1.An appropriate journal entry to recognise an impairment loss under the cost model is:

Select one:

a.DR Loss on revaluation XX CR Machinery XX

b.DR Revenue XX CR Impairment loss XX

c.DR Accumulated impairment losses XX CR Impairment loss XX

d.DR Accumulated impairment losses XX CR Revaluation reserve XX

e.DR Impairment loss XX CR Accumulated impairment losses XX

2.An impairment loss occurs when:

Select one:

a.the carrying amount of an asset exceeds the recoverable amount

b.the recoverable amount of an asset exceeds the carrying amount

c.the recoverable amount of an asset is equal to the carrying amount

d.the asset has a zero residual value

e.the recoverable amount of an asset exceeds its initial cost

3.A copyright is obtained for what becomes a very successful book. The publisher expects the book to generate sales for ten years. The copyright should be:

Select one:

a.amortized over a 20 year period based expected readership.

b.amortized over 10 years.

c.amortized over the author's life plus 70 years.

d.amortized over a reasonable life.

e.expensed immediately.

4.On 1 July 2016, Metal Fuzz Pty Ltd bought a warehouse for $450,000 cash. At this time, the warehouse has an expected useful life of 10 years and an expected residual value of $250,000. Metal Fuzz Pty Ltd uses the cost method to account for the warehouse, and the depreciation is done on a straight-line basis. As 30 June 2017, Metal Fuzz Pty Ltd test the warehouse for impairment testing and find that the warehouse's fair value less cost sell to be $480,000 and its value in use to be $340,000. On 31 December 2017, Metal Fuzz Pty sells the warehouse for $480,000 cash. The journal entry to record the sale of the warehouse on 31 December 2017 would be:

Select one:

a.Dr Cash$480,000

Dr Accumulated Depreciation$40,000

Cr Gain on sale$10,000

Cr Warehouse$450,000

b.Dr Cash$480,000

Dr Accumulated Depreciation$30,000

Dr Accumulated Impairment$90,000

Cr Gain on Sale$400,000

Cr Warehouse$200,000

c.Dr Cash$480,000

Dr Accumulated Depreciation$30,000

Cr Warehouse$450,000

d.Dr Cash$480,000

Dr Loss on Sale$30,000

Cr Warehouse$450,000

e.Dr Cash$480,000

Dr Accumulated Depreciation$25,000

Dr Accumulated Impairment$90,000

Cr Gain on sale$145,000

Cr Warehouse$450,000

5.On 1 July 2016, Metal Fuzz Pty Ltd erected a fence around the company's new warehouse at a cost of 9,000. The $9,000 was initially charged to maintenance expenses. This accounting error was discovered at year end on 30 June 2017. At the time the fence was erected it had an expected useful life of 10 years and no expected residual value, and the benefits to be received from the fence was expected to uniform across its useful life. The journal entry to be posted on 30 June 2017 to correct the error on 1 July 2016 and account for the fence correctly would be:

Select one:

a.Dr Fence$9,000

Cr Cash$9,000

b.Dr Fence$9,000

Dr Depreciation Expense$900

Cr Maintenance Expense$9,000

Cr Accumulated depreciation$900

c.Dr Fence$9,000

Cr Maintenance Exp$9,000

d.Dr Maintenance Expense$9,000

Dr Accumulated Depreciation$900

Cr Fence$9,000

Cr Depreciation Expense$900

e.Dr Fence$9,000

Dr Depreciation Expense$900

Cr Cash$9,000

Cr Accumulated depreciation$900

6.On 1 December 2018, Jailbreak Pty Ltd bought a delivery truck for $50,000 cash. At this time, the delivery truck has an expected useful life of 10 years and an expected residual value of $5,000. Jailbreak Pty Ltd uses the cost method to account for the delivery truck, and the depreciation is done on a straight-line basis. On 20 June 2019, Jailbreak Pty Ltd changes the engine of the delivery truck to a more fuel-efficient engine that is also going to extend the useful life of the delivery truck by 5 years. Jailbreak also changes a worn-out tire with a new one. The engine cost Jailbreak Pty Ltd $5,000 and then replacement tire cost Jailbreak Pty Ltd $500, both were paid for in cash. The journal entry on 20 June 2019 would be:

Select one:

a.Dr Delivery Truck$5,500

Cr Cash$5,500

b.Dr Maintenance Expense$5,500

Cr Cash$5,500

c.Dr Delivery Truck$500

Dr Maintenance Expense$5,000

Cr Accounts Payable$5,500

d.Dr Delivery Truck$5,000

Dr Maintenance Expense$500

Cr Cash$5,500

e.Dr Delivery Truck$5,000

Dr Maintenance Expense$500

Cr Accounts Payable$5,500

7.Which of the following need to be established before development costs are capitalised?

i)A customer should have ordered the development of the product

ii)The cost of the product should be reliably identified

iii)The business should have all necessary resources to complete the project

iv)The business should be committed to completing the development

Select one:

a.ii & iii

b.i, ii & iv

c.ii, iii & iv

d.i, iii & iv

e.iii & iv

8.Which of the following would NOT be debited to the Machinery account?

Select one:

a.None of the options.

b.Freight charges to ship the machine to the factory

c.Installation costs

d.Electricity used by the machine

e.Cost of testing runs of the new machine

9.Which of the following statements about the capitalisation of goodwill is true?

Select one:

a.Internally generated goodwill is never capitalised, but purchased goodwill is capitalised.

b.None of the options

c.Neither internally generated nor purchased goodwill may be capitalised.

d.Both internally generated and purchased goodwill may be capitalised.

e.Internally generated goodwill may be capitalised, but purchased goodwill is never capitalised.

10.The Framework states that an asset should be recognised when and only when:

1.The asset possesses a cost or other value that can be measured reliably

2.It is legally owned by the entity

3.It is probable that the future economic benefits embodied in the asset will realised

4. It is a tangible asset with a physical substance

5. It is necessary to recognise depreciation expense over the asset's useful life

Select one:

a.1, 2 and 3 only

b.2, 4 and 5 only

c.1 and 3 only

d.2 and 4 only

e.1 and 2 only