9706 · 1.3.2
Changing asset values flashcards
Revision flashcards for Cambridge 9706 Changing asset values (syllabus 1.3.2). Flip, recall, then mark a real past-paper question.
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Straight-line formula?
(Cost − Residual value) ÷ Expected life in years.
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Reducing balance?
NBV × % each year — higher charge early years.
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Accumulated depreciation?
Contra-asset — total depreciation to date.
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Net book value?
Cost − Accumulated depreciation.
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Disposal gain?
Proceeds > NBV — credit to SPL (or loss if reverse).
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Revaluation surplus?
Equity reserve — not income through SPL (under revaluation model).
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What is the double entry to record annual depreciation?
Debit: Depreciation Expense (in the Income Statement). Credit: Provision for Depreciation (in the Statement of Financial Position, deducted from the asset's cost).
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Define 'Net Book Value' (NBV) or 'Carrying Amount'.
The value of a non-current asset recorded in the financial statements. It is calculated as the asset's original cost less its total accumulated depreciation to date.
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What is the purpose of a Revaluation Surplus?
It is an equity reserve used to record the increase in the value of a non-current asset following an upward revaluation. It represents an unrealised gain and is not distributable as dividends.
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State the formula for the Straight-Line method of depreciation.
Annual Depreciation = (Cost of Asset – Estimated Residual Value) / Estimated Useful Life of Asset (in years).
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How is the profit or loss on the disposal of a non-current asset calculated?
It is the difference between the Net Book Value (NBV) of the asset at the time of disposal and the net disposal proceeds (cash received).