1.If the fair value less cost to sell cannot be determined*

The recoverable amount is the value in use.

The carrying value of the asset remains the same.

The asset is not impaired.

The net realizable value is used.

2.Statement 1: PAS 36 explicitly provides that an impairment loss recognized for goodwill shall not be reversed in a subsequent period. Statement 2: Corporate assets are assets including goodwill that contribute to the future cash flows of both the cash generating unit under review and other cash generating units.*

Only statement 1 is true.

Both statements are true.

Only statement 2 is true.

Both statements are false.

3.When an asset's carrying amount is increased as a result of a revaluation, the increase shall be credited directly to*

Income

Retained earnings

Deferred income

Revaluation surplus

4.Which of the following reasons provides the best theoretical support for accelerated depreciation?*

Expenses should be allocated in a manner that "smooths" earning

Accelerated depreciation provides easier replacement because of the time value of money.

Assets are more efficient in early years and initially generate more revenue

Repairs and maintenance costs will probably increase in later periods so depreciation should decline.

5.A company using the group depreciation method for its delivery trucks retired one of its delivery trucks after the average service life of the group was reached. Cash proceeds were received from a salvage company. The net carrying amount of these group asset accounts would be decreased by the.*

cash proceeds received.

original cost of the truck less the cash proceeds

original cost of the truck

cash proceeds received and original cost of the truck

6.The straight-line method of depreciation is not appropriate for*

Equipment on which maintenance and repairs increase substantially with age.

Equipment used consistently every period.

Equipment with useful life that is not affected by the amount of use.

An entity that is neither expanding nor contracting its investment in equipment because it is replacing equipment as the equipment depreciates.

7.The output or production method of depreciation results in*

Increasing charge over the life of the asset

Charge based on the expected use or output of the asset

Constant charge over the life of the asset

Decreasing charge over the life of the asset

8.Which is incorrect concerning the residual value of an item of property, plant and equipment?*

In practice, the residual value of an asset is often insignificant and therefore immaterial in the calculation of the depreciable amount.

The residual value of an asset shall be reviewed at least at each financial year-end and if expectation differs from previous estimate, the change shall be accounted for as a change in an accounting policy.

The residual value of an asset may increase to an amount equal to or greater than the asset's carrying amount.

The depreciable amount is determined after deducting the residual value of the asset

9.Which of the following statements is correct?*

A gain on disposal of a noncurrent asset is classified as revenue.

A noncurrent asset acquired as the result of an exchange of assets is not recognized.

Land and buildings are not accounted for separately when acquired together.

Assets are depreciated even if their fair value exceeds their carrying amount.

10. Technical obsolescence arises from*

Expected physical wear and tear

Changes or improvements in production or change in the market demand for the product output of the asset

Expected usage of the asset

Expiry date of related lease of the asset

11. A method which excludes residual value from the base for the depreciation calculation*

Double declining balance

Productive output method

Sum of years' digits

Straight line

12. What factor must be present to use the production method of depreciation?*

Total units to be produced can be estimated

Production is constant over the life of the asset

Repair costs increase with use

Obsolescence is expected

13. When the revaluation surplus is realized because of the use of the asset by the entity or disposal of the asset, it may be transferred directly to*

Retained earnings

Income

Share capital

Share premium

14. Information needed to compute a depletion charge per unit includes the*

Estimated total amount of resources available for removal

Amount of resources removed during the period.

Amount of resources sold during the period.

Cumulative amount of resources removed.

15. It is the smallest identifiable group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows from the other assets or group of assets*

Good will

The enterprise as a whole

Cash generating unit

Corporate asset

16. Which of the following reasons provides the best theoretical support for accelerated depreciation?*

Accelerated depreciation provides easier replacement because of the time value of money.

Repairs and maintenance costs will probably increase in later periods so depreciation should decline.

Assets are more efficient in early years and initially generate more revenue.

Expenses should be allocated in a manner that "smooths" earnings.

17. The estimates of future cash flows in calculating value in use shall include all of the following, except*

Cash inflows from the continuing use of the asset.

Net cash flows from the disposal of the asset at the end of its useful life.

Future cash flows that are expected to arise from improving or enhancing the asset's performance.

Cash outflows incurred to generate the cash inflows from the continuing use of the asset.

18. An asset has a nine-year useful life and is to be depreciated under the sum of the year's digits method. The annual depreciation expense would be the same as that under the straight-line method in the*

ninth year

fifth year

third year

seventh year

19. The most common method of computing depletion is*

Percentage depletion method

Production or output method

Decreasing charge method

Straight line

20. Estimates of future cash flows normally would cover projections over a maximum of*

ten years

twenty years

five years

fifteen years