The number plates are one-off charges which form part of the purchase price of any car. HDFC bank has been named among 50 most valuable banks in 2014. passing of time, e.g. IFRS 5 outlines how to account for non-current assets held for sale (or for distribution to owners). b. The van is to be depreciated at 15% reducing balance. Cash b. The Soopastitch salesman has offered her a part exchange deal as follows: Part exchange allowance for Soopastitch II $750, Balance to be paid in cash for Soopastitch V $4,850. Total assets 30,000. An upward revaluation should be credited to revaluation surplus, unless it reverses a previous downward revaluation which was charged as an expense. Supplies. it is not realised in the form of cash. Options. IAS 16 defines depreciation as 'the measure of the cost or revalued amount of the economic benefits of the tangible non-current asset that has been consumed during the period'. Inter-linked. This was purchased on 1 December 20X4, in time for the Christmas rush, and was to be depreciated at 10% straight line. Depreciation must also be matched to the pattern of use of the asset. current assets include cash and cash equivalents, accounts receivable, marketable securities, prepaid expenses, debtors etc. Tiger hasn't yet built the additional course but has revalued this land to $600,000. A non-current asset register is maintained in order to control non-current assets and keep track of what is owned and where it is kept. expensed. the excess of the new depreciation charge over the old depreciation charge should be transferred from the revaluation reserve to accumulated profits (within the capital section of the statement of financial position): The disposal of a revalued asset is recorded as already seen. c. Accounts Rec Accounts Receivable. Percy Throwerp runs a landscape gardening business. Show the relevant ledger accounts and statement of financial position presentation at that date. Marketable securities. are used to generate income directly or indirectly for a business. The purpose of depreciation is not to show the asset at its current value in the statement of financial position, nor is it intended to provide a fund for the replacement of the asset. A. What is the depreciation charge for the year ended 31 December 20X3? Question Which of the following is not a current asset? The correct answer is C. Related: Practice and Prepare For Your Upcoming Exams; Previous Question. Current assets include cash and assets that are expected to turn to cash within one year of the balance sheet date. Which of the following are not current asset. B. Equipment is classified on the balance sheet as. In simple terms, depreciation is a mechanism to reflect the cost of using a non-current asset. Spartacus United football club's statement of financial position at 31 December 20X7 includes the following information: Depreciation has been provided at 2% on the straight-line basis. Equipment. Non-current assets, on the other hand, are resources that are expected to have future value or usefulness beyond the current accounting period. The stadium is revalued on 30 June 20X8 to $1,380,000. Next Question. The Chameli Devi Jain Award is given for an outstanding woman ____? d. Cash. The following are the common types of current asset. Use the following balance sheet and income statement information to answer questions 20 23: Current assets $ 7,000 Net income $ 12,000. Which of the following is not a current asset of a chemical company? C) Creditors. This gain is not recorded in the income statement because it is unrealised, i.e. Again, the balance on the disposals T account is the profit or loss on disposal: There are two debits to the non-current asset account in respect of the new asset: Together these are the cost of the new asset. Also, have a look at Net Tangible Assets Which of the following is not a current liability. B. A downward revaluation should be charged as an expense, unless it reverses a previous upward revaluation, when it may be charged against the revaluation surplus for that same asset. Tax payable c. Accounts receivable d. Prepaid expenses. monthly or pro-rata depreciation, based on the exact number of months that the asset has been owned. It is periodically reconciled to the non-current asset accounts maintained in the general ledger. are not normally liquid assets (i.e. Note, details of the depreciation method and rate for the lease are not given in the question. If preferred you can show the total as one debit (however do not forget to record both credits). a. motor vehicles, fixtures and fittings. (This assumes that the company has an operating cycle of less than one year.) The unit has a remaining useful life of 25 years. Residual value was taken as $10,000. b. QN=104 Which of the following would not be classified as a current asset? 20. The procedure to record the transaction is very similar to the three-step process seen for a cash disposal. Disposal through a part exchange agreement (PEA). Bindi Bobbin runs a business altering and repairing clothes. This does not mean that a computer can no longer be used after three years; it means that the business is likely to replace the computer after three years due to technological advancement. (1) Remove the original cost of the non-current asset from the 'non-current asset' account. He bought it 25 years ago for $100,000, depreciating it over 50 years. See the answer. If assets are stated at revalued amounts, the following should be disclosed: Created at 8/24/2012 10:54 AM  by System Account, (GMT) Greenwich Mean Time : Dublin, Edinburgh, Lisbon, London, Last modified at 8/24/2012 10:56 AM  by System Account, distinguish between capital and revenue expenditure, explain the function and purpose of an asset register, explain and illustrate the ledger entries to record the acquisition of non-current assets, define and explain the purpose of depreciation, explain the straight-line and reducing balance methods of depreciation and make necessary calculations, explain and illustrate how depreciation expense and accumulated depreciation are recorded in ledger accounts, explain and illustrate how depreciation is presented in the income statement and statement of financial position, explain the relevance of consistency and subjectivity in accounting for depreciation, make the necessary adjustments if changes are made in the estimated useful life/residual value of a non-current asset, explain and illustrate the ledger entries to record the disposal of non-current assets for cash, explain and illustrate the ledger entries to record the disposal of non-current assets through part exchange, explain and illustrate the inclusion of profits or losses on disposal in the income statement, explain and record the revaluation of a non-current asset in ledger accounts and in the statement of financial position, explain the impact of a revaluation on accounting for depreciation and disposal of a non-current asset. Non-Current Assets examples are like land are often revalued over a period of time in the Balance Sheet of the Company. 26. Some years ago Tiger purchased land next to the existing course with the intention of creating a smaller nine-hole course. This amount will form the accumulated depreciation at the year end. He depreciates it at 10% straight line on a monthly basis. The road licence fee, drivers' wages and receipts are ongoing expenses, incurred every year. How much is charged to Percy's income statement in respect of the asset for the year ended 31 December 20X5? 12 Disclosure of non-current asset balances in company financial statements. Average assets 40,000 Total liabilities 9,000. It can be argued that these subjective areas could therefore result in manipulation of the accounts by management. Marketable securities c. Inventory d. Accounts receivable ANS: C DIF: MEDIUM LO: 15.5 Financial Ratio Analysis Pg.435 AACSB: Analytic BT: K 67. Non-current assets are assets whose value will not be realized within a period of one year since they are not easily converted into cash. D) Cash. Types. Current assets contrast with long-term assets, which represent the assets that cannot be feasibly turned into cash in the space of a year. When a non-current asset has been revalued, the charge for depreciation should be based on the revalued amount and the remaining useful life of the asset. The premises were purchased on 1 January 20X1 for $450,000 and depreciation charged at 2% pa straight line. the extraction of a mineral from a quarry. Instead it should be taken to the income statement as a revenue expense. Non-current asset can be categorised into. A classified balance sheet shows non-current assets separately from current assets. Property, plant, and equipment (PP&E) (2) Remove accumulated depreciation on the non-current asset from the 'accumulated depreciation' account. From above three options the Fixture does not meet this criteria so is non-current asset. The correct double entry to record the purchase is: A separate cost account should be kept for each category of non-current asset, e.g. 2. The answer is explained below - Explanation: Non current assets are long term assets which can't be liquidated within one year. For a company, the current asset in the balance sheet can be calculated as follows. CV: original cost of the non-current asset less accumulated depreciation on the asset to date. D. None of these. Straight-line depreciation is often expressed as a percentage of original cost, so that straight-line depreciation over four years would alternatively be described as straight-line depreciation at 25% pa. Depreciation charge = X % x carrying value (CV). In order to reduce the scope for such manipulation and increase consistency of treatment, IAS 16 Property, Plant and Equipment requires the following: Illustration 3 – Changes to estimates. They cannot be capitalised, but should be taken to the income statement as expenses. Assets are useful or valuable resources owned by a company. Note: A disposals T account is required when recording the disposal of a non-current asset. Sold within one year. A noncurrent asset is an asset that is not expected to turn to cash within one year of date shown on a company's balance sheet. Coco acquired two fixed assets for cash on 1 August 20X5 for use in her party organising business: The fountain is to be depreciated at 25% pa using the reducing balance method. Join The Discussion. Collecting Cheques/Drafts customers . Illustration 4 – Revaluation of non-current assets. He sells the lawnmower to an old friend, Alan Titchmuck, for $2,000 on 31 July 20X5. Current assets also include prepaid expenses that will be used up within one year. customer lists, relationships and loyalty, controlled by the entity as a result of past events (normally by enforceable legal rights), a resource from which future economic benefits are expected to flow (either from revenue or cost saving), meet the definition of an intangible asset, and. (this is later covered within chapter 15). Current assets are resources that are expected to be used up in the current accounting period or the next 12 months. At 1 January 20X3 a review of asset lives was undertaken and the remaining useful life was estimated at eight years. Depreciation must continue to be charged on the original cost until the date of revaluation. Businesses may choose to reflect the current value of the asset in their statement of financial position. a. Assets which physically exist i.e. The accumulated depreciation account is a statement of financial position account and as the name suggests is cumulative, i.e. Which of the following is not a current asset? Noncurrent assets are reported under the following balance sheet headings: Record the part exchange allowance (PEA) as proceeds. A. Current liabilities 4,000 Stockholders equity 27,000. Tangible Assets Examples include Land, Property, Machinery, Vehicles etc. Current assets are a key indicator of a company’s short-term financial health as they provide insight into the amount of cash the company has access to and determines its ability to meet financial obligations. Suggests that it would be appropriate to use the asset to date this charge will be higher than depreciation to... Note, details of the non-current asset Securities investments that have increased value. It rains an asset begins when it is unlikely to be raised $! 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