1) A vehicle was purchased by a newsagent business in May 20X3 for:
The business adopts a date of 31 December as its year end.
The car was traded in for a replacement vehicle in August 20X6 at an agreed value of $5,000.
It has been depreciated at 20% per annum on the reducing balance method, charging a full year's depreciation in the year of purchase and none in the year of sale.
What was the profit or loss on disposal of the vehicle during the year ended December 20X6?
2) A non‐current asset was purchased at the beginning of Year 1 for $3,800 and depreciated at 25% per annum using the reducing balance method. At the beginning of Year 4 it was sold for $.
What was the profit or loss on disposal?
3) Which of the following best explains what is meant by 'capital expenditure'?
4) When a revalued building is disposed of, how is the revaluation surplus relating to that asset at the date of disposal accounted for?
5) Bing Co purchased a building on 31 March 20X8 for $2,500,000. At acquisition, the useful life of the building was 50 years. Depreciation is calculated on the straight-line basis. 10 years later, on 31 March 20Y8 when the carrying amount of the building was $2,000,000, the building was revalued to $2,400,000. Bing Co has a policy of transferring the excess depreciation on revaluation from the revaluation surplus to retained earnings.
Assuming no further revaluations take place, what is the balance on the revaluation surplus at 31 March 20Y9?
6) A business has an accounting year end of 30 September. It purchased an item of plant on 1 June 20X6 as follows:
At the date of purchase, the item of plant and equipment had an estimated useful life to the business of five years and an estimated residual value of $3,000. This item of plant was traded in for a replacement item on 30 December20X9 at an agreed valuation of $5,000.
It has been depreciated at 20% per annum on a straight‐line basis, with a pro‐rated charge in the year of acquisition and disposal.
Calculate the profit or loss on disposal of the item of plant.
7) Ross Co purchased an asset for $300,000 on 1.1.X7. It had an estimated useful life of 6 years and it was depreciated using the straight line method. On 1.1.X9Ross Co revised the remaining estimated useful life to 8 years.
What is the carrying amount of the asset at 31.12.X9?
8) State whether each of the following statements is true or false.
Statement 1 When an item of property, plant and equipment is revalued, it is compulsory to make the annual transfer of excess depreciation within equity.
Statement 2 If the revaluation model is used for property, plant and equipment, all items of property, plant and equipment must be subject to revaluation.
9) Complete the following statement by making one choice from each option available.
When an entity has revalued a non‐current asset, it is (Option 1)…………………....to account for excess
depreciation arising on the revaluation. When excess depreciation is accounted for, the accounting adjustment is reflected in (Option 2)………………………
A. Option 1
10) Wrapping Co uses the revaluation model when accounting for land and buildings and makes the annual transfer of ‘excess depreciation’. Following the most recent revaluation, Wrapping Co calculated that the annual amount of the excess depreciation was $10,000.
What accounting entries should Wrapping Co post to make the annual transfer of ‘excess depreciation’?