Unit 2 AOS3

Question 1

Historical Cost

Answer 1

The cost of the asset when purchased.

Question 2

Fair value

Answer 2

The price received when selling an asset if it was sold at the time it was acquired by the business.

Question 3

Asset Register

Answer 3

Shows all the assets that a business owns and usually includes the following:
1. Date of purchase
2. Description of the asset
3. Serial number(s)
4. Acquisition cost (fancy way of saying purchase price)
5. Estimated useful life
6. Rate of depreciation
7. Usage for relevant assets such as kilometres travelled for vehicles, units produced for machinery.
8. Disposal details – date the non-current asset was sold and for how much.

Question 4

Depreciation

Answer 4

The process of allocating the cost of a non-current asset over it’s useful life.

Question 5

Finite life

Answer 5

A limited period of time (usually measured in years) for which a non-current asset will exist.

Question 6

Depreciable asset

Answer 6

A non-current asset that has a finite life, and thus
must be depreciated over that life.

Question 7

Depreciation expense

Answer 7

The part of the future economic benefit of a non- current asset that has been consumed in the current reporting period

Question 8

Residual value

Answer 8

The estimated value of the non-current asset at the end of its Useful life.

Question 9

Straight line depreciation

Answer 9

Straight line depreciation assumes the non-current asset contributes evenly to the generation of revenue over it’s useful life.

Question 10

Life

Answer 10

Useful life

Question 11

Reducing balance

Answer 11

contribute to the generation of revenue unevenly (has many moving parts).