Question 1: On 30 June 2019, a machine with a cost of $300,000 has accumulated depreciation written off $100,000. If its sold for $250,000 on 1 July 2019, what will be the net effect of the sale on the income statement?

a. $50,000 gain

b. $150,000 gain

c. $50,000 loss

d. $150,000 loss

Question 2: When a non-current asset is sold the gain or loss on disposal is the difference between:

a. Selling price and accumulated depreciation

b. Fair market value and accumulated depreciation

c. Fair value and selling price

d. Selling price and carrying amount

Question 3: The cost of acquisition for fixed assets as per AASB116 can be defined as:

a. carrying value in the previous owners books

b. purchase cost plus any incidental costs directly attributable to acquiring the asset and getting it ready for use.

c. invoice cost.

d. invoice cost plus freight inwards, plus other costs of acquiring the assets

Question 4: Depreciation expense is classified as a(n):

a. expense in the income statement.

b. liability in the balance sheet.

c. contra asset in the balance sheet.

d. equity in the balance sheet.

Question 5: Melbourne Manufacturing purchased a machine for $600 000 on 1 January 2018 which is expected to have a 5 year life, no residual value, and to produce a total of 200 000 wingdings before it is scrapped. Assuming the Melbourne Manufacturing uses the units- of-production method and actual production up to 31 December 2018, (the end of the accounting year) is 50000 wingdings, calculate depreciation expense for 2018.

a. $150000

b. $5000

c. $12000

d. $15000

Question 6: A machine was purchased on 1 January 2019 for $60 000, net of GST. The machine had an estimated residual value of $6 000 and an estimated useful life of 5 years. Depreciation expense for the year ended 31 December 2019, using sum-of-the-years'-digits method, is:

a. $18000

b. $14000

c. $30000

d. $20000

Question 7: All assets must be accounted for on acquisition at cost. Which of the following item is not part of the cost?

a. Purchase price

b. Installation costs

c. Transportation costs

d. GST payable

Question 8: On 1 January, a machine is purchased at a cost of $330,000 (net of GST) and has a residual value of $30,000 with a useful life of 5 years. How much depreciation will be recorded in the books on 30th June (Straight-line method is used to calculate depreciation)

a. $60000

b. $30000

c. $20000

d. $50000

Question 9: Which statement best describes the nature of depreciation?

a. A charge against profits to provide funds for asset replacement.

b. Allocating the cost of an asset over its useful life.

c. Writing down the value of an asset according to the decline in its physical efficiency.

d. Writing down the value of an asset according to the change in its market value.

Question 10: What is the correct entry to record a machine that was fully depreciated by $25, 000 and discarded because it was worthless?

a. Debit machine $25 000; credit accumulated depreciation $25 000

b. Debit machine $25 000; credit bank $25 000

c. Debit accumulated depreciation $25 000; credit machine $25 000

d. Debit depreciation expense $25 000; credit accumulated depreciation $25 000