Question 1

What is the meaning of "useful life"?

Accepted Answer

A) The estimated amount that an entity would currently obtain from disposal of the asset,after deducting disposal costs,for an asset of similar age and condition expected at the end of its useful life. 
B) The total amount to be expensed through depreciation. 
C) The systematic allocation of an asset's depreciable amount over its estimated useful life. 
D) The estimated period of time over which an asset is expected to be available for use by an entity. 
A) The estimated amount that an entity would currently obtain from disposal of the asset,after deducting disposal costs,for an asset of similar age and condition expected at the end of its useful life. 
B) The total amount to be expensed through depreciation. 
C) The systematic allocation of an asset's depreciable amount over its estimated useful life. 
D) The estimated period of time over which an asset is expected to be available for use by an entity.

Question 2

Under IFRS,what is the acceptable treatment for borrowing costs on a self constructed property,plant and equipment?

Accepted Answer

A) Capitalize costs that would have been avoided if the expenditure had not been made. 
B) Capitalize costs of any internal debt incurred within the corporation. 
C) Capitalize all indirectly attributable borrowing costs and expense the directly attributable costs. 
D) A company can make a policy choice on the treatment of borrowing costs. 
A) Capitalize costs that would have been avoided if the expenditure had not been made. 
B) Capitalize costs of any internal debt incurred within the corporation. 
C) Capitalize all indirectly attributable borrowing costs and expense the directly attributable costs. 
D) A company can make a policy choice on the treatment of borrowing costs.

Question 3

Ontario Ltd.owns a machine that it purchased on Jan 1,2016 for $750,000.The machine had an estimated useful life of 5 years and an estimated residual value of $50,000.The company uses straight-line depreciation and records monthly depreciation.The machine was sold on December 31,2019 for $200,000.What was the annual depreciation expense?

Accepted Answer

A) $10,000 
B) $140,000 
C) $150,000 
D) $560,000 
A) $10,000 
B) $140,000 
C) $150,000 
D) $560,000

Question 4

Gigantic Corp acquired a machine from Miko Company in exchange for 10,000 Gigantic common shares,for which the quoted market price on the stock exchange was $20 per share.The machine was estimated by Gigantic to have a fair market value of $225,000.(Assume that the market price of the shares and the fair value of the machine are equally reliable. )The book value of the machine in Miko's records was $190,000.At what amount should Gigantic record the machine?

Accepted Answer

A) $190,000 
B) $200,000 
C) $212,500 
D) $225,000 
A) $190,000 
B) $200,000 
C) $212,500 
D) $225,000

Question 5

What is a monetary item?

Accepted Answer

A) An asset that has a fixed or determinable cash flow. 
B) Assets such as land and buildings. 
C) An asset arising from contractual agreements on future cash flows. 
D) An asset that does not have a fixed or determinable cash flow. 
A) An asset that has a fixed or determinable cash flow. 
B) Assets such as land and buildings. 
C) An asset arising from contractual agreements on future cash flows. 
D) An asset that does not have a fixed or determinable cash flow.

Question 6

What costs should not be capitalized to "equipment"?

Accepted Answer

A) Non-refundable sales tax. 
B) Equipment purchase cost. 
C) General training. 
D) Transportation and delivery. 
A) Non-refundable sales tax. 
B) Equipment purchase cost. 
C) General training. 
D) Transportation and delivery.

Question 7

Polar Sky Railway (PSR),a transportation company,has substantial investments in property,plant,and equipment.In 2017,the company exchanged some of these assets with other companies.[Note: any depreciation expense prior to the following transaction has already been properly recorded.] PSR transported some luxury automobiles from the port in Vancouver to Winnipeg "for free." The company does not usually transport cars on this route,so a fair value was not determinable.However,there were negligible incremental costs because doing this involved simply attaching a few extra railcars to an existing train bound for Winnipeg.For doing this,PSR received two luxury cars,which the company awarded to executives as perquisites (perks).These cars had a retail value totaling $450,000.
Required:
Record the journal entry for the above transaction on PSR's books.State your reason(s)for the chosen accounting method.

Accepted Answer

This transaction involves an exchange of

Question 8

On March 31,2019,a machine costing $3,000,000 was acquired.The company estimates that the asset will have an estimated useful life of five years and a residual value of $450,000.On April 1,2024,the asset is sold for $550,000.The company uses the declining balance method at a rate of 40%.The company has a December 31 year-end.The company records partial depreciation in the year of acquisition or disposal based on the number of months the asset is available for use in the year.
Prepare the entries to record depreciation expense for 2019 and 2020,and all entries required for 2024 as they relate to this asset.

Accepted Answer

Declining

Question 9

Which of the following is not a characteristic of a property,plant and equipment (PPE)?

Accepted Answer

A) No physical substance. 
B) Identifiable. 
C) Non-monetary. 
D) Provides future cash flows. 
A) No physical substance. 
B) Identifiable. 
C) Non-monetary. 
D) Provides future cash flows.

Question 10

What is the meaning of "current value"?

Accepted Answer

A) The cost required to replace the productive capacity of an asset. 
B) The value of an asset in an input market or output market on the date of measurement. 
C) The value expected from the sale of an asset,net of any costs of disposal. 
D) The actual cost of an asset at the time it was purchased. 
A) The cost required to replace the productive capacity of an asset. 
B) The value of an asset in an input market or output market on the date of measurement. 
C) The value expected from the sale of an asset,net of any costs of disposal. 
D) The actual cost of an asset at the time it was purchased.

Question 11

Easter Corp.owns a machine that it purchased on Jan 1,2016 for $600,000.The machine had an estimated useful life of 10 years and an estimated residual value of $100,000.The company uses the declining balance method with a rate of 20%.The machine was sold on December 31,2018 for $140,000.What was the accumulated depreciation at December 31,2017?

Accepted Answer

A) $100,000 
B) $120,000 
C) $180,000 
D) $216,000 
A) $100,000 
B) $120,000 
C) $180,000 
D) $216,000

Question 12

Polar Sky Railway (PSR),a transportation company,has substantial investments in property,plant and equipment.In 2017,the company exchanged some of these assets with other companies.[Note: any depreciation expense prior to the following transaction has already been properly recorded.] PSR traded railway tracks running Vancouver-Calgary-Winnipeg to its competitor,High Land Railway,in exchange for the Vancouver-Edmonton-Winnipeg route.PSR received $15 million from High Land because the southern route was shorter.Aside from this $15 million differential,there are no other significant differences in the amount,risk,and timing of future benefits from these two sets of tracks.The tracks,originally laid down in the late 19th century,had a cost of $125 million,accumulated depreciation of $90 million,and a fair value of $100 million.The Vancouver-Edmonton-Winnipeg tracks were recorded on High Land's books at a cost of $105 million and accumulated depreciation of $70 million.
Required:
Record the journal entry for the above transaction on PSR's books.State your reason(s)for the chosen accounting method.

Accepted Answer

No commercial substa

Question 13

Explain the accounting purpose of "depreciation." Does depreciation represent the decline in value of an asset?

Accepted Answer

Depreciation is a systematic (yet arbitr

Question 14

What is the meaning of "depreciable amount"?

Accepted Answer

A) The estimated amount that an entity would currently obtain from disposal of the asset,after deducting disposal costs,for an asset of similar age and condition expected at the end of its useful life. 
B) The total amount to be expensed through depreciation. 
C) The systematic allocation of an asset's depreciable amount over its estimated useful life. 
D) The estimated period of time over which an asset is expected to be available for use by an entity. 
A) The estimated amount that an entity would currently obtain from disposal of the asset,after deducting disposal costs,for an asset of similar age and condition expected at the end of its useful life. 
B) The total amount to be expensed through depreciation. 
C) The systematic allocation of an asset's depreciable amount over its estimated useful life. 
D) The estimated period of time over which an asset is expected to be available for use by an entity.

Question 15

On January 1,2019,BigBen purchased a machine,incurring the expenditures listed below.The machine had an estimated useful life of 10 years,and BigBen uses straight-line depreciation for its equipment.
 
What amount should be capitalized as the cost of the machinery for 2019?

Accepted Answer

A) $100,000 
B) $110,000 
C) $115,000 
D) $155,000 
A) $100,000 
B) $110,000 
C) $115,000 
D) $155,000

Question 16

What is the meaning of "depreciation"?

Accepted Answer

A) The estimated amount that an entity would currently obtain from disposal of the asset,after deducting disposal costs,for an asset of similar age and condition expected at the end of its useful life. 
B) The total amount to be expensed. 
C) The systematic allocation of an asset's depreciable amount over its estimated useful life. 
D) The estimated period of time over which an asset is expected to be available for use by an entity. 
A) The estimated amount that an entity would currently obtain from disposal of the asset,after deducting disposal costs,for an asset of similar age and condition expected at the end of its useful life. 
B) The total amount to be expensed. 
C) The systematic allocation of an asset's depreciable amount over its estimated useful life. 
D) The estimated period of time over which an asset is expected to be available for use by an entity.

Question 17

Office Plus Company bought an office building for $9,000,000 so it could consolidate its entire senior management staff in one location.An independent appraiser valued these items individually as follows:
   
Prior to completing the purchase,Office Plus' management decided that it will remove the computer network system and replace it with fiber-optic cables and related technologies.
Required:
Allocate the purchase price among the assets acquired.

Accepted Answer

Since the company has no inten

Question 18

What is the meaning of "straight-line method"?

Accepted Answer

A) The systematic allocation of an asset's depreciable amount allocated in proportion to the productive capacity used. 
B) The systematic allocation of an asset's depreciable amount allocated evenly over the asset's estimated useful life. 
C) The systematic allocation of an asset's depreciable amount over its estimated useful life. 
D) The systematic allocation of an asset's depreciable amount whereby a period's depreciation equals the asset's net carrying amount multiplied by a fixed percentage. 
A) The systematic allocation of an asset's depreciable amount allocated in proportion to the productive capacity used. 
B) The systematic allocation of an asset's depreciable amount allocated evenly over the asset's estimated useful life. 
C) The systematic allocation of an asset's depreciable amount over its estimated useful life. 
D) The systematic allocation of an asset's depreciable amount whereby a period's depreciation equals the asset's net carrying amount multiplied by a fixed percentage.

Question 19

Which of the following is a not characteristic of property,plant and equipment (PPE)?

Accepted Answer

A) PPE are tangible items. 
B) PPE benefit more than one year. 
C) PPE are held for use in the ordinary course of business. 
D) PPE have fixed and determinable future cash flows. 
A) PPE are tangible items. 
B) PPE benefit more than one year. 
C) PPE are held for use in the ordinary course of business. 
D) PPE have fixed and determinable future cash flows.

Question 20

Discuss how a company can manipulate earnings through estimates used in depreciation.

Accepted Answer

A significant amount of judgment must be

What is the meaning of "useful life"?

Under IFRS,what is the acceptable treatment for borrowing costs on a self constructed property,plant and equipment?

What is a monetary item?

What costs should not be capitalized to "equipment"?

Which of the following is not a characteristic of a property,plant and equipment (PPE)?

What is the meaning of "current value"?

Explain the accounting purpose of "depreciation." Does depreciation represent the decline in value of an asset?

What is the meaning of "depreciable amount"?

On January 1,2019,BigBen purchased a machine,incurring the expenditures listed below.The machine had an estimated useful life of 10 years,and BigBen uses straight-line depreciation for its equipment. What amount should be capitalized as the cost of the machinery for 2019?

What is the meaning of "depreciation"?

What is the meaning of "straight-line method"?

Which of the following is a not characteristic of property,plant and equipment (PPE)?

Discuss how a company can manipulate earnings through estimates used in depreciation.

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Accrual Accounting

Revenue and Recognition

Cash and Receivables

Inventories

Financial Assets

Intangible Assets, goodwill, mineral Resources, and Government Grants

Applications of Fair Value to Non-Current Assets

Filters

Exam 8: Property, plant and Equipment

What is the meaning of "useful life"?

Under IFRS,what is the acceptable treatment for borrowing costs on a self constructed property,plant and equipment?

What is a monetary item?

What costs should not be capitalized to "equipment"?

Which of the following is not a characteristic of a property,plant and equipment (PPE)?

What is the meaning of "current value"?

Explain the accounting purpose of "depreciation." Does depreciation represent the decline in value of an asset?

What is the meaning of "depreciable amount"?

On January 1,2019,BigBen purchased a machine,incurring the expenditures listed below.The machine had an estimated useful life of 10 years,and BigBen uses straight-line depreciation for its equipment. What amount should be capitalized as the cost of the machinery for 2019?

What is the meaning of "depreciation"?

What is the meaning of "straight-line method"?

Which of the following is a not characteristic of property,plant and equipment (PPE)?

Discuss how a company can manipulate earnings through estimates used in depreciation.

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Accrual Accounting

Revenue and Recognition

Cash and Receivables

Inventories

Financial Assets

Intangible Assets, goodwill, mineral Resources, and Government Grants

Applications of Fair Value to Non-Current Assets

Filters