Q: Which of the following is the correct formula for calculating depreciation using the diminishing balance method?

$$\text{Depreciation} = (\text{Cost} - \text{Accumulated Depreciation}) \times \text{Rate}$$

Question 1

Which of the following best describes the treatment of inventory in the statement of financial position according to IFRS, when inventory is valued at the lower of cost or net realisable value?

Accepted Answer

Inventory is valued at the lower of cost or net realisable value, as per IFRS.

Question 2

All Ltd acquired land for R240,000 and revalued it to R400,000. According to IFRS, what is the correct journal entry for the revaluation surplus?

Accepted Answer

Debit Land R160,000; Credit Revaluation Surplus R160,000

Question 3

A machine was purchased for R250,000 and depreciated at 15% per annum using the straight-line method. What is the annual depreciation expense?

Accepted Answer

R37,500

Question 4

Miller Ltd issued 20,000 ordinary shares at R1.25 each. What is the total amount credited to share capital?

Accepted Answer

R25,000

Question 5

Which of the following is the correct formula for calculating depreciation using the diminishing balance method?

Accepted Answer

$$	ext{Depreciation} = (	ext{Cost} - 	ext{Accumulated Depreciation}) 	imes 	ext{Rate}$$

Question 6

Apple Ltd purchased a delivery vehicle for R102,600 (VAT included). If VAT is 14%, what is the cost excluding VAT?

Accepted Answer

R90,000

Question 7

Purco Ltd revalued land from R1,000,000 to R1,500,000. What is the revaluation surplus?

Accepted Answer

R500,000

Question 8

Which of the following best describes the recognition criteria for a liability according to the Conceptual Framework?

Accepted Answer

A liability must be probable and reliably measurable.

Question 9

Shake-It Ltd declared a capitalisation issue of one ordinary share for every five shares held, funded out of profits to the amount of R285,000. If there were 1,500,000 ordinary shares before the issue, how many capitalisation shares were issued?

Accepted Answer

300,000

Question 10

Design Ltd allocates fixed production overhead costs at R50 per unit based on a normal production capacity of 2,000 units. What is the total fixed production overhead allocated?

Accepted Answer

$$2,000 	imes 50 = 100,000$$

Question 11

Jobs Ltd traded in a motor vehicle with a cost of R50,000 and accumulated depreciation of R25,000 for a new vehicle costing R70,000. What is the carrying amount of the traded-in vehicle?

Accepted Answer

$$50,000 - 25,000 = 25,000$$

Question 12

Which of the following events is considered an adjusting event after the reporting date according to IFRS?

Accepted Answer

A debtor's financial difficulties that existed before the reporting date but were discovered after.

Question 13

If a company issues 100,000 ordinary shares at R5 each and incurs share issue expenses of R1,000, what is the net amount credited to share capital?

Accepted Answer

R499,000

Question 14

A company purchased equipment for R150,000 with a residual value of R10,000. If the equipment is depreciated over 5 years using the straight-line method, what is the annual depreciation expense?

Accepted Answer

$$\frac{150,000 - 10,000}{5} = 28,000$$

Question 15

Which of the following is the correct journal entry for writing off credit losses of R40,000 for a debtor in the annual financial statements?

Accepted Answer

Debit Credit losses R40,000; Credit Trade and other receivables R40,000

Question 16

A company has a policy to refund purchases within two months. Which of the following best justifies raising a provision for refunds as a liability?

Accepted Answer

There is a present obligation from a past event, probable outflow of economic benefits, and the amount can be measured reliably.

Question 17

If a company revalues land from R380,000 to R800,000, what is the revaluation surplus?

Accepted Answer

$$800,000 - 380,000 = 420,000$$

Question 18

Which of the following is NOT a requirement for recognising a liability according to the Conceptual Framework?

Accepted Answer

The obligation must be certain.

Question 19

A company purchased 20,000 preference shares at a cost of R46,000. If the market value at year-end is R2.30 per share, what is the fair value of the investment?

Accepted Answer

$$20,000 	imes 2.30 = 46,000$$

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