Chapter 5

A characteristic of a non-current asset is that it is:
1. Tangible
2. Used in the operations of a business
3. Held for sale in the ordinary course of the business
4. Not currently used in the business but held for future use
The term applied to the periodic transfer of a long-term tangible asset’s cost to expense is:
1. Impairment
2. Depletion
3. Depreciation
4. Amortization
According to the IASB Framework a long-term asset should only be recognized if:
1. It is probable that future economic benefits associated with the item will flow to the company
2. The item has a cost or value that can be measured reliably
3. Both a and b are necessary
4. Neither a nor b are relevant
Which of the following is included in the cost of a long-term asset?
1. Installation and assembly costs
2. Fire insurance cost
3. Maintenance cost
4. Repair costs
Which of the following is included in the cost of land?
1. Cost of paving a parking lot
2. Brokerage commission
3. Outdoor parking lot lighting attached to the land
4. Fences on the land
Depreciation of a long-term asset is the cost expensed in order to:
1. Record the long-term asset at the ‘recoverable amount’ on the statement of financial position
2. Spread the purchase cost of the long-term asset over a free number of periods
3. Impair the long-term asset periodically
4. Match with the revenues produced by using the long-term asset
The depreciable amount of an asset shall be allocated on a systematic basis over:
1. The useful life of the company
2. The useful life of the asset
3. The production period of the company
4. The accounting periods that end with a profit for the company
When the use of the asset is uniform throughout its working life, the best method of determining depreciation is
1. Straight-line
2. Diminishing balance
3. Units of production
4. Tax depreciation
Depreciation is:
1. The loss of value of a long-term asset during an accounting period
2. An allocation of part of the net cost of an asset to a period on the asset’s life
3. The difference between an asset’s replacement cost and its net realisable value
4. Resources retained in the business to provide for the replacement of an asset at the end of its useful life
Long-term assets are ordinarily presented in the statement of financial position
1. At current market values
2. At replacement costs
3. At cost less accumulated depreciation
4. At historical purchase cost
The accumulated depreciation account is
1. An expense account
2. An intangible asset account
3. Reported on the income statement as other expense
4. Reported on the statement of financial position as a deduction from the acquisition cost account
A new machine with a purchase price of €94,000, transportation costs of €8,000, installation costs of €6,000 and special acquisition fees of €2,000 would have a total asset value of:
1. €96,000
2. €108,000
3. €102,000
4. €110,000
On 1 January 20X0 Alfa Company purchased a machine for €30,000. The machine was expected to have a useful life of 10 years, which equates to approximately 30,000 machine hours of usage. The machine is expected to have a residual value of €2,000. The accumulated depreciation on the machine after five full years using straight-line depreciation would be
1. €14,000
2. €2,000
3. €5,000
4. €28,000
At the end of its useful life the accumulated depreciation of a long-term asset would be
1. Greater under the diminishing balance method than under the straight-line method
2. Greater under the straight-line method than under the diminishing balance method
3. The same under both methods
4. Unable to determine from the information given
On 1 January 20X0 Delta Company purchased a machine for €30,000. The machine was expected to have a useful life of 10 years, which equates to approximately 30,000 machine hours of usage. The machine is expected to have a residual value of €2,000. The accumulated depreciation on the machine after five full years using the diminishing balance method would be
1. €22,250
2. €22,000
3. €12,250
4. €12,000
Which of the following is classified as an intangible asset on the statement of financial position?
1. Land held for future use
2. Goodwill
3. Buildings
4. Receivables
In which section are patents reported on the statement of financial position?
1. Intangible assets
2. Current assets
3. Property, plant and equipment
4. Investments
Every accounting period land is
1. Depreciated over its useful life
2. Depreciated over an indefinite period
3. Written-off
4. Neither depreciated, nor written-off
All leases are classified as either
1. Finance leases or long-term leases
2. Finance leases or operating leases
3. Operating leases or current leases
4. Long-term leases or current leases
Investments are
1. Written-off
2. Depreciated
3. Tested for impairment
4. None of the above
Which of the following is not a major category of long-term assets?
1. Investments
2. Intangibles
3. Property; Plant and Equipment
4. Purchased goodwill
5. Receivables
Intangibles do not include
1. Brands
2. Copyrights
3. Goodwill
4. Computer networks
5. Patents

Chapter 5

Quiz