Marks: 20 Time Allowed: 20 Min.

Question – 1
Encircle the correct option and fill in the blanks

1. On September 2018, a new equipment was acquired by making payment of Rs. 70 million, to the
supplier. An old equipment was also given in exchange to the supplier. The fair value of the old
and new equipment were assessed at Rs.21 million and Rs. 93 million respectively. The old
equipment had been acquired at a cost of Rs. 40 million on 1st July 2016. Cost incurred on
installing the new equipment amounted to Rs. 5 million.

Calculate the amount at which new equipment should be recognized in the books.

Rs.____________________ (2)

2. Which of the following is not allowable as a directly attributable cost of a machine?

a) Site preparation
b) Initial testing cost
c) Carriage inwards for fuel for the machinery
d) Estimated dismantling cost (1)

3. Depreciable amount means:

a) Cost of an asset + residual value
b) Cost of an asset – salvage value
c) Cost of an asset – residual value/useful life
d) Purchase price + directly attributable cost (1)

4. Which of the following is not an asset that falls under the scope of IAS – 16?
a) Tangible assets
b) Assets held for production or supply of goods or services
c) Assets held for sale in the normal course of business
d) Assets expected to be used for more than one period. (1)

5. A car M936TTJ was transferred from the company’s showroom for permanent use by the
company’s workshop manager in the course of his company duties. The vehicle had a sale price
of Rs.200,000 in the company’s showroom. This would have produced a gross profit of 30% on
the sales price.

Record journal entry to recognize motor car as property, plant & equipment in the books of the
company. (2)

Debit Credit
Rs. Rs.
 6. Purchase of breakdown recovery vehicle, K356BMG on 1st August 2015 at a cost of Rs. 160,000
from Benz Motors. The vehicle was bought in a damaged condition and required major repairs
in the company’s workshop. On 1st October, 2015 vehicle was fully operational upon leaving the
company’s workshops. Workshop costs totaled Rs.90,000 including Rs.10,000 for the purchase
of consumables.

At what amount vehicle should be initial measured and when it is to be recognized in the book
of the company? (2)

Rs.______________________ Date: __________________

7. A business acquired new premises at a cost of Rs. 150 million on 1st January, 2019. In the period
to the year ended 31st March, 2019 the following further costs were incurred:
Rs.000
Cost of initial adaptation of the building 12,000
Legal cost relating to the purchase of premises 2,500
One year cleaning contract 1,000
Air conditioning unit necessary for machinery to be used 3,000
Cost of machinery 12,500

What amount should appear as the cost of premises in the company’s statement of financial
position at 31st March, 2019?

Rs._______________________ (2)

8. An entity has built a new factory incurring the following costs:

Rs.000

Land 1,200
Materials 2,400
Labor 3,000
Architect’s fee 25
Surveyor’s fees 15
Site overheads 300
Apportioned administrative overheads 150
Testing of fire alarms 10
Business rates for the first year 12

What will be the total amount capitalized in respect of the factory? (2)
Rs.000
a) 6,112
b) 6,950
c) 7112
d) 7100
9. Red Eagle purchases the equipment for Rs. 600,000. It has an estimated salvage value of Rs.
100,000 and a useful life of five years.

What is the book value of equipment under the reducing balance method at the end of its useful
life? (1)

a) Rs.163,840
b) Rs.165,000
c) Rs120,000
d) Rs.100,000

10. Vehicle was purchased at Rs 450,000. Registration charges paid to Excise department of Rs
20,000. Useful life is 5 year. Estimated scrap value is Rs 80,000. Which of following rate is more
appropriate for reducing balance method: (2)

a) 20% b) 21%
c) 29% d) 30%

11. A business purchased a machine at 01-July-08 for Rs. 550,000. Business depreciates machinery
at 20% by reducing balance method. What will be deprecation for the year ended 31 December
2012: (2)

a) Rs. 45,056 b) Rs. 50,688

c) Rs. 55,000 d) Rs. 110,000

12. Net profit for the year ended 31-December-2013 is Rs 450,000. Business wrongly capitalized
repair expense of Rs 20,000 at 01-July-2013. What would be the net profit after its rectification?
Business depreciates its assets at 15% using reducing balance method: (2)

a) Rs 468,500 b) Rs 430,000
c) Rs 428,500 d) Rs 431,500