Property, Plant & Equipment
Are the annual insurance fees included in the cost of an asset?
No, they are not included when determining the cost of an asset.
The chef uses his cooking equipment roughly the same amount each day. What depreciation method should he apply?
Straight-line method. He is consuming the equipments' economic benefits consistently each accounting period, so equal amounts of depreciation should be allocated.
What adjustment is made if the recoverable amount of an asset is greater than its carrying amount?
If the recoverable amount is greater than the carrying amount, no adjustment is required.
What are the effects of an upward revaluation on the balance sheet?
carrying amount increase, revaluation surplus(equity) increase
What is recognised on disposal if the proceeds are greater than the carrying amount?
Gain
Correct this sentence: A non-current asset should only be used directly to generate revenue.
Correction: a non-current asset should be used directly or indirectly to generate revenue.
Once the depreciation amount for a NCA is allocated, it shouldn't be changed during subsequent accounting periods. True or false, and why?
False, the residual value and useful life needs to be reviewed at the end of every financial year, and thus the depreciation method and value can change
What are the two components that must be compared to determine the recoverable amount of an asset?
The two components are the asset’s fair value less costs of disposal and its value in use.
Why would we use revaluation model?
it helps ensure that the value of assets reported on the balance sheet is closer to their current market value
What is recognised on disposal if the proceeds exceed the carrying amount?
Loss