Ali Sattars Non-Current Assets +971-55-1582821

01. At 31 December 2004 Q, a limited liability company, owned a building

that cost $800,000 on 1 anuary 1!!"# $t was being depreciated at two per
cent per year#
%n 1 anuary 200" a re&aluation to $1,000,000 was recogni'ed# At this date
the building had a remaining use(ul li(e o( 40 years#
)hat is the depreciation charge (or the year ended 31 December 200" and
the re&aluation reser&e balance as at 1 anuary 200"*
Depreciation charge +e&aluation reser&e
(or year ended 31 December 200" as at 1 anuary 200"
$ $
A 2",000 200,000
B 2",000 3,0,000
C 20,000 200,000
D 20,000 3,0,000
02. -he plant and machinery account .at cost/ o( a business (or the year
ended 31 December 200" was as (ollows0
1lant and machinery 2 cost

200" 200"
$
$
1 an 3alance 240,000 31 4arch disposal
account ,0,000
30 une 5ash 2 purchase o( plant 1,0,000 31 Dec 3alance
340,000

400,000
400,000

-he company6s policy is to charge depreciation at 207 per year on the
straight line basis, with proportionate depreciation in the years o( purchase
and disposal#
)hat should be the depreciation charge (or the year ended 31 December
200"*
A $68,000
B $64,000
C $61,000
D $55,000
03. )hich o( the (ollowing statements are correct*
.1/ 5apitalised de&elopment e8penditure must be amorti'ed o&er a period
not e8ceeding 9&e years#
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Ali Sattars Non-Current Assets +971-55-1582821
.2/ 5apitalised de&elopment costs are shown in the balance sheet under
the heading o( :on;current Assets
.3/ $( certain criteria are met, research e8penditure must be recogni'ed as
an intangible asset#
A 2 only
B 2 and 3
C 1 only
D 1 and 3
04. <areth, a sales ta8 registered trader purchased a computer (or use in
his business# -he in&oice (or the computer showed the (ollowing costs related
to the purchase0

$
5omputer 8!0
Additional memory !"
Deli&ery 10
$nstallation 20
4aintenance .1 year/ 2"

1,040
=ales ta8 .1>#"7/ 182

-otal 1,222

?ow much should <areth capitalise as a non;current asset in relation to the
purchase*
A $1,222
B $1,040
C $890
D $1,015
05. )hat is the correct double entry to record the depreciation charge (or a
period*
A D+ Depreciation e8pense
5+ Accumulated depreciation
B D+ Accumulated depreciation
5+ Depreciation e8pense

06. A company6s motor &ehicles at cost account at 30 une 200, is as
(ollows0

4otor &ehicles 2 cost

$ $
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Ali Sattars Non-Current Assets +971-55-1582821
3alance b@( 3",800 Disposal 12,000
Additions 12,!"0 3alance c@( 3,,>"0

48,>"0 48,>"0

)hat opening balance should be included in the (ollowing period6s trial
balance (or motor &ehicles 2 cost at 1 uly 200,*
A $3,,>"0 D+
B $48,>"0 D+
C $3,,>"0 5+
D $48,>"0 5+
07. 3eta purchased some plant and eAuipment on 1 uly 2001 (or $40,000#
-he estimated scrap &alue o( the plant in ten years6 time is estimated to be
$4,000# 3eta6s policy is to charge depreciation on the straight line basis, with
aproportionate charge in the period o( acAuisition#
)hat should the depreciation charge (or the plant be in 3eta6s accounting
period o( twel&e months to 30 =eptember 2001*
A $>20
B $,00
C $!00
D $,>"
08. At 30 =eptember 2000, the (ollowing balances e8isted in the records o(
Bambda0
$
1lant and eAuipment0 5ost 8,0,000
Accumulated depreciation 3!>,000
During the year ended 30 =eptember 2001, plant with a written down &alue
o( $3>,000 was sold (or $4!,000# -he plant had originally cost $80,000# 1lant
purchased during the year cost $180,000# $t is the company6s policy to
charge a (ull year6s depreciation in the year o( acAuisition o( an asset and
none in the year o( sale, using a rate o( 107 on the straight line basis#
)hat net amount should appear in Bambda6s balance sheet at 30 =eptember
2001 (or plant and eAuipment*
A $",3,000
B $4,>,000
C $"10,000
D $,0,,000
09. )hich o( these statements about research and de&elopment e8penditure
are correct*
1/ $( certain conditions are satis9ed, research and de&elopment e8penditure
must be capitalised#
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2/ %ne o( the conditions to be satis9ed i( de&elopment e8penditure is to be
capitalised is that the technical (easibility o( the proCect is reasonably
assured#
3/ $( capitalised, de&elopment e8penditure must be amorti'ed o&er a period
not e8ceeding 9&e years#
4/ -he amount o( capitalised de&elopment e8penditure (or each proCect
should be re&iewed each year# $( circumstances no longer Custi(y the
capitalisation, the balance should be written oD o&er a period not e8ceeding
9&e years#
"/ De&elopment e8penditure may only be capitalised i( it can be shown that
adeAuate resources will be a&ailable to 9nance the completion o( the proCect#
A 2 and "
B 3, 4 and "
C 2, 3 and "
D 1, 2 and 3
10. A company6s plant and machinery ledger account (or the year ended 30
=eptember 2002 was as (ollows0
1lant and machinery 2 cost
2001 $ 2002 $
1 %ctober 3alance 381,200 1 une Disposal
account 3,,000
1 December 5ash 2 addition 18,000 30 =eptember
3alance 3,3,200
3!!,200
3!!,200
-he company6s policy is to charge depreciation at 207 per year on the
straight line basis, with proportionate depreciation in years o( purchase and
sale#
)hat is the depreciation charge (or the year ended 30 =eptember 2002*
A $>4,440
B $84,040
C $>2,,40
D $>,,840
11. )hich o( the (ollowing statements about research and de&elopment
e8penditure are correct according to $A=38 $ntangible Assets*
.1/ $( certain conditions are met, an enterprise may decide to capitalise
de&elopment e8penditure#
.2/ +esearch e8penditure, other than capital e8penditure on research
(acilities, must be written oD as incurred#
.3/ 5apitalised de&elopment e8penditure must be amortised o&er a period
not e8ceeding " years#
.4/ 5apitalised de&elopment e8penditure must be disclosed in the balance
sheet under intangible non;current assets#
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A 1, 2 and 4 only
B 1 and 3 only
C 2 and 4 only
D 3 and 4 only#
12. A business purchased a motor car on 1 uly 2003 (or $20,000# $t is to be
depreciated at 20 per cent per year on the straight line basis, assuming a
residual &alue at the end o( 9&e years o( $4,000, with a proportionate
depreciation charge in the year o( purchase#
-he $20,000 cost was correctly entered in the cash booE but posted to the
debit o( the motor &ehicles repairs account#
?ow will the business pro9t (or the year ended 31 December 2003 be
aDected by the error*
A Fnderstated by $18,400
B Fnderstated by $1,,800
C Fnderstated by $18,000
D %&erstated by $18,400
13. )hich o( the (ollowing statements about goodwill are correct*
.1/ <oodwill may only be re&alued to a 9gure in e8cess o( cost i( there is
rele&ant and reliable e&idence to support the re&aluation#
.2/ $nternally generated goodwill may not be capitalised#
.3/ $mpairment o( goodwill should always be shown separately on the (ace o(
a company6s income statement#
.4/ 1urchased goodwill is the diDerence between the cost o( acAuiring a
company and the (air &alue o( its identi9able net assets#
A 1 and 3 only
B 2 and 3 only
C 1 and 4 only
D 2 and 4 only
The following info!a"ion ela"e# "o $%e#"ion n%!&e 15 ' 16
Arnold bought a machine (or use in his business on 1 :o&ember 20G4# ?e
ga&e the supplier a cheAue (or $11,">0 and traded in an old machine# -he
supplier allowed him $4,430 in part e8change (or the old machine# Arnold
depreciates machinery on the reducing balance basis at a rate o( 207 per
annum# -he old machine had cost $12,000 and had been depreciated by
$",8",#
14. )hat is the pro9t or loss on trade in o( the old machine*
A A pro9t o( $1,42,
B A pro9t o( $1,>14
C A loss o( $1,42,
D A loss o( $1,>14
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Ali Sattars Non-Current Assets +971-55-1582821
15. )hat is the depreciation charge on the new machine (or the year to 31
%ctober 20G"*
A $88,
B $1,428
C $2,314
D $3,200
16. An asset cost $100,000# $t is e8pected to last (or ten years and ha&e a
scrap &alue o( $10,000# -he company is going to depreciate this asset at
207 on the reducing balance basis# )hat will be the depreciation charge on
this asset be in its second year*
A $14,400
B $1,,000
C $18,000
D $20,000
17. %n 1 anuary 200" a company purchased some plant#
-he in&oice showed
$
5ost o( plant 48,000
Deli&ery to (actory 400
%ne year warranty co&ering breaEdown during 200" 800
2222222
4!,200
2222222
4odi9cations to the (actory building costing $2,200 were necessary to enable
the plant to be installed# )hat amount should be capitali'ed (or the plant in
the company6s records*
A $"1,400
B $48,000
C $"0,,00
D $48,400
18. -he opening balance on Der& plc6s motor &ehicles at cost account was
$140,000# -he opening balance on depreciation o( motor &ehicles was
$,0,000# -he company purchased new &ehicles costing $30,000 during the
year# :o &ehicles were sold# -he company depreciates &ehicles at 2"7 on
the reducing balance basis, with a (ull year6s depreciation in the year o(
acAuisition and none in the year o( disposal#
)hat is the closing balance on Der& plc6s depreciation o( motor &ehicles
account*


19. )hen 4ichelle purchased a new car, she used her old car in part
e8change# =he has made the correct entry (or the part e8change &alue o(
$3,"00 in the non current asset disposal account#
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Ali Sattars Non-Current Assets +971-55-1582821
)hat other entry is needed to complete the double entry (or the part
e8change &alue o( $3,"00*
A A debit entry in the motor &ehicles cost account
B A credit entry in the motor &ehicles cost account
C A debit entry in the banE account
D A credit entry in the banE account
20# An organi'ation6s non;current assets register shows a net booE &alue o(
$12",,00#-he non;current assets account in the general ledger shows a net
booE &alue o( $13",,00#
-he diDerence could be due to disposed asset not ha&ing been deducted
(rom the 98ed asset ledger#
A )ith disposal proceeds o( $1"000 and a pro9t on disposal o( $"000
B )ith disposal proceeds o( $1"000 and a net booE &alue o( $"000
C )ith disposal proceeds o( $1"000 and a loss on disposal o( $"000
D )ith disposal proceeds o( $"000 and a net booE &alue o( $"000
21. At 31 December 20G1# -ina owned eAuipment which had cost
$1,8,"00# At that date $,,,"00 had been allowed in respect o( depreciation#
-ina6s accounting policy is to allow depreciation in eAuipment at a rate o(
2"7 in the reducing balance method#
-he depreciation charge to be included in -ina6s income statement (or the
year ended 31 December 20G2 should be $
22. A non current asset was disposed o( (or $2,200 during the last accounting
year# $t had been purchased e8actly three years earlier (or $",000, with an
e8pected residual &alue o( $"00, and had been depreciated on the reducing
balance method, at 207 per annum, -he pro9t or loss on disposal was $
23. Don has sold a machine (or $",300# -he machine had been bought three
years pre&iously at a cost o( $10,000# At the date o( sale the machine had
been depreciated by $4,800# )hat is the pro9t on disposal*
24. )hat is the purpose o( charging the depreciation in accounts*
A -o allocate the cost less residual &alue o( a non current asset o&er
the accounting periods e8pected to bene9t (rom its use
B -o ensure that (unds are a&ailable (or the e&entual replacement o(
the asset
C -o reduce the cost o( the asset in the statement o( 9nancial position
to its estimated marEet &alue
D -o comply with the prudence concept
25. An asset register showed a net booE &alue o( $,>,4,0# A non;current
asset costing $1",000 had been sold (or $4,000, maEing a loss on disposal
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o( $1,2"0# :o entries had been made in the asset register (or this
disposal#
)hat is the correct balance on the asset register*
A $42,>10
B $"1,210
C $"3,>10
D $,2,210
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