ACCT2110 REVALUATION & IMPAIRMENT OF PPE
REVALUATION & IMPAIRMENT OF PPE
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ACCT2110 In-class Questions Semester 2/ 2023
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TOPIC 1: REVALUATION & IMPAIRMENT OF PPE
1. Under AASB 116, the net method of treating accumulated depreciation when assets
are re-valued requires:
A) accumulated depreciation to be increased by the same proportion as the gross carrying
amount of the asset, so the carrying amount of the asset represents its re-valued amount.
B) accumulated depreciation to be closed to the asset account before re-valuation.
C) accumulated depreciation to be written back to net profit on the date of re-valuation.
D) accumulated depreciation to be ignored at re-valuation.
2. On 1 January 20X0 an asset that had a useful life of five years and a cost of $100 000,
had a carrying value of $60 000. (The asset had been depreciated for two years at $20
000 per annum). On 1 January 20X0 it was decided to revalue the asset upwards to
$90 000 with no change in its useful life. A year after the revaluation on 1 January
20X1 the asset was sold for $80 000. Under the provisions of AASB 116, the gain or
loss on disposal is:
A) $10 000 gain
B) $20 000 gain
C) $10 000 loss
D) $30 000 gain
3. What is the main feature of the cost model in asset measurement?
A) The gross carrying amount of an asset is unchanged over its useful life.
B) Depreciation is not measured.
C) Assets are impaired each year based on estimated useful life.
D) None of the above are correct.
4. An impairment loss results when the ________ of an asset is less than its ________.
A) carrying amount; recoverable amount
B) recoverable amount, carrying amount
C) fair value, carrying amount
D) original cost, fair value
5. AASB 136 proposes factors that may indicate the existence of asset impairment. Which
of the following is not one of those factors?
A) Evidence of obsolescence or physical damage to an asset
B) Changes in interest rates that would reduce fair value calculations involving future cash
flows
C) The carrying amount of net assets exceeds the entity's market capitalisation
D) None of the above, i.e., all are factors that may indicate the existence of impairment
ACCT2110 In-class Questions Semester 2/ 2023
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6. Under the provisions of AASB 116, concerning an asset that has been re-valued
upward, which statement is correct?
A) If the asset is disposed of, the revaluation surplus can remain in the accounts after the
disposal of the asset that created it
B) The amount of the revaluation increment is included in equity without being included in net
profit
C) Neither of the statements is correct
D) Both of the statements are correct
7. Which statement concerning depreciation is correct?
A) Land is depreciated
B) Most assets that have increased in value should still be depreciated
C) Charging depreciation provides cash for asset replacement
D) None of the statements is correct
8. Assume that an asset was bought at a cost of $50 000. It is expected that the asset will
have zero residual value and a useful life of 10 years with the straight-line depreciation
method being used. At the beginning of year 5, the total useful life is re-estimated
downward to 8 years. Under AASB 116 the annual depreciation expense for the final
years of useful life is:
A) $8333
B) $7500
C) $6250
D) $5000
9. AASB 136 requires that assets are carried at no more than which amount?
A) Original cost
B) Current market value
C) Cost less accumulated depreciation
D) Recoverable amount