Fixed Assets Paper 6

1

On December 31, year 3, Bit Co. had capitalized costs for a new computer software product with an economic life of five years. Sales for year 4 were 30% of expected total sales of the software. At December 31, year 4, the software had a net realizable value equal to 90% of the capitalized cost. What percentage of the original capitalized cost should be reported as the net amount on Bit’s December 31, year 4 balance sheet?






2

Which of the following statements is incorrect regarding internal-use software?






3

Which of the following statements is(are) correct regarding the proper accounting treatment for internal-use software costs?
I. Preliminary costs should be capitalized as incurred.
II. Application and development costs should be capitalized as incurred.






4

For companies that prepare financial statements in accordance with IFRS, plant, property, and equipment should be valued using which models?






5

Which is true about the revaluation model for valuing plant, property, and equipment?






6

When the revaluation model is used for reporting plant, property, and equipment, the gain or loss should be included in






7

Linden Corporation has investment property that is held to earn rental income. Linden prepares its financial statements in accordance with IFRS. Linden uses the fair value model for reporting the investment property. Which of the following is true?






8

Under IFRS, when an entity chooses the revaluation model as its accounting policy for measuring property, plant, and equipment, which of the following statements is correct?






9

On January 1, year 1, an entity acquires for $100,000 a new piece of machinery with an estimated useful life of 10 years. The machine has a drum that must be replaced every five years and costs $20,000 to replace. Continued operation of the machine requires an inspection every four years after purchase; the inspection cost is $8,000. The company uses the straight-line method of depreciation. Under IFRS, what is the depreciation expense for year 1?






10

Taylor Company uses IFRS for financial reporting purposes. Which of the following is true about accounting for the development costs of the company?






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