Question 1

An estimate of the value of an asset that can be recovered at the end of its useful life is called its r_____________ value.

Accepted Answer

The answer of An estimate of the value of an...

Question 2

When examining an external financial report a ratio that can be useful in determining the approximate age of the assets is:

Accepted Answer

The ratio of accumulated depreciation to the average recorded property, plant, and equipment at cost can provide an approximation of the age of the assets. As assets age, their value decreases, and the accumulated depreciation value will increase. Dividing this value by the average recorded property, plant, and equipment at cost will give an estimate of how long ago the assets were acquired.

Question 3

The correct statement concerning subsequent costs incurred in relation to a depreciable asset after its original acquisition is:

Accepted Answer

If a part of an asset is replaced and the cost is added to the carrying amount, the carrying amount of the replaced part should be derecognized.

Question 4

The units-of-production method relates depreciation to u__________ rather than to time.

Accepted Answer

The answer of The units-of-production method relates depreciation to u__________...

Question 5

Which of the following not is an advantage of the use of accelerated depreciation methods for tax purposes as opposed to the straight-line method?

Accepted Answer

The total amount of tax paid over the lifetime of the asset is reduced is not an advantage of accelerated depreciation methods.

Question 6

The Egypt Corporation purchased a machine for $40 000 on 1 January 2012 which is expected to have a 5 year life,no residual value,and to produce a total of 20 000 ridgets before it is scrapped.Assuming the Egypt Corporation uses the units-of-production method and actual production up to 31 December 2012,the end of the accounting year)is 5 000 ridgets,calculate depreciation expense for 2012.

Accepted Answer

Under the units-of-production method, depreciation expense is based on the actual production achieved during the accounting period. To calculate depreciation expense for 2012, we first need to determine the depreciation rate per unit:
Depreciation rate per unit = ($40,000 cost - $0 residual value) ÷ 20,000 units = $2 per unit
Then, we can calculate depreciation expense for 2012:
Depreciation expense = Depreciation rate per unit × Units produced in 2012
Depreciation expense = $2 per unit × 5,000 units produced in 2012
Depreciation expense = $10,000
Therefore, the correct answer is B) $10,000.

Question 7

Wong purchased a computer for $15 000,net of GST.Originally it had an estimated useful life of 4 years and a residual value of $3000.The straight-line method is used.At the start of the third year of usage Wong revised the life of the computer to a total life of 6 years.The residual value had not changed.What depreciation expense should be recorded for the computer for year 3?

Accepted Answer

Using the straight-line method, the annual depreciation expense for the computer would be calculated as:
($15,000 - $3,000) / 4 years = $3,000 per year

However, since Wong revised the estimated useful life to 6 years at the start of year 3, the remaining useful life would be:
6 years - 2 years already used = 4 years remaining

So, the revised annual depreciation expense for the remaining 4 years would be:
($15,000 - $3,000) / 4 years = $3,000 per year

Therefore, the depreciation expense for year 3 would be $3,000. But since Wong has already recorded 2 years of depreciation at $3,000 per year, the accumulated depreciation after year 2 would be:
$3,000 x 2 years = $6,000

So, the book value of the computer at the start of year 3 would be:
$15,000 - $6,000 = $9,000

And the depreciation expense for year 3 would be:
($9,000 - $3,000) / 4 years = $1,500

Therefore, the best choice is B) $1500.

Question 8

How many of these are advantages of maintaining a subsidiary ledger for depreciable assets?
.It provides information for the preparation of income tax returns
.It provides information to support insurance claims in the event of loss from theft or accident
.It provides information concerning servicing of the assets
.It provides information for internal control over assets

Accepted Answer

All four options are advantages of maintaining a subsidiary ledger for depreciable assets. It provides information for income tax returns, insurance claims, servicing of assets and internal control over assets. Therefore, option D is the correct answer.

Question 9

If the straight-line method of depreciation rather than the reducing-balance method is selected,in the early years of the asset's life the depreciation charge will be comparatively:

Accepted Answer

The straight-line method of depreciation charges an equal amount of depreciation each year of an asset's life. This means that in the early years, the depreciation charge will be higher than under the reducing-balance method since the reducing-balance method charges a higher percentage of the asset's value as depreciation in the earlier years. Therefore, the depreciation charge will be comparatively smaller under the reducing-balance method.

Question 10

The depreciation method most commonly used in Australia,as disclosed by a survey of the annual reports of listed companies,is:

Accepted Answer

According to the survey of annual reports of listed companies in Australia, the most commonly used depreciation method is straight-line. This method is widely accepted as it is simple to calculate and provides a consistent depreciation expense over the asset's useful life. Additionally, this method is generally accepted by both accounting standards and tax authorities, making it a popular choice among companies.

Question 11

A retailer purchased a delivery wagon for $21 000 on 1 July 2010.It was planned to keep the vehicle until it had done 60 000 kilometres and then to trade it in.The expected trade in value was $6 000.
Schedule of actual distance travelled was: $$\begin{array} { l l } 
30 / 6 / 11 & 20000 \mathrm {~km} \
30 / 6 / 12 & 15000 \mathrm {~km} \
30 / 6 / 13 & 15000 \mathrm {~km} \
30 / 6 / 14 & 10000 \mathrm {~km}
\end{array}$$
Using the units-of-production method the amount of depreciation charged for the year ended 30 June 2014 was:

Accepted Answer

The total depreciation is $21,000 - $6,000 = $15,000 over 60,000 km. The rate is $15,000 / 60,000 km = $0.25 per km. For the year ended 30 June 2014, the vehicle traveled 10,000 km, so depreciation is 10,000 km * $0.25/km = $2,500.

Question 12

The s_____________ line method of depreciation is the most widely used.

Accepted Answer

The answer of The s_____________ line method of depreciation is...

Question 13

When estimates of useful life and residual value made for the purposes of calculating depreciation,in later years turn out to be materially incorrect and the asset has not reached the end of its useful life,the procedure to be followed is to:

Accepted Answer

When estimates of useful life and residual value turn out to be incorrect, the correct procedure is to adjust depreciation expense going forward based on the remaining depreciable amount over the remaining useful life. This is in accordance with the matching principle, as it ensures that depreciation expense is recognized over the asset's useful life. There is no need to issue corrected financial statements for prior years unless the error is material and would significantly affect the financial statements.

Question 14

A machine was purchased on 3 January 2012 for $48 000,net of GST.The machine had an estimated residual value of $6000 and an estimated useful life of 5 years.Depreciation expense for the year ended 31 December 2012,using sum-of-the-years'-digits method,is:

Accepted Answer

The answer of A machine was purchased on 3 January...

Question 15

The information to be disclosed about office equipment in the financial statements prepared for external reporting includes how many of the following?
.The total number of assets held in the office equipment grouping
.Aggregate cost of office equipment
.Aggregate Accumulated Depreciation of office equipment
.Depreciation rates used or useful lives of office equipment
.Depreciation method used

Accepted Answer

The financial statements prepared for external reporting should disclose the aggregate cost of office equipment, the aggregate accumulated depreciation of office equipment, depreciation rates used or useful lives of office equipment, and the depreciation method used. This makes a total of four pieces of information to be disclosed. Therefore, choice (C) is the correct answer.

Question 16

Under IAS 23/AASB 123,if borrowing costs are directly attributable to the acquisition or construction of an asset that takes a considerable period of time to produce,the standard allows the alternative of treating the borrowing costs as part of the c_________ of acquisition of the qualifying asset.

Accepted Answer

The answer of Under IAS 23/AASB 123,if borrowing costs are...

Question 17

Failure to record depreciation expense for a period when fixed assets are used would result in an overstatement /understatement)____________________ of expenses and thus an overstatement /understatement)__________________ of profit.

Accepted Answer

The answer of Failure to record depreciation expense for a...

Question 18

An asset bought for $168 000 with a zero residual value was expected to last for seven years before it needed replacing.If at the end of the third year it was decided to extend its total useful life by four years new remaining life is now eight years)calculate the new depreciation charge using the straight-line approach.

Accepted Answer

The asset's initial depreciation was $24,000 per year ($168,000 / 7 years). After 3 years, $72,000 has been depreciated, leaving a book value of $96,000. With a new remaining life of 8 years, the new annual depreciation is $12,000 ($96,000 / 8 years).

Question 19

If the cost of a major service on a motor vehicle,which did not increased the vehicles' useful life was incorrectly capitalised and added to the carrying amount of the vehicle rather than being expensed:

Accepted Answer

The cost should have been expensed, so expenses are understated. The incorrect capitalization increases fixed assets, overstating them, and equity is overstated because retained earnings are higher due to lower expenses.

Question 20

The cost of an asset less its residual value is known as its d__________________ amount.

Accepted Answer

The answer of The cost of an asset less its...

Quiz 20: Non-Current Assets: Acquisition and Depreciation