Question 1

A change in accounting policy from the revaluation model to the cost model requires a retrospective adjustment to the:

Accepted Answer

A) revenue in the profit and loss statement 
B) expenses in the profit and loss statement 
C) opening balance of retained earnings 
D) other comprehensive income. 
A) revenue in the profit and loss statement 
B) expenses in the profit and loss statement 
C) opening balance of retained earnings 
D) other comprehensive income. C

Question 2

Outline the two situations where an asset revaluation surplus may be transferred to retained earnings.

Accepted Answer

The first situation is where the associated non-current asset is derecognised (that is,removed from the statement of financial position).In this case the whole or part of the surplus may be transferred.The second situation is where an asset is being used up over its useful life,a proportion of the revaluation surplus,in relation to the depreciation on the asset,may be transferred to retained earnings.

Question 3

When an asset is sold the resulting gain or loss is:

Accepted Answer

A) reported in other comprehensive income,normally on a gross basis 
B) reported in other comprehensive income,normally on a net basis 
C) reported in current period profit or loss,normally on a gross basis 
D) reported in current period profit or loss,normally on a net basis 
A) reported in other comprehensive income,normally on a gross basis 
B) reported in other comprehensive income,normally on a net basis 
C) reported in current period profit or loss,normally on a gross basis 
D) reported in current period profit or loss,normally on a net basis D

Question 4

Revaluations under AASB 116 Property,Plant and Equipment apply to:

Accepted Answer

A) all assets on an individual basis 
B) individual current assets only 
C) individual non-current assets only 
D) assets on a class-by-class basis. 
A) all assets on an individual basis 
B) individual current assets only 
C) individual non-current assets only 
D) assets on a class-by-class basis.

Question 5

Explain how an entity determines the useful life of an asset for the purpose of calculating a periodic depreciation charge.

Accepted Answer

Determination of useful life requires es

Question 6

Troubadour Limited had an existing revaluation surplus in respect to an item of Plant that had been derecognised.An appropriate journal entry to transfer the surplus to retained earnings would include:

Accepted Answer

A) DR Gain on revaluation - OCI 
B) CR Asset revaluation surplus 
C) DR Retained earnings 
D) CR Retained earnings. 
A) DR Gain on revaluation - OCI 
B) CR Asset revaluation surplus 
C) DR Retained earnings 
D) CR Retained earnings.

Question 7

The net effect of the journal entries necessary to record the revaluation of plant at 30 June 2012 in accordance with AASB 116 Property,Plant and Equipment is:

Accepted Answer

A)   
B)   
C)   
D)   
A)   
B)   
C)   
D)

Question 8

The cost of property,plant and equipment is only recognised as an asset if it is probable that the future economic benefits will flow to the entity and if:

Accepted Answer

A) the cost can be reliably measured 
B) the asset has been fully paid for in cash 
C) the asset has been received by the purchaser 
D) it is a tangible asset. 
A) the cost can be reliably measured 
B) the asset has been fully paid for in cash 
C) the asset has been received by the purchaser 
D) it is a tangible asset.

Question 9

Wilson Limited applied the straight-line method of depreciation to its non-current assets.The cost of the buildings was $640 000 the depreciable amount is $560 000 the residual value is $40 000 and the useful life is 8 years.The annual depreciation charge is:

Accepted Answer

A) $80 000 
B) $75 000 
C) $70 000 
D) $65 000. 
A) $80 000 
B) $75 000 
C) $70 000 
D) $65 000.

Question 10

A non-current Property,plant and equipment asset is depreciated using the straight-line method.The asset was revalued upwards after four years of use.There is no change in the remaining useful life of six years or to the residual value.Which of the following relationships reflects the effect of the revaluation on the prospective depreciation of the asset?
Depreciation Annual depreciation
Rate Expense

Accepted Answer

A) Same Higher 
B) Same Same 
C) Higher Higher 
D) Higher Same 
A) Same Higher 
B) Same Same 
C) Higher Higher 
D) Higher Same

Question 11

Which of the following statements is not correct in relation to disclosure of property,plant & equipment balances?

Accepted Answer

A) Paragraph 79 of AASB 116 contains disclosure that are encouraged,but not required in relation to property,plant & equipment. 
B) An entity must disclose the useful life estimates for each class of assets. 
C) A summary of movements in the revaluation surplus is required to be disclosed. 
D) Information on assets carried at revalued amounts must be disclosed on an individual asset basis. 
A) Paragraph 79 of AASB 116 contains disclosure that are encouraged,but not required in relation to property,plant & equipment. 
B) An entity must disclose the useful life estimates for each class of assets. 
C) A summary of movements in the revaluation surplus is required to be disclosed. 
D) Information on assets carried at revalued amounts must be disclosed on an individual asset basis.

Question 12

When using the revaluation model:

Accepted Answer

A) ongoing record keeping costs are generally lower than if the cost model were used. 
B) the values reported will provide more relevant information to users of the financial statements. 
C) depreciation costs will generally be lower than under the cost model. 
D) the entities financial statements will be consistent with USGAAP requirements. 
A) ongoing record keeping costs are generally lower than if the cost model were used. 
B) the values reported will provide more relevant information to users of the financial statements. 
C) depreciation costs will generally be lower than under the cost model. 
D) the entities financial statements will be consistent with USGAAP requirements.

Question 13

The net effect of the journal entries to adjust for the tax effect of the revaluation at 30 June 2012 is:

Accepted Answer

A)   
B)   
C)   
D)   
A)   
B)   
C)   
D)

Question 14

Property,plant and equipment includes items that are:

Accepted Answer

A) intangible 
B) held for resale 
C) expected to be used up during the current period 
D) held for rental to others. 
A) intangible 
B) held for resale 
C) expected to be used up during the current period 
D) held for rental to others.

Question 15

Replicator Limited acquired an item of Plant with an expected useful life of 5 years.Expected total production output over this period was: Year 1,35 000 units; Year 2,30 000 units; Year 3,18 000 units; Year 4,12 000 units; Year 5,5000 units.The asset cost $ 100 000 and associated installation costs amounted to $20 000 and residual value is $5 000.The amount of depreciation charged in the first year is:

Accepted Answer

A) $40 250 
B) $42 000 
C) $35 000 
D) $33 250. 
A) $40 250 
B) $42 000 
C) $35 000 
D) $33 250.

Question 16

Speculator Limited acquired a parcel of land for $50 000.This amount is also the tax base of the land.Two years after acquisition date the building was revalued to $80 000.The tax rate is 30%.The appropriate journal entry to recognise the net effect of the revaluation is:

Accepted Answer

A) DR Gain on revaluation - OCI $30 000 CR Asset revaluation surplus $30 000 
B) DR Land $21 000 DR Income tax expense - OCI $ 9 000
CR Asset revaluation surplus $30 000 
C) DR Land $30 000 CR Deferred tax liability $ 9 000
CR Asset revaluation surplus $21 000 
D) DR Gain on revaluation - OCI $30 000 CR Income tax expense - OCI $9 000
CR Asset revaluation surplus $21 000 
A) DR Gain on revaluation - OCI $30 000 CR Asset revaluation surplus $30 000 
B) DR Land $21 000 DR Income tax expense - OCI $ 9 000
CR Asset revaluation surplus $30 000 
C) DR Land $30 000 CR Deferred tax liability $ 9 000
CR Asset revaluation surplus $21 000 
D) DR Gain on revaluation - OCI $30 000 CR Income tax expense - OCI $9 000
CR Asset revaluation surplus $21 000

Question 17

When a company recognises a depreciation credit resulting from a review of the estimated residual value of a depreciable asset,the depreciation debit should be recognised in accumulated depreciation and the depreciation credit should be recognised:

Accepted Answer

A) in the opening balance of retained earnings 
B) in the current period depreciation expense 
C) directly in the depreciable asset account 
D) as a gain in the current period. 
A) in the opening balance of retained earnings 
B) in the current period depreciation expense 
C) directly in the depreciable asset account 
D) as a gain in the current period.

Question 18

Under the cost model,after initial recognition of a Property,plant and equipment asset the item must be carried at its:

Accepted Answer

A) residual value 
B) cost less accumulated depreciation and less accumulated impairment losses 
C) initial cost 
D) net present value. 
A) residual value 
B) cost less accumulated depreciation and less accumulated impairment losses 
C) initial cost 
D) net present value.

Question 19

Distinguish between the accounting treatment for a revaluation increment and a revaluation decrement.

Accepted Answer

Revaluation is conducted on a class-by-c

Question 20

Provide a definition of 'residual value' of an asset,and explain the nature of residual value.

Accepted Answer

The residual value of an asset is the es

A change in accounting policy from the revaluation model to the cost model requires a retrospective adjustment to the:

Outline the two situations where an asset revaluation surplus may be transferred to retained earnings.

When an asset is sold the resulting gain or loss is:

Revaluations under AASB 116 Property,Plant and Equipment apply to:

Explain how an entity determines the useful life of an asset for the purpose of calculating a periodic depreciation charge.

Troubadour Limited had an existing revaluation surplus in respect to an item of Plant that had been derecognised.An appropriate journal entry to transfer the surplus to retained earnings would include:

The net effect of the journal entries necessary to record the revaluation of plant at 30 June 2012 in accordance with AASB 116 Property,Plant and Equipment is:

The cost of property,plant and equipment is only recognised as an asset if it is probable that the future economic benefits will flow to the entity and if:

Wilson Limited applied the straight-line method of depreciation to its non-current assets.The cost of the buildings was $640 000 the depreciable amount is $560 000 the residual value is $40 000 and the useful life is 8 years.The annual depreciation charge is:

Which of the following statements is not correct in relation to disclosure of property,plant & equipment balances?

When using the revaluation model:

The net effect of the journal entries to adjust for the tax effect of the revaluation at 30 June 2012 is:

Property,plant and equipment includes items that are:

Speculator Limited acquired a parcel of land for $50 000.This amount is also the tax base of the land.Two years after acquisition date the building was revalued to $80 000.The tax rate is 30%.The appropriate journal entry to recognise the net effect of the revaluation is:

When a company recognises a depreciation credit resulting from a review of the estimated residual value of a depreciable asset,the depreciation debit should be recognised in accumulated depreciation and the depreciation credit should be recognised:

Under the cost model,after initial recognition of a Property,plant and equipment asset the item must be carried at its:

Distinguish between the accounting treatment for a revaluation increment and a revaluation decrement.

Provide a definition of 'residual value' of an asset,and explain the nature of residual value.

Nature and Regulation of Companies

Financing Company Operations

Company Operations

Fundamental Concepts of Corporate Governance

Fair Value Measurement

Accounting for Company Income Tax

Leases

Intangible Assets

Business Combinations

Impairment of Assets

Disclosure: Legal Requirements and Accounting Polices

Disclosure: Presentation of Financial Statements

Disclosure: Statement of Cash Flows

Consolidation: Controlled Entities

Consolidation: Wholly Owned Subsidiaries

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Accounting for Investments in Associates

Insolvency and Liquidation

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Exam 7: Property, Plant and Equipment

A change in accounting policy from the revaluation model to the cost model requires a retrospective adjustment to the:

Outline the two situations where an asset revaluation surplus may be transferred to retained earnings.

When an asset is sold the resulting gain or loss is:

Revaluations under AASB 116 Property,Plant and Equipment apply to:

Explain how an entity determines the useful life of an asset for the purpose of calculating a periodic depreciation charge.

Troubadour Limited had an existing revaluation surplus in respect to an item of Plant that had been derecognised.An appropriate journal entry to transfer the surplus to retained earnings would include:

The net effect of the journal entries necessary to record the revaluation of plant at 30 June 2012 in accordance with AASB 116 Property,Plant and Equipment is:

The cost of property,plant and equipment is only recognised as an asset if it is probable that the future economic benefits will flow to the entity and if:

Wilson Limited applied the straight-line method of depreciation to its non-current assets.The cost of the buildings was $640 000 the depreciable amount is $560 000 the residual value is $40 000 and the useful life is 8 years.The annual depreciation charge is:

Which of the following statements is not correct in relation to disclosure of property,plant & equipment balances?

When using the revaluation model:

The net effect of the journal entries to adjust for the tax effect of the revaluation at 30 June 2012 is:

Property,plant and equipment includes items that are:

Speculator Limited acquired a parcel of land for $50 000.This amount is also the tax base of the land.Two years after acquisition date the building was revalued to $80 000.The tax rate is 30%.The appropriate journal entry to recognise the net effect of the revaluation is:

When a company recognises a depreciation credit resulting from a review of the estimated residual value of a depreciable asset,the depreciation debit should be recognised in accumulated depreciation and the depreciation credit should be recognised:

Under the cost model,after initial recognition of a Property,plant and equipment asset the item must be carried at its:

Distinguish between the accounting treatment for a revaluation increment and a revaluation decrement.

Provide a definition of 'residual value' of an asset,and explain the nature of residual value.

Nature and Regulation of Companies

Financing Company Operations

Company Operations

Fundamental Concepts of Corporate Governance

Fair Value Measurement

Accounting for Company Income Tax

Leases

Intangible Assets

Business Combinations

Impairment of Assets

Disclosure: Legal Requirements and Accounting Polices

Disclosure: Presentation of Financial Statements

Disclosure: Statement of Cash Flows

Consolidation: Controlled Entities

Consolidation: Wholly Owned Subsidiaries

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Accounting for Investments in Associates

Insolvency and Liquidation

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