ACCA F3 MCQ NON-CURRENT ASSET
!
Carter, a limited liability company, has non-current assets with a carrying value of $200000 on 1 December 2007.
During the year ended 30 November 2008, the following occurred:
Depreciation of $10000 was charged to the income statement
Land and buildings with a carrying value of $140000 were revalued to $142000
An asset with a carrying value of $160000; was disposed of for $166000
The carrying value of non-current assets at 30 November 2008 was $280000
What amount should be shown for the purchase of non-current assets in the statement of cash flows for the year ended 30 November 2008?
| A. | 248000 |
| B. | 250000 |
| C. | 254000 |
| D. | 108000 |
| Answer. | A. |
| + means Debit | - means Credit |
The answer to this question is A.
Examiner's comment:
Quote
This question requires the student to calculate the purchase of non-current assets for inclusion in a statement of cash flows. As with most figures in a statement of cash flows, the method of arriving at the answer requires the student to reconcile the opening balance of non-current assets to the closing balance taking account of all movements during the year. The balancing figure will be the amount of non-current assets purchased for cash during the year.
One of the easiest methods of dealing with this type of question is to draw up a T-account and enter all the relevant figures into it as illustrated below:
| Depreciation | 10000 | b/f | 200000 |
| Disposal | 160000 | Revalution | 2000 |
| c/f | 280000 | Addition | 248000 |
| Total | 450000 | 450000 |
The information given in the question can be brought into the account until one side of the account can be balanced, leaving the missing figure as the balancing figure.
The revaluation of the non-current assets should be included in the reconciliation as the revaluation increases the carrying value but there is no cash involved. In the case of the disposal, it is only the carrying value that we are concerned with as the cash proceeds will be included in the statement of cash flows.
Somewhat surprisingly, only 38% of respondents answered correctly, and those who answered the question incorrectly chose B and C. Answer B ignored the revaluation altogether and answer C used the cash proceeds as the figure for disposals. Both of these are errors that suggest that this topic may need to be studied in more depth.
UnQuote
To do the same topic again in ACCA F3 MCQ NON-CURRENT ASSET
To do another topic in Principles of Accounts Singapore
