Question 1

For the purposes of recognising property, plant and equipment assets the acquisition date is the date:

Accepted Answer

A)  the consideration is paid. 
B)  on which the acquirer obtains control of the asset. 
C)  the contract to exchange assets is signed. 
D)  on which the contract to acquire the asset becomes unconditional. 
A)  the consideration is paid. 
B)  on which the acquirer obtains control of the asset. 
C)  the contract to exchange assets is signed. 
D)  on which the contract to acquire the asset becomes unconditional. B

Question 2

Which of the following statements regarding depreciation is incorrect?

Accepted Answer

A)  Depreciation is an allocation of the cost of the asset over its useful life. 
B)  The depreciation method used should best reflect the pattern of usage of the asset over its useful life. 
C)  Depreciation is a measure of the asset's change in value. 
D)  Depreciation is a systematic allocation of the cost of the asset over its useful life. 
A)  Depreciation is an allocation of the cost of the asset over its useful life. 
B)  The depreciation method used should best reflect the pattern of usage of the asset over its useful life. 
C)  Depreciation is a measure of the asset's change in value. 
D)  Depreciation is a systematic allocation of the cost of the asset over its useful life. C

Question 3

An entity acquired an item of machinery in exchange for a motor vehicle. The carrying amount of the machinery is $8000 and its fair value is $10 000. The journal entry to record the acquisition of the machinery will include:

Accepted Answer

A)  a loss on acquisition of $2000. 
B)  a gain on sale of $2000. 
C)  proceeds on sale of motor vehicle of $2000. 
D)  proceeds on sale of machinery of $2000. 
A)  a loss on acquisition of $2000. 
B)  a gain on sale of $2000. 
C)  proceeds on sale of motor vehicle of $2000. 
D)  proceeds on sale of machinery of $2000. B

Question 4

Property, plant and equipment are assets that:

Accepted Answer

A)  are expected to be used up within twelve months from purchase date. 
B)  are physical in nature. 
C)  are held for resale within the current period. 
D)  have a remaining productive life of less than one year. 
A)  are expected to be used up within twelve months from purchase date. 
B)  are physical in nature. 
C)  are held for resale within the current period. 
D)  have a remaining productive life of less than one year.

Question 5

Which of the following statements is incorrect in relation to disclosure of balances for property, plant and equipment?

Accepted Answer

A)  An entity must disclose the useful life estimates for each class of assets. 
B)  A summary of movements in the revaluation surplus is required to be disclosed. 
C)  The gross carrying amounts of the assets at both the beginning and the end of the financial period must be disclosed. 
D)  Information on assets carried at revalued amounts must be disclosed on an individual asset basis. 
A)  An entity must disclose the useful life estimates for each class of assets. 
B)  A summary of movements in the revaluation surplus is required to be disclosed. 
C)  The gross carrying amounts of the assets at both the beginning and the end of the financial period must be disclosed. 
D)  Information on assets carried at revalued amounts must be disclosed on an individual asset basis.

Question 6

Use the following information to answer this question. The draft statement of financial position for Banjo Ltd as at 30 June 2021 discloses the following:
Machinery (at cost) $750 000
Less Accumulated depreciation 400 000 $350 000
On the same date, Banjo Ltd assessed the fair value of the machinery to be $400 000.
The tax rate is 30%. Depreciation rates are 10% p.a. (accounting) and 12.5% p.a. (tax) using the straight-line method.
In accordance with IAS 16 Property, Plant and Equipment, the journal entries necessary to record the revaluation of machinery (ignoring any tax effect) at 30 June 2021 is:

Accepted Answer

A)  $\begin{array}{llll}
\text { Accumulated depreciation - Machinery } & \mathrm{Dr} & 400,000 & \
\text { Machinery } & \mathrm{Cr} & & 400,000 \
& & & \
\text { Machinery } & \mathrm{Dr} & 50,000 & \
\text { Gain on revaluation\_OCI } & \mathrm{Cr} & & 50,000
\end{array}$ 
B)  $\begin{array}{lll}
\text { Machinery } & \mathrm{Dr} & 50,000 \
\text { Gain on revaluation \_ OCI } & \mathrm{Cr} && 50,000 \
\end{array}$ 
C)  $\begin{array}{lll}
\text { Gain on revaluation \_ OCI }  & \mathrm{Dr} & 50,000 \
\text { Asset revaluation surplus }& \mathrm{Cr} && 50,000 \
\end{array}$ 
D)  $\begin{array}{llr}
\text { Machinery } & \mathrm{Dr} & 350,000 \
\text { Gain on revaluation - OCI } & \mathrm{Dr} & 50,000 \
\text { Accumulated depreciation } & - \mathrm{Cr}&&400,000\\text { Machinery }
\end{array}$ 
A)  $\begin{array}{llll}
\text { Accumulated depreciation - Machinery } & \mathrm{Dr} & 400,000 & \
\text { Machinery } & \mathrm{Cr} & & 400,000 \
& & & \
\text { Machinery } & \mathrm{Dr} & 50,000 & \
\text { Gain on revaluation\_OCI } & \mathrm{Cr} & & 50,000
\end{array}$ 
B)  $\begin{array}{lll}
\text { Machinery } & \mathrm{Dr} & 50,000 \
\text { Gain on revaluation \_ OCI } & \mathrm{Cr} && 50,000 \
\end{array}$ 
C)  $\begin{array}{lll}
\text { Gain on revaluation \_ OCI }  & \mathrm{Dr} & 50,000 \
\text { Asset revaluation surplus }& \mathrm{Cr} && 50,000 \
\end{array}$ 
D)  $\begin{array}{llr}
\text { Machinery } & \mathrm{Dr} & 350,000 \
\text { Gain on revaluation - OCI } & \mathrm{Dr} & 50,000 \
\text { Accumulated depreciation } & - \mathrm{Cr}&&400,000\\text { Machinery }
\end{array}$

Question 7

Depreciation is a process that is designed to:

Accepted Answer

A)  allocate the cost of an asset across its useful life to an entity. 
B)  reduce the carrying amount of an asset to reflect the diminishing fair value of the asset. 
C)  spread the cost of an asset across a period no greater than 10 years. 
D)  reflect the change in value of an asset due to advances in technology. 
A)  allocate the cost of an asset across its useful life to an entity. 
B)  reduce the carrying amount of an asset to reflect the diminishing fair value of the asset. 
C)  spread the cost of an asset across a period no greater than 10 years. 
D)  reflect the change in value of an asset due to advances in technology.

Question 8

Under AASB 116, the depreciation charge for a period reflects:

Accepted Answer

A)  the fall in the re-sell value of the asset across the period. 
B)  the consumption of economic benefits over the period. 
C)  a change in the market value of the asset that has occurred over the period. 
D)  a reduction in the estimated fair value of the asset across the period. 
A)  the fall in the re-sell value of the asset across the period. 
B)  the consumption of economic benefits over the period. 
C)  a change in the market value of the asset that has occurred over the period. 
D)  a reduction in the estimated fair value of the asset across the period.

Question 9

Use the following information to answer this question. The draft statement of financial position for Banjo Ltd as at 30 June 2021 discloses the following:
Machinery (at cost) $750 000
Less Accumulated depreciation 400 000 $350 000
On the same date, Banjo Ltd assessed the fair value of the machinery to be $400 000.
The tax rate is 30%. Depreciation rates are 10% p.a. (accounting) and 12.5% p.a. (tax) using the straight-line method.
The journal entries to adjust for the tax effect of the revaluation at 30 June 2021 is:

Accepted Answer

A)  $\begin{array}{cccc}
\text { Income tax expense - OCI } & \mathrm{Dr} & 15,000 & \
\text { Deferred tax liability } & \mathrm{Cr} & & 15,000
\end{array}$ 
B)  $\begin{array}{clll}
\text { Asset revaluation surplus } & \mathrm{Dr} & 15,000 & \
\text { Income tax expense - OCI } & \mathrm{Cr} & & 15,000
\end{array}$ 
C)  $\begin{array}{rlll}
\text { Income tax expense - OCI } & \mathrm{Dr} & 15,000 & \
\text { Asset revaluation surplus } & \mathrm{Cr} & & 15,000
\end{array}$ 
D)  $\begin{array}{cll}\text { Income tax exp ense - OCI } & \mathrm{Dr}&15,000 \
\text { Deferred tax liability } & \mathrm{Cr}&&15,000\
\\text { Gain on revaluation - OCI } & \mathrm{Dr} & 50,000 \
\text { Income tax expense - OCI } & \mathrm{Cr} &&15,000 \
\text { Asset revaluation surplus } & \mathrm{Cr} &&35,000
\end{array}$ 
A)  $\begin{array}{cccc}
\text { Income tax expense - OCI } & \mathrm{Dr} & 15,000 & \
\text { Deferred tax liability } & \mathrm{Cr} & & 15,000
\end{array}$ 
B)  $\begin{array}{clll}
\text { Asset revaluation surplus } & \mathrm{Dr} & 15,000 & \
\text { Income tax expense - OCI } & \mathrm{Cr} & & 15,000
\end{array}$ 
C)  $\begin{array}{rlll}
\text { Income tax expense - OCI } & \mathrm{Dr} & 15,000 & \
\text { Asset revaluation surplus } & \mathrm{Cr} & & 15,000
\end{array}$ 
D)  $\begin{array}{cll}\text { Income tax exp ense - OCI } & \mathrm{Dr}&15,000 \
\text { Deferred tax liability } & \mathrm{Cr}&&15,000\
\\text { Gain on revaluation - OCI } & \mathrm{Dr} & 50,000 \
\text { Income tax expense - OCI } & \mathrm{Cr} &&15,000 \
\text { Asset revaluation surplus } & \mathrm{Cr} &&35,000
\end{array}$

Question 10

Gemma Limited acquired a number of assets for $400 000 cash. The fair values of the assets on date of acquisition were: building $320 000, furniture and fittings $80 000. The correct journal entry to record this acquisition is:
a.b.$\begin{array}{lr}\text { DR Property, plant and equipment }&\$440,000\
\text { CR Cash }&&\$440,000\
\end{array}$

b.$\begin{array}{lr}\text { DR Property, plant and equipment }&\$440,000\
\text { CR Cash }&&\$440,000\
\end{array}$

c.$\begin{array}{lr}
\text { DR Building } & \$ 320,000 \
\text { DR Furniture and fittings }\quad\quad\quad\quad & \$ 80,000\\text { CR Cash }&&\$400,000
\end{array}$

d.$\begin{array}{lr}
\text { DR Building }\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad & \$ 352,000 \
\text { DR Furniture } & \$ 88,000\\text { CR Cash }&&\$440,000
\end{array}$

Accepted Answer

The answer of Gemma Limited acquired a number of assets...

Question 11

Costs that may be included in the cost of acquisition of property, plant and equipment assets include: $$\begin{array} { | l | c | c | c | c | } 
\hline & \text { I } & \text { II } & \text { III } & \text { IV } \
\hline \text { Site preparation } & \text { No } & \text { Yes } & \text { Yes } & \text { Yes } \
\hline \text { Initial delivery and hardling costs } & \text { No } & \text { Yes } & \text { Yes } & \text { No } \
\hline \text { Installation and assernbly costs } & \text { No } & \text { No } & \text { Yes } & \text { Yes } \
\hline \text { Testing whether the asset is functioning } & \text { No } & \text { No } & \text { Yes } & \text { Yes } \
\hline
\end{array}$$

Accepted Answer

A)  I. 
B)  II. 
C)  III. 
D)  IV. 
A)  I. 
B)  II. 
C)  III. 
D)  IV.

Question 12

AASB 116 Property, Plant and Equipment requires revaluations to be applied to:

Accepted Answer

A)  all assets on an individual basis. 
B)  assets on a class-by-class basis. 
C)  individual current assets only. 
D)  individual non-current assets only. 
A)  all assets on an individual basis. 
B)  assets on a class-by-class basis. 
C)  individual current assets only. 
D)  individual non-current assets only.

Question 13

Subsequent to the initial recognition of an asset an entity has a choice on the measurement basis to be adopted. The entity can choose either:

Accepted Answer

A)  cost or revaluation. 
B)  cash or accrual. 
C)  tax or accounting. 
D)  current or non-current. 
A)  cost or revaluation. 
B)  cash or accrual. 
C)  tax or accounting. 
D)  current or non-current.

Question 14

AASB 116 requires which of the following disclosures for each class of property, plant and equipment?

Accepted Answer

A)  The type of deprecation methods used. 
B)  The useful lives or the depreciation rates used. 
C)  Whether the class of assets is valued using the cost or revaluation method. 
D)  All of the options are correct. 
A)  The type of deprecation methods used. 
B)  The useful lives or the depreciation rates used. 
C)  Whether the class of assets is valued using the cost or revaluation method. 
D)  All of the options are correct.

Question 15

If a residual value is determined to be of a material amount the entity is required to review the residual value:

Accepted Answer

A)  monthly. 
B)  at the end of each reporting period. 
C)  when completing interim reports. 
D)  at no time. 
A)  monthly. 
B)  at the end of each reporting period. 
C)  when completing interim reports. 
D)  at no time.

Question 16

The cost of property, plant and equipment is only recognised if the cost of the asset can be reliably measured and:

Accepted Answer

A)  the asset has been paid for in cash. 
B)  the asset has been received by the purchaser. 
C)  the cost is not directly attributable to the asset. 
D)  it is probable that future economic benefits associated with the asset will flow to the entity. 
A)  the asset has been paid for in cash. 
B)  the asset has been received by the purchaser. 
C)  the cost is not directly attributable to the asset. 
D)  it is probable that future economic benefits associated with the asset will flow to the entity.

Question 17

After an item of property, plant and equipment has been initially recognised at cost it may be measured using which measurement method?

Accepted Answer

A)  liquidation value. 
B)  revaluation. 
C)  accrual. 
D)  net realisable value. 
A)  liquidation value. 
B)  revaluation. 
C)  accrual. 
D)  net realisable value.

Question 18

A company depreciates an item of machinery using the straight-line method. The asset was revalued upwards after two years of use. The remaining useful life of four years and the residual value are determined to remain the same. Which of the following relationships reflects the effect of the revaluation on the prospective depreciation of the machinery?

Accepted Answer

A)  Depreciation rate = Same; Annual depreciation expense = Same. 
B)  Depreciation rate = Higher; Annual depreciation expense = Higher. 
C)  Depreciation rate = Same; Annual depreciation expense = Higher. 
D)  Depreciation rate = Higher; Annual depreciation expense = Same. 
A)  Depreciation rate = Same; Annual depreciation expense = Same. 
B)  Depreciation rate = Higher; Annual depreciation expense = Higher. 
C)  Depreciation rate = Same; Annual depreciation expense = Higher. 
D)  Depreciation rate = Higher; Annual depreciation expense = Same.

Question 19

Footloose Limited acquired furniture and fittings on 1 July 2019 for $42 000. The estimated useful life of the furniture and fittings at acquisition date was 8 years and the residual value was $2000. The company sold all the furniture and fittings on 1 January 2025 for $18 000. The journal entry to reflect the sale is:

Accepted Answer

A)  $\begin{array}{ll}
\text { DR Cash } & \$ 18000 \
\text { DR Accumulated depreciation } & \$ 30000\\text { CR Furniture and fittings }&\$42,000\
\text { CR Gain on sale }&\$6000
\end{array}$ 
B)  $\begin{array}{lll}
\text { DR Cash } & \$ 18,000 & \
\text { CR Proceeds on sale } & & \$ 18,000 \
\text { DR Carrying amount of F \& F } & \$ 27,500 & \
\text { CR Furniture and fittings } & & \$ 27,500
\end{array}$ 
C)  $\begin{array}{ll}
\text { DR Cash } & \$ 18,000 \
\text { DR Loss on sale } & \$ 3,500\\text { CR Furniture and fittings }&&\$21,500
\end{array}$ 
D)  $\begin{array}{ll}
\text { DR Cash } & \$ 18,000 \
\text { DR Accumulated depreciation } & \$ 27,500\
\text { CR Furniture and fittings }&&\$42,000\\text { CR Gain on sale }&&\$3,500
\end{array}$ 
A)  $\begin{array}{ll}
\text { DR Cash } & \$ 18000 \
\text { DR Accumulated depreciation } & \$ 30000\\text { CR Furniture and fittings }&\$42,000\
\text { CR Gain on sale }&\$6000
\end{array}$ 
B)  $\begin{array}{lll}
\text { DR Cash } & \$ 18,000 & \
\text { CR Proceeds on sale } & & \$ 18,000 \
\text { DR Carrying amount of F \& F } & \$ 27,500 & \
\text { CR Furniture and fittings } & & \$ 27,500
\end{array}$ 
C)  $\begin{array}{ll}
\text { DR Cash } & \$ 18,000 \
\text { DR Loss on sale } & \$ 3,500\\text { CR Furniture and fittings }&&\$21,500
\end{array}$ 
D)  $\begin{array}{ll}
\text { DR Cash } & \$ 18,000 \
\text { DR Accumulated depreciation } & \$ 27,500\
\text { CR Furniture and fittings }&&\$42,000\\text { CR Gain on sale }&&\$3,500
\end{array}$

Question 20

Roland Limited acquired an item of plant with an expected useful life of 5 years. Expected total production output over this period was: Year 1, 40 000 units; Year 2, 40 000 units; Year 3, 32 000 units; Year 4, 28 000 units Year 5, 15 000 units. The plant cost $200 000 and associated installation costs amounted to $50 000 and residual value is $20 000. The amount of depreciation charged in the first year is:

Accepted Answer

A)  $57 500 
B)  $62 500 
C)  $67 500 
D)  $92 000 
A)  $57 500 
B)  $62 500 
C)  $67 500 
D)  $92 000

Exam 5: Property, Plant and Equipment

For the purposes of recognising property, plant and equipment assets the acquisition date is the date:

Which of the following statements regarding depreciation is incorrect?

An entity acquired an item of machinery in exchange for a motor vehicle. The carrying amount of the machinery is $8000 and its fair value is $10 000. The journal entry to record the acquisition of the machinery will include:

Property, plant and equipment are assets that:

Which of the following statements is incorrect in relation to disclosure of balances for property, plant and equipment?

Depreciation is a process that is designed to:

Under AASB 116, the depreciation charge for a period reflects:

Costs that may be included in the cost of acquisition of property, plant and equipment assets include: I II III IV Site preparation No Yes Yes Yes Initial delivery and hardling costs No Yes Yes No Installation and assernbly costs No No Yes Yes Testing whether the asset is functioning No No Yes Yes

AASB 116 Property, Plant and Equipment requires revaluations to be applied to:

Subsequent to the initial recognition of an asset an entity has a choice on the measurement basis to be adopted. The entity can choose either:

AASB 116 requires which of the following disclosures for each class of property, plant and equipment?

If a residual value is determined to be of a material amount the entity is required to review the residual value:

The cost of property, plant and equipment is only recognised if the cost of the asset can be reliably measured and:

After an item of property, plant and equipment has been initially recognised at cost it may be measured using which measurement method?

Accounting Regulation and the Conceptual Framework

Application of Accounting Theory

Fair Value Measurement

Inventories

Intangible Assets

Impairment of Assets

Provisions, Contingent Liabilities and Contingent Assets

Employee Benefits

Leases

Financial Instruments

Income Taxes

Share Capital and Reserves

Share Based Payment

Revenue

Presentation of Financial Statements

Statement of Cash Flows

Accounting Policies and Other Disclosures

Earnings Per Share

Operating Segments

Related Party Disclosures

Sustainability and Corporate Social Responsibility Recording

Foreign Currency Transactions and Forward Exchange Contracts

Translation of Foreign Currency Financial Statements

Business Combinations

Consolidation: Controlled Entities

Consolidation: Wholly Owned Entities

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Associates and Joint Ventures

Joint Arrangements

Insolvency and Liquidation

Accounting for Mineral Resources

Agriculture

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