Chapter 7 & 8: Fixed Assets & Further Fixed Assets

Question 1

Fixed Assets

Under FRS 102, What Are Fixed Assets Known as?

Answer 1

Property, Plant & Equipment.

Fixed Assets is The Terminology Used Under The CA 2006.

Question 2

Fixed Assets

Whether an Asset is Classed as Capital or Revenue is Contextual. A Classic Example Being?

Answer 2

A Car Bought For Resale at a Car Dealership.

Looking to Sell in The Short-Term.

Question 3

Fixed Assets

When do All Entities Incur Capital Expenditure?

Answer 3

The Initial Set up of a Business.

Question 4

Fixed Assets

How Can a Fixed Asset be Classified?

Answer 4

• Tangibles - Which Can be Physically Seen & Touched.
• Intangibles - Which Can’t be Physically Seen Nor Touched.

Question 5

Fixed Assets

How Does FRS 102 Define Depreciation?

Answer 5

‘The Systematic Allocation of The Depreciable Amount of an Asset Over its Useful Life’.

Not Written Off to The P&L a/c Immediately.

Question 6

Fixed Assets

What is The Only Fixed Asset Not Depreciable?

Answer 6

Land.

Question 7

Fixed Assets

What is The Useful Life of An Asset?

Answer 7

The Period Over Which The Present Owner Will Derive Economic Benefit.

Question 8

Fixed Assets

What is a Fixed Asset’s Estimated Residual Value?

Answer 8

The Amount The Asset is Expected to be Sold for at The End of its Useful Life.

Question 9

Fixed Assets

How is The Straight Line Method of Depreciation Best Put?

Answer 9

The Depreciation Charge is Spread Equally Over The Asset’s Useful Life.

Question 10

Fixed Assets

Which Assets Are Known For Calculating Depreciation Under The Reducing Balance Method?

Answer 10

Motor Vehicles.

Question 11

Fixed Assets

How is Depreciation Treated Under Tax Legislation?

Answer 11

As a Disallowable Expense.

Replaced by Capital Allowances Set at Rates by The Government.

Question 12

Fixed Assets

An Accepted Practise (Regarding Depreciation), Where An Asset is Purchased Part-Way Through an Accounting Period is:

Answer 12

• To Charge a Full Year’s Depreciation in The Year of Purchase; and
• No Charge in The Year of Disposal.

Question 13

Further Fixed Assets

The ‘Performance Model’ States That:

Answer 13

Grants Should Only be Recognised When Future Performance-Related Conditions Are Met.

If There Are None, Recognise When Received.

Question 14

Further Fixed Assets

An Entity Applying The ‘Accrual Model’ Will Classify Grants as:

Answer 14

• Revenue Grants; or
• Asset Grants.

Question 15

Further Fixed Assets

How is The Receipt of a Revenue Grant Recorded in The Accounts?

Answer 15

• Dr Bank
• Cr Grant Income (Sundry Income)

As a Contribution Towards Wages & Salaries for Employing Someone Unemployed.

Question 16

Further Fixed Assets

How is an Asset Grant Recorded in The Accounts?

Answer 16

• Dr Bank
• Cr Deferred Income

With the Initial Cash Receipt.

• Dr Deferred Income
• Cr Grant Income (Sundry Income)

Being The ‘Release’ of The Grant Income in Line With The Associated Depreciation Expense.

Question 17

Further Fixed Assets

FRS 102 States That All Intangible Fixed Assets Are Considered to Have?

Answer 17

A Finite Useful Life.

If The Useful Life Cannot be Reliably Estimated, it Shall Not Exceed 10 Years.

Question 18

Further Fixed Assets

The Cost of an Intangible Fixed Asset Realised Over it’s Useful Life is Known as?

Answer 18

Amortisation.

The Equivalent of Depreciation for Fixed Assets.

Question 19

Further Fixed Assets

How is The Profit/(Loss) Calculated on The Disposal of an Asset?

Answer 19

Sale Proceeds
Less: NBV

Profit/(Loss)