Under AASB 116 When an Asset Is Revalued and the Net

question 9

Multiple Choice

Under AASB 116 when an asset is revalued and the net method is used,accumulated depreciation:

• A) must be written back to profit.
• B) must be closed off to the equity account.
• C) should be eliminated against the gross carrying amount of the asset before revaluation.
• D) should be increased by the same proportion as the gross carrying amount of the asset so that the carrying amount of the asset after revaluation equals the revalued amount.

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Definitions:

Required Rate

The minimum expected rate of return on an investment, determined by assessing risk levels and market conditions.

Credit Policy

A set of guidelines that a company follows to determine credit terms for customers, which influences decisions such as payment periods and credit limits.

Net Present Value

A method used in capital budgeting to evaluate the profitability of an investment or project, calculated as the difference between the present value of cash inflows and outflows over a period.

Monthly Interest Rate

The fraction of the annual interest rate divided by twelve, representing the interest for a single month.