Started on Thursday, 12 March 2020, 9:27 PM

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Completed on Thursday, 12 March 2020, 9:37 PM
Time taken 9 mins 56 secs
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Question 1
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What issues need to be addressed to determine how to allocate the cost of an asset

Select one:
a. The cost of the asset, its residual value and the method of cost apportionment
b. The depreciation method, the probable future benefit and the years to
obsolescence.
c. The depreciable base, its useful life and the method of cost apportionment 

d. The probable future benefit, the depreciation method and the depreciable base

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The correct answer is: The depreciable base, its useful life and the method of cost
apportionment

Question 2
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Where an asset is revalued, the treatment of depreciation is to

Select one:
a. recalculate and charge it to the income statement based on the revalued amount
for the asset and the revalued residual value 
b. charge the original amount of depreciation to the income statement and
calculate the new depreciation based on the revalued amount and treat it as a
special item
c. charge the original amount of depreciation to the income statement and transfer
any change in value to the asset revaluation reserve

d. recalculate and charge it to the income statement based on the revalued amount
and the original residual value

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The correct answer is: recalculate and charge it to the income statement based on
the revalued amount for the asset and the revalued residual value

Question 3
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Assets should be depreciated from

Select one:
a. the date the asset is paid for until it is disposed of.
b. the date the asset is ordered
c. the date the asset is first put into use or held ready for use 

d. the date the asset is delivered to the premises until it is no longer in use.

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The correct answer is: the date the asset is first put into use or held ready for use

Question 4
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Identifiable intangible assets are those intangible assets that

Select one:
a. have been purchased by the entity from external parties
b. cannot be separately sold
c. can have a value placed on them separately from other assets of the entity 

d. have an unlimited life

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The correct answer is: can have a value placed on them separately from other
assets of the entity

Question 5
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Examples of elements of a business that commonly make up goodwill are

Select one:
a. research and development
b. established reputation and loyal customers 
c. trademarks and brand names

d. patents and licences

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The correct answer is: established reputation and loyal customers

Question 6
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Glass 4 Windows is involved in a research and development project to create a

filtering window that removes the need for curtains. For the current year ended 30
June 2011 expenditure on the project is as follows:
Research $235,000
Development $350,000
The window is expected to earn revenues of $70 000 per year for the 10 years
commencing 1 July 2011. Assuming straight-line amortisation, how much of the
research and development cost should be expensed this period and what amount
should be amortised in the year ended 30 June 2014?

Select one:
a. Expensed in 2011: $235 000; amortisation in 2014: $35 000 
b. Expensed in 2011: $58 500; amortisation in 2014: $58 500

c. Expensed in 2011: $350 000; amortisation in 2014: $23 500

d. Expensed in 2011: $235 000; amortisation in 2014: $28 000

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The correct answer is: Expensed in 2011: $235 000; amortisation in 2014: $35 000

Question 7
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Tantrax Ltd has just purchased a piece of equipment for $45 000. It is expected to
operate at its normal output level for 20 years, but the product it is used to
manufacture is expected to be marketable only for the next 13 years. The expected
salvage values are $5000 after 20 years and $8000 after 13 years. The equipment
is expected to generate output consistently over its life. What depreciation should
be charged in each of the first three years of the equipment's life? 

Select one:
a. Year 1: $1850, Year 2: $1850, Year 3: $1850
b. Year 1: $2846.15, Year 2: $2846.15, Year 3: $2846.15 
c. Year 1: $3461.54, Year 2: $3461.54, Year 3: $3461.54

d. Year 1: $5285.71, Year 2: $4879.12, Year 3: $4472.53

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The correct answer is: Year 1: $2846.15, Year 2: $2846.15, Year 3: $2846.15

Question 8
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Super Industries purchased a new vehicle on 1 May for $28 000. Upon delivery the
vehicle required a new two-way radio to be installed before it could be used. This
installation was completed on 30 June. Assuming a residual value of $4000 and a
declining balance rate of 20 per cent, calculate the depreciation expense recorded
at the end of the first two financial years since purchase. (Financial Year ends on 30
June, round to the nearest dollar.) 
Select one:
a. $4800; $3840
b. $933; $5413
c. $5600; $4480

d. $0; $5600 

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The correct answer is: $0; $5600

Question 9
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Precious Gems Co purchased a diamond-cutting machine at a cost of $58 000. They

bought it at a discount from the recommended price of $67 000 because of a drop
in the demand for diamonds around that time. There were additional costs of $12
000 to get the machine operational. It was installed on 30 June 2007, but the
machine was not used for 2 years. The operational life of the machine is expected
to be 10 years at the end of which its salvage value is estimated to be $5000. On
30 June 2012, the machine was upgraded to allow a more sophisticated range of
cutting styles to be used. The addition to the cutting machine cost $10 000, has an
estimated life of 9 years and can be used on other machines. The addition is
expected to have a nil salvage value. The machine and the addition are expected to
generate economic benefits evenly over their lives. What is the depreciation
expense for the diamond-cutting machine and addition for the years ended 30 June
2008; 30 June 2013; 30 June 2020 (rounded to the nearest dollar)? 

Select one:
a. $5417; $6527; $1111 
b. $6500; $7929; $1429
c. $0; $6829; $1429

d. $0; $7611; $1111

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The correct answer is: $5417; $6527; $1111

Question 10
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Which of the following statements is correct with respect to intangible assets? 

Select one:
a. Purchased goodwill should be amortised over a period of 20 years
b. Internally generated brands are not recognised as intangible assets because
expenditures in these assets are not distinguishable from the cost of developing the
business as a whole 
c. Internally generated publishing titles may be revalued if fair value is determined
by reference to an active market

d. Internally generated brands are recognised as intangible assets because

expenditures in these assets are not distinguishable from the cost of developing the
business as a whole.  

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The correct answer is: Internally generated brands are not recognised as intangible
assets because expenditures in these assets are not distinguishable from the cost of
developing the business as a whole