useful life of three years. It was depreciated using the straight-line method. The financial year ends on 30 June. What was the accumulated depreciation at 30 June 2020?

A) $15 000
B) $30 000
C) $45 000
D) None of the above

Question 13

The purpose of depreciation is to:

A) allocate cost in order to measure profit.
B) track value changes in the assets.
C) measure the current value of assets in the balance sheet.
D) record the fair value of the asset.

Question 14

On 1 January 2018, a new motor vehicle with a useful life of four years and an estimated trade-in value of $12 000 was purchased by a business for $54 000. The straight-line method is employed and the financial year ends on 31 December. What was the accumulated depreciation at 31 December 2020?

A) $21 000
B) $31 500
C) $42 000
D) None of the above

Question 15

Which of the following would be included in property, plant and equipment?

A) i and ii only
B) i, ii and iii only
C) i, ii and iv only
D) i, ii, iii and iv

Question 16

A machine purchased on 1 July 2019 cost $100 000 and has a zero estimated salvage value. The useful life of the machine is five years. If the machine was sold on 30 September 2021, what would its net book value be?

A) $45 000
B) $50 000
C) $55 000
D) $60 000

Question 17

Equipment with a cost of $160 000 has an estimated residual value of $10 000 and an estimated useful life of four years. The equipment is to be depreciated by the reducing balance method (at twice the straight-line rate). What is the amount of depreciation for the first full year?

A) $40 000
B) $75 000
C) $80 000
D) $85 000

Question 18

Squires Ltd purchased equipment for $90 000 on 1 July 2018. It had an estimated life of 200 000 units. The machine was depreciated using the units of production method. The financial period of Squires Ltd ends on 30 June. What was the depreciation expense for year ended 30 June 2019 if 26 000 units were produced in that year?

A) $11 000
B) $11 700
C) $23 400
D) $35 100

Question 19

Which method can result in annual depreciation expense going up and down from period to period?

A) Reducing balance
B) Units of production
C) Straight line
D) None of the above

Question 20

Norman Ltd purchased a motor vehicle for $45 000 on 1 July 2017. The vehicle was expected to have a four-year life span. The financial period ends on 30 June. Assuming Norman Ltd used the reducing balance method of depreciation and a rate of 40 per cent, the balance of the accumulated depreciation account at 30 June 2019 was:

A) $10 800.
B) $18 000.
C) $28 800.
D) None of the above.

Question 21

Where there is an asset revaluation decrement that does not reverse a previous increment, the amount is debited to:

A) an expense account.
B) retained profits.
C) revaluation surplus.
D) share capital.

Question 22

Bully Ltd acquires all the business assets and liabilities of Small Ltd for $800 000 cash. The best estimates of the fair market values of the assets and liabilities are: What is the value of goodwill acquired by Bully Ltd?

A) $210 000
B) $300 000
C) $600 000
D) None of the above

Question 23

Equipment with a cost of $15 000 and accumulated depreciation of $12 500 was sold for $1 700. The journal entry to record the disposal would include:

A) CR Cash, $1 700.
B) CR Loss on sale, $800.
C) DR Accumulated depreciation, $12 500.
D) CR Equity, $15 000.

Question 24

Where there is an asset revaluation increment that does not reverse a previous decrement, the amount of the increment is credited to:

A) retained profits.
B) accumulated depreciation.
C) revaluation surplus.
D) capital.