Reference no: EM132893304
Question 1: Zion Ltd purchased an equipment on 1 January 2020 for $42 000. It was estimated that it would have a useful life of 4 years and operate for 35 000 hours over its life. The asset's residual value is estimated at $5000. Other similar assets are depreciated on a reducing balance method at 35% rate. Which of the following statement is correct for year ending 31 December 2020?
A. If the reducing balance method is used, depreciation expense is $14 800 and if the sum of digits method is used, depreciation expense is also $14 800.
B. If the reducing balance method is used, depreciation expense is $14 800.
C. If the sum of digits method is used, depreciation expense is $14 800.
D. If the straight-line method is used, depreciation expense is $9 200.
Question 2: Which of the following statements is not true?
A. An intangible asset may be recorded if it is internally generated and fits the definition of an asset and meets the associated recognition criteria.
B. IAS 38 states that intangible assets may be measured by using either the cost model or the revaluation model.
C. The revaluation model requires all intangible assets in the same class to have a fair value determined by reference to an active market.
D. The cost of a separately acquired intangible asset includes its purchase price and directly attributable cost for preparing the asset for its intended use.
Question 3: Darius Ltd acquires some machinery at a cost of $150 000 on 1 July 2019. On 30 June 2020, the machinery, which has an accumulated depreciation balance of $20 000, is assessed as having a fair value equal to $100 000. Darius Ltd carries machinery at fair value. Which of the following journal entries will be made to record the revaluation of machinery?
A. Dr: Accumulated depreciation 20 000
Cr: Machinery 20 000
Dr: Loss on revaluation of machinery 30 000
Cr: Machinery 30 000
B. Dr: Accumulated depreciation 20 000
Cr: Machinery 20 000
Dr: Machinery 30 000
Cr: Gain on revaluation of machinery 30 000
C. Dr: Accumulated depreciation 20 000
Cr: Machinery 20 000
Dr: Gain on revaluation of machinery 30 000
Cr: Machinery 30 000
D. Dr: Accumulated depreciation 20 000
Cr: Machinery 20 000
Dr: Machinery 30 000
Cr: Loss on revaluation of machinery 30 000