TA-Q: PROPERTY, PLANT & EQUIPMENT

1. Property, plant and equipment (PPE) does not include:

a. Property not subject to depreciation, such as land used as a factory site b. Property subject to depreciation, such as building used for administrative purposes c. Property subject to amortization, such as franchise acquired to obtain business rights d. Property subject to depletion, such as timber, oil and mining lands and leases Which of the following items is capitalized as part of the cost of PPE? a. Cost of opening a new facility b. Cost of relocation or reorganizaning an entitys operations c. Cost of introducing a new product or conducting business in new location d. Cost directly attributable to bringing the PPE to intended location and condition Which of the following items is not capitalized as part of the cost of PPE? a. Professional fees b. Initial operating loss c. Costs of site preparation and testing d. Initial estimate of the cost of dismantling and removing the PPE Which of the following items is not chargeable to the Land account? a. Cost of survey by engineers b. Expenditures for fence, water system, sidewalk and pavement c. Brokers commission and fees for registration and title transfer d. Attorneys fee and any other expenditures for establishing clean title The following chares are generally capitalized toe the Land account, except a. Cost of option of land not acquired b. Payments to tenants to include them to vacate the premises c. Buyer-assumed mortgages and encumbrances like property taxes d. Special assessment for local improvements which benefit the property A land acquired has an unwanted building that should be demolished. Assuming a salvage value can be recovered from the demolition of the building, the land account should be charged with the a. Salvage value c. Cost of demolition plus salvage value b. Cost of demolition d. Cost of demolition minus salvage value Which of the following items is not chargeable to the Machinery and Equipment account? a. Freight and installation b. Material, labor and other expenditures incurred in placing the equipment ready for use c. Testing cost of the equipment or facilities before they are ready for production use When a group of assets is acquired for a lump sum price, the total cost should be allocated to the individual assets based on their relative a. Fair value c. Assessed value b. Book value d. Appraised value The cost of property acquired on credit with available cash discount is equal to a. Invoice price plus cash discount, taken or not b. Invoice price minus cash discount, taken or not c. Invoice price plus cash discount, only when taken d. Invoice price minus cash discount, only when taken The cost of property acquired by installation is equal to a. Cash purchase price c. Installation price b. Invoice price d. List price Property acquired through the issuance of securities (shares or bonds) of a closely held corporation should be recorded at a. Fair value of the property acquired b. Fair value of the securities issued c. Fair value of the property acquired or fair value of the securities issued, whichever is lower d. Fair value of the property acquired or fair value of the securities issued, whichever is higher Property acquired in exchange for a non-monetary asset and the exchange lacks commercial substance, the cost of the asset acquired is measured at a. Fair value of the asset given b. Fair value of the asset received c. Carrying amount of the asset given d. Carrying amount of the asset received The cost of self-constructed property, plant and equipment does not include a. Direct costs of materials and labor b. Indirect costs and overhead specifically identifiable or traceable to the construction c. Abnormal amount of wasted material, labor or overhead incurred in the construction Under PAS 23, borrowing costs incurred in acquiring, producing, constructing a qualifying asset are a. Expensed in the period incurred b. Capitalized as part of the cost of the qualifying asset c. Expensed (benchmark treatment); capitalized (allowed alternative treatment) d. Capitalized (benchmark treatment); expensed (allowed alternative treatment) Which of the following items is not a qualifying asset for purposes of capitalizing borrowing cost? a. Manufacturing plants b. Power generation facilities

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Inventories that production in large quantities over short period of time

d. Inventories that required a substantial period of time to bring them to a salable condition
16. If the qualifying asset is financed by SPECIFIC borrowing, the borrowing cost capitalized is equal to a. Actual borrowing costs incurred during the construction period b. Actual borrowing costs incurred during and after the construction period c. Actual borrowing costs incurred during the construction period less any investment income on the temporary investment of borrowings d. Actual borrowing costs incurred during and after the construction period less any investment income on the temporary investment of borrowings 17. If the qualifying asset is financed bye GENERAL borrowing, the borrowing cost capitalized is equal to a. Actual borrowing cost incurred b. Total expenditures on the asset multiplied by a capitalization rate c. (average expenditures in the asset multiplied by a capitalization rate) or (actual borrowing costs), whichever us higher d. (average expenditures in the asset multiplied by a capitalization rate) or (actual borrowing costs), whichever is lower 18. The carrying amount of property is increased as a result of revaluation. Assuming no revaluation was made before, the increase should be credited to a. Accumulated depreciation b. Revaluation gain, shown as a component of income c. Revaluation surplus, shown as a component of equity d. Retained earnings, shown under equity section of the balance sheet 19. The carrying amount of a property decreased as a result of revaluation. Assuming no revaluation was made before, the decrease should be debited to a. Accumulated depreciation b. Revaluation or impairment loss c. Revaluation surplus, shown as component of equity d. Retained earnings, shown under equity section of the balance sheet 20. A revaluation increase shall be recognized as income a. Always b. When the asset is revalued for the first time c. When the asset is revalued frequently than usual d. When it is reverses a revaluation decreases of the same asset previously recognized as expense 21. If a revalued property is sold, the related revaluation surplus is transferred directly to a. Revaluation gain c. Additional paid-in-capital b. Retained earnings d. Accumulated depreciation 22. Major spare parts and standby equipment that are expected to be used over period of more than one year should be classified as a. Property, plant and equipment c. Noncurrent investment b. Inventory d. Expense 23. Property, plant and equipment acquired by way of donation are usually recorded at a. Recorded value of the asset b. Fair value of the donated asset c. Nil amount memorandum entry is necessary d. Appraised value as determined by the board of directors 24. Under PAS 20, these represent assistance by government in the form of transfers of resources to an enterprise in return for past or future compliance with certain conditions relating to the operating activities of the enterprise. a. Government warnings c. Government grants b. Government discounts d. Government interventions 25. Government grants are generally treated as a. Income as matched related costs b. Donated capital c. Part of retained earning d. A memorandum entry only 26. Grants related to depreciable assets should be recognized as income a. In proportion to the depreciation of the related assets b. On a straight line basis over the useful life of the depreciable asset c. In proportion to the compliance of the conditions set for the grantee d. Any of these 27. What is depreciation? a. It is a process of asset valuation for balance sheet purposes b. It applies only to long-lived intangible assets c. It is used to indicate a decline in market value of a long-lived asset d. It is an accounting process which systematically allocated long-lived asset cost to accounting periods 28. Periodic depreciation expense is primarily the result of applying the a. Revenue principle c. Cost principle b. Full-disclosure principle d. Matching principle 29. Depreciation is best described as a method of a. Cost allocation b. Asset valuation c. Current value allocation d. Useful life determination

30. It is related to a depreciable assets deterioration over a period due to use or non-use. a. Physical depreciation c. Psychological depreciation b. Mental depreciation d. Functional depreciation 31. It arises from obsolescence or inadequacy of the asset to perform efficiently. a. Psychiatric depreciation b. Physiological depreciation c. Psychological depreciation d. Functional development 32. Depreciation measurement should be based on a. Past input exchange price c. Future input exchange price b. Current input exchange price d. Current output exchange price 33. Which of the following is not considered in determining the useful life of an item of PPE? a. Expected usage of the asset c. Technical obsolescence b. Legal limits d. Residual value 34. Which of the following terms best describes the cost or amount substitute for costs of an asset less its residual value? a. Revalued amount c. Recoverable amount b. Carrying amount d. Depreciable amount 35. A depreciation method that provides higher depreciation expense during the early years of asset life. a. Sum of years digit method c. Service hours method b. Straight-line method d. Units or production method 36. Which of the following statements is the assumption on which straight-line depreciation is based? a. The operating efficiency of the asset decreases in later years b. Service value declines as a function of time rather than use c. Service value declines as a function of obsolescence rather than time d. Physical wear and tear are more important than economic obsolescence 37. A method that excludes residual from the base for the depreciation calculation is a. Straight line c. Productive output b. Service hours d. Declining balance 38. A depreciation method used where the usage of the asset varies considerably from period to period and the service life is more function of use rather than passage of time. a. Straight-line method c. Sum of years digit method b. Units of production method d. Declining balance method 39. The most common method of recording depletion for wasting asset is the a. Effective interest method c. Straight-line method b. Sum-of-the-years method d. Output method 40. If there is change from sum of years digits to straight line method a. The accumulated depreciation is adjusted to its appropriate balance through retained earnings based on the straight line method b. The accumulated depreciation is adjusted to its appropriate balance through net income based on the straight line method c. The accumulated depreciation balance is not adjusted but the remaining book value is allocated over the remaining life using the straight line method d. The accumulated depreciation balance is not adjusted but the remaining book value is allocated over the original life using the straight line method