BZ102 Accounting Principles Portfolio - Topic 9: Non-Current Assets

This homework assignment focuses on accounting principles related to non-current assets, covering topics such as asset cost, depreciation methods (straight-line and reducing balance), accumulated depreciation, journal entries, asset disposal, and asset registers. The assignment includes multiple-choice questions and detailed explanations with calculations for specific scenarios involving asset depreciation and disposal, providing step-by-step solutions for understanding the concepts. The solutions cover depreciation calculations for vehicles and assets sold at a profit, demonstrating how to determine depreciation expense and the impact of asset sales on financial statements. This assignment is a valuable resource for students studying accounting principles, providing practical examples and solutions to reinforce their understanding of non-current asset accounting.

BZ102 ACCOUNTING PRINCIPLES
PORTFOLIO QUESTIONS – TOPIC 9 – NON-CURRENT ASSETS
QUESTION 1
Complete the following questions by selecting the most appropriate response and
recording your response in the answer sheet attached.
1. Which expenditure would not be recorded as part of the cost of a machine?
a) annual maintenance
b) installation costs
c) freight and transit insurance for delivery of machine
d) all of the above
2. Which category of account would you debit to record the purchase of a new
forklift for a warehouse?
a) operating expenses
b) current assets
c) property expenses
d) non-current assets
3. Which depreciation method is likely to produce the highest depreciation expense
in the earlier years of an asset’s life, but lower depreciation expense in later
years?
a) Straight line
b) Reducing Balance
c) Units of Production
d) All produce the same expense annually
4. Depreciation expense is recorded by preparing the following journal entry –
a) debit accumulated depreciation; credit asset at cost
b) debit depreciation expense; credit accumulated depreciation
c) debit asset cost; credit depreciation expense
d) debit accumulated depreciation; credit depreciation expense
5. An office computer cost $1,500 when it was purchased, and now has
accumulated depreciation of $700. If depreciation is calculated assuming a 5
year useful life and no residual value, then the correct depreciation expense for
the current year should be:
a) $160
b) $800
c) $300
d) $700

6. Suppose that a machine which cost $1,500 and has accumulated depreciation of
$700 is sold for $900. What will be the result of this disposal transaction?
a) Profit of $100
b) Profit of $200
c) Loss of $100
d) Loss of $200
7. A business purchases a vehicle for $25,000 on 1 December, 2017 and uses a
30% per annum reducing balance depreciation rate. Which of the following
amounts should be recorded as the depreciation expense for the financial year
ended 30thJune, 2018?
a) $7,500
b) $ 625
c) $4,375
d) $3,750
8. An asset register contains details of which of the following?
a) depreciation recorded annually and the asset’s reduced balance
b) maintenance costs for each asset
c) date of purchase of asset and its cost
d) all of the above
9. An asset cost $12,000 and has Accumulated Depreciation at 1 July, 2018 of
$3,000. The asset was depreciated by the reducing balance method at 15% per
annum. The asset was sold on 30 April, 2019 and resulted in a profit on sale of
$1000. How much was received for the asset when it was sold?
a) $ 6,875
b) $ 8,000
c) $ 8,875
d) $15,125
10. Which type of account classification is Accumulated Depreciation?
a) Expense
b) Asset
c) Liability
d) Equity
QUESTION 2
Refer to Questions 7 and 9 in Question 1 above.
Provide a detailed explanation/reasoning for your response, and show detailed
calculations supporting each answer.

Question no. 7
Cost of Vehicle = $ 25,000
Date of purchase = 1st Dec-17
Depreciation rate = 30%
Depreciation method = Reducing Balance
Depreciation for 1 year = 25000 x 30%
= $ 7500
As the vehicle used for 7 months during the financial year ended on 30th Jun-2018, therefore
Depreciation for financial year ended on 30th Jun-2018 = 7500 x (7 / 12)
= $ 4,375
Question no. 9
Cost of asset = $ 12,000
Accumulated Depreciation as on 1st Jul-18 = $ 3,000
Depreciation rate = 15%
Depreciation method = Reducing Balance
Date of sale = 30th Apr-19
Profit on sale = $ 1,000
WDV of asset as on 1st Jul-18 = Cost of asset - Accumulated Depreciation
= 12000 – 3000
= $ 9,000
Since asset is sold on 30th Apr-19, asset has been used for 10 months during financial year
ended on 30th Jun-19. Therefore,
Depreciation for financial year ended on 30th Jun-2019 = 9000 x 15% x (10 / 12)
= $ 1,125
WDV as on date of sale = 9000 – 1125
= $ 7,875

Since asset is sold at the profit of $1,000, therefore,
Sale price of asset = WDV as on date of sale + Profit on sale
= 7875 + 1000
= $ 8,875