Multiple choice theories 1 which of the following

MULTIPLE CHOICE (THEORIES)
1. Which of the following describes depreciation?
I. It is an accounting procedure by which the cost of an asset is rationally allocated
to accounting periods benefited.
II. The removal of an asset from an entity’s statement of financial position
A. I only
B. II only

FAR HANDOUTS
C. Both I and II
D. Neither I and II
2. Which of the following statement is incorrect concerning the residual value of an item of
property, plant and equipment?
3. On January 20x1, ABC Co. placed an order for equipment. The supplier shipped the
equipment on January 15 20x1 and was received by ABC Co. on February 1, 20x1.
Installation and testing were finished by March 1, 20x1 and the equipment is available
for use on this date. However, ABC Co, started using the equipment only on May 1,
20x1. According to PAS 16, when should ABC Co. start depreciating the equipment?
4. S1: An asset is said to be fully depreciated when carrying amount is zero or equal to its
residual value
S2: In using group or composite method, gain or toss may be recognized as the difference
of the net disposal price and carrying amount of the disposed item of PPE of the group.
S3: variable charge methods of depreciation are based on the philosophy that new assets are
generally capable of producing more revenue in the earlier years than in the later years.
S4: When an estimate of an assets useful life is changed, only the depreciation expense in
the remaining year is changed
S5: Depreciation stops when an item of PPE is derecognized or becomes temporarily idle
whichever comes first