Non-Current Assets

Question 1

1. Trentham transport purchases a new delivery truck for $70,000. The stamp and transfer duty is $3,000. The logo of the company is painted on the side of the truck for $1000. The truck registration is $700 and a 12 month accident insurance policy is $1,200. The truck undergoes safety testing for $350. What does Trentham Transport record as the cost of the new truck?
   a. $75,200
   b. $74,350
   c. $75,350
   d. $76,250

Answer 1

b. $74,350

Question 2

2. Replacement of worn gears out gears on factory machinery is an example of …
   a. Revenue expenditure
   b. Capital expenditure

Answer 2

a. Revenue Expenditure

Question 3

3. Painting the extierior of a buliding is an example of a …
   a. Revenue expenditure
   b. Capital expenditure

Answer 3

a. Revenue expenditure

Question 4

What does a Capital expenditure do?

Answer 4

Extends assets useful life and or, increases its capacity or efficiency

Question 5

What does a Revenue expenditure do?

Answer 5

Maintains the asset in it’s working order.

Or if it is a insignificant amount

Question 6

Painting and lettering of a used truck upon acquistion of the truck is a:
a. Revenue Expenditure
b. Capital Expenditure

Answer 6

b. Capital Expenditure

Question 7

Replacing a pentium chip with a core 2 Duo chip, Whihc increases productive capacity. No extention of useful life expected. This should be treated as:
a. Revenue expenditure
b. Capital expenditure

Answer 7

b. Capital expenditure

Question 8

Overhaul of a truck motor. One-year extention in useful life is expected. This should be treated as a:
a. Revenue expenditure
b. Capital expenditure

Answer 8

b. Capital expenditure

Question 9

Purchased a wastebasket for $30 is a…
a. Revenue expenditure
b. Capital expenditure

Answer 9

a. Revenure expenditure

Question 10

Computer installation cost should be claisfiied as an…

Answer 10

Equipment cost

Question 11

Driveway cost should be clasified as

Answer 11

land imporovements

Question 12

Grading cost should be clasified as…

Answer 12

Land

It is preparing land for land improvements. Therefore is a land cost

Question 13

Cost of lighting for a parking lot should be clasified as…

Answer 13

Land improvement

Question 14

Insurance and frieght on eqiupment should be classified as…

Answer 14

Equipment

Question 15

Cost of tearing down a warehouse on land just purcahsed should be classified as…

Answer 15

Land

Question 16

A Truck was purchased for $15,000 and it was estimated to a $3,000 residual value at the end of its useful life. Monthly deprecetiation expense of $250 was recored using the striaght line method The annual depreciation rate is?
a. 20%
b. 25%
c. 8%
d. 2%

Answer 16

b. 25%

Annual depreciation / Purchase price - residual value

Question 17

A company purchased factory equipment on April 1, 2023, for $48,000. It is estimated that the equipment will have a $6,000 residual value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at 31 december 2023, is:
a. $4,800
b. $3,150
c. $4,200
d. $3,600

Answer 17

b. $3,150

48,000 - 6,000 / 10 * 9/12

Question 18

. Depreciation is a process of:

Answer 18

Cost allocation

Question 19

A plant asset was purchased on 1 January for $50,000 with an estimated residual value of
$10,000 at the end of its useful life. The current year’s depreciation expense is $4,000
calculated on the straight-line basis and the balance of the Accumulated depreciation account
at the end of the year is $16,000. The remaining useful life of the plant asset is:
. 10 years.
b. 8 years.
c. 5 years.
d. 6 years

Answer 19

d. 6 years

Question 20

Equipment with a cost of $160,000 has an estimated residual value of $10,000 and an
estimated life of 4 years or 12,000 hours. It is to be depreciated by the diminishing value
method with a constant depreciation rate of 37.5%. What is the amount of depreciation
expense for the first full year, during which the equipment was used 3,300 hours?
a. $60,000.
b. $80,000.
c. $56,250.
d. $55,500.

Answer 20

A. 60,000

Question 21

Equipment with a cost of $180,000 has an estimated residual value of $15,000 and an
estimated life of 4 years or 15,000 hours. It is to be depreciated by the units-of-production
method. What is the amount of depreciation expense for the first full year, during which the
equipment was used 3,000 hours?
a. $36,000.
b. $33,000.
c. $42,500.
d. $37,500

Answer 21

b. 33,000

Question 22

The balance in the Accumulated depreciation account represents the:

Answer 22

amount charged to expense since the acquisition of the plant asset.

Question 23

Endevour Enterprises acquires land for $250,000 cash. Additional costs are as follows:
Removal of old building $6,700
Salvage of building materials from old building $1,500
Filling and grading $2,500
Broker commission $3,300
Paving of parking lot $30,000
Stamp duty $7,000
Endevour Enterprises will record the acquisition cost of the land as:
a. $268,000
b. $250,000
c. $298,000
d. $269,500

Answer 23

a. $268,000 [250,000 + 3,300 + 7,000 + 6,700 + 2,500 – 1,500]

Question 24

Which of the following statements regarding depreciation is true?
a. All property, plant and equipment assets must be depreciated.
b. Recording deprecation on plant assets affects the income statement only.
c. In calculating depreciation expense both the cost of the asset and its residual value are
estimates.
d. Depreciable amount is the cost of the asset less its residual value

Answer 24

*d. Depreciable amount is the cost of the asset less its residual value

Question 25

8. Which of the following statements regarding accounting for the acquisition of property, plant and equipment is incorrect? a. Asset acquisition costs that are not expensed immediately are referred to as capital expenditures. b. Capital expenditures are expenditures that increase the company’s investment in productive facilities. c. When the construction of a building is complete, the cost of interest is recorded as interest expense. d. When purchasing land, the cost for clearing, draining, filling and grading should be charged to a Land Improvements account.

Answer 25

*d. When purchasing land, the cost for clearing, draining, filling and grading should be charged to a Land Improvements account.

Question 26

9. The carrying amount of an asset is equal to the: a. the market value of the asset less its historical cost. b. the cost of the asset less accumulated depreciation. c. replacement cost of the asset. d. book value relied on by secondary markets.

Answer 26

b. the cost of the asset less accumulated depreciation.