ACCOUNTING 102

DEPRECIATION, DEPLETION, REVALUATION, IMPAIRMENT

SUMMARY QUIZ
THEORIES.

What is depreciation?
The systematic allocation of the depreciable amount of an asset over its useful life.
The cost of an asset, or other amount substituted for cost, less its residual value.
The removal of a previously recognized asset from an entity’s statement of financial position.
Price that would be received to sell an asset in an orderly transaction between market participants
at the measurement date.
Depreciation of an asset begins
When it is available for use.
When it is actually used.
When it is retired from active use.
When it is derecognized.
Depreciation of an asset ceases
At the date that the asset is derecognized.
At the date that the asset is classified as held for sale in accordance with PFRS 5.
At the earlier of a or b.
At the later of a or b.
The depreciation method used shall reflect the pattern in which the asset’s future economic
benefits are expected to be consumed by the entity. Which statement is incorrect regarding
depreciation methods?
Straight-line depreciation results in a constant charge over the useful life if the asset’s residual
value does not change.
The diminishing balance method results in a decreasing charge over the useful life.
The units of production method results in a charge based on the expected use or output.
A depreciation method that is based on revenue that is generated by an activity that includes the
use of an asset is appropriate.
Which of the following is a realistic assumption of the straight-line method of depreciation?
Depreciation is a function of time rather than a function of usage.
The asset’s economic usefulness is the same each year.
The repair and maintenance expense is essentially the same each period.
The rate of return analysis is enhanced using the straight-line method.
Useful life of Property, Plant and Equipment is:
The period over which an asset is expected to be available for use by an entity.
The number of production or similar units expected to be obtained from the asset by an entity.
Either a or b.
Neither a nor b.
Under the revaluation model, an item of property, plant and equipment whose fair value can
be measured reliably shall be carried at a revalued amount. Revalued amount means
Fair value at the date of the revaluation.
Fair value at the date of the revaluation less any accumulated depreciation and any accumulated
impairment losses.
Fair value at the date of the revaluation less any subsequent accumulated depreciation and
subsequent accumulated impairment losses.
Cost less any accumulated depreciation and accumulated impairment losses.
Which statement is correct regarding the revaluation model?
Revaluations shall be made with sufficient regularity to ensure that the carrying amount does not
differ materially from that which would be determined using fair value at the end of the reporting
period.
The frequency of revaluations depends upon the changes in fair values of the items of property,
plant and equipment being revalued.
If an item of property, plant and equipment is revalued, the entire class of property, plant and
equipment to which the asset belongs shall be revalued.
All of the above.
When an item of property, plant and equipment is revalued, any accumulated depreciation at
the date of the revaluation is
Restated proportionately with the change in the gross carrying amount of the asset so that the
carrying amount of the asset after revaluation equals its revalued amount.
Eliminated against the gross carrying amount of the asset and the net amount restated to the
revalued amount of the asset.
Either a or b.
Neither a nor b.