Property, Plant and Equipment Quiz
21 multiple-choice questions with answers and explanations · 6 easy, 12 medium, 3 hard
Recognising and measuring property, plant and equipment: capitalised costs, subsequent expenditure, component accounting, revaluation and disposal.
- 1Costs Capitalized to PPEA company purchases a machine for $40,000, pays $2,000 in freight and $1,500 to install and test it before use. The cost recorded for the machine is:easy
- 2Recognition: What Qualifies as PPEWhich of the following qualifies as Property, Plant and Equipment under IAS 16?easy
- 3Recognition Criteria: Probable Benefit & Reliable CostA company incurs a cost it expects to generate economic benefit over several future periods, and the cost can be measured reliably. Under IAS 16's recognition criteria, this cost should be:easy
- 4Recognition: Component ReplacementA company replaces a major component of an asset. Under IAS 16, the cost of the replacement is:easy
- 5Presentation: Where PPE AppearsProperty, plant and equipment is presented in the statement of financial position as:easy
- 6Disclosure: What Must Be DisclosedFor each class of PPE, IAS 16 requires disclosure of the measurement basis used, along with:easy
- 7IAS 16 — Revaluation IncreaseA company revalues land upward for the first time under IAS 16's revaluation model. The increase is recognized:medium
- 8Capitalizable Subsequent ExpenditureA company spends $8,000 replacing a major component of a machine, extending its useful life by 5 years, and $500 on routine oil changes and minor repairs. Under IAS 16, the correct treatment is:medium
- 9Where a Revaluation Surplus Is RecognizedA company revalues an item of PPE upward under IAS 16's revaluation model, with no prior impairment on this specific asset. The revaluation surplus is recognized:medium
- 10When Depreciation BeginsUnder IAS 16, depreciation of an asset begins:medium
- 11Theory: Capitalization Criteria (IAS 16)Which expenditure is most likely to be included in PPE cost under IAS 16?medium
- 12Theory: Depreciation After RevaluationAfter an upward revaluation of PPE, future depreciation generally:medium
- 13Theory: Why Component AccountingWhy is significant component accounting used?medium
- 14Theory: Gain or Loss on DisposalA machine has a carrying amount of $80,000 and is sold for $65,000. The company should recognize:medium
- 15Spot the Error: Installation Cost MisclassifiedA company purchases equipment for $200,000 and records: Dr Equipment $200,000 / Cr Cash $200,000. The equipment requires $20,000 installation before it can operate, but the company records the installation as repairs expense. What is wrong with this accounting treatment?medium
- 16Spot the Error: Component Replacement Without DerecognitionA company replaces a major component costing $150,000 but simply adds $150,000 to PPE without removing the old component. What is the problem?medium
- 17Recognition: Major InspectionsA required major inspection is a condition of continuing to operate a piece of equipment. Under IAS 16, the cost of this inspection is:medium
- 18Disclosure: Reconciliation of Carrying AmountIAS 16 requires a reconciliation of each asset class's carrying amount at the start and end of the period. Which of the following would NOT typically appear as a reconciling item?medium
- 19IAS 16 — Revaluation Decrease After an IncreaseLand previously revalued upward (with $20,000 accumulated in revaluation surplus) is now revalued DOWNWARD by $30,000. The decrease is recognized as:hard
- 20Gain or Loss on Disposal of PPEEquipment with an original cost of $60,000 and accumulated depreciation of $45,000 is sold for $10,000 cash. The company records:hard
- 21Revaluation Increase After a Prior DecreaseA building was revalued downward in a prior period, with the full decrease recognized in profit or loss. This period, the building's fair value has increased. How is this period's increase recognized?hard