Question 1

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 2

FeelGood Corp. purchased equipment on January 1, 2011 for $275,000. It was estimated that the equipment would have a residual value of $25,000 at the end of its useful life. The asset's useful life was estimated at 5 years or 10,000 units of output. The company has a December 31 year end. Assuming the double-declining-balance depreciation method is used, what is the net book value (carrying value)of the asset on December 31, 2012?

Accepted Answer

A) $66,000 
B) $99,000 
C) $110,000 
D) $165,000 
A) $66,000 
B) $99,000 
C) $110,000 
D) $165,000

Question 3

Explain how non-monetary transactions are accounted for.

Accepted Answer

•Enterprises should generally account fo

Question 4

An important piece of equipment requires major maintenance. Management has decided to upgrade the machine, by installing a new component which will extend the useful life of the machine from the three remaining years to five more years. The regular part could have been purchased for $75,000 but a more reliable part cost $225,000. The replaced part was not set up as a separate asset when the machine was purchased.
Prepare the necessary journal entry to record the transaction. Provide a short justification for your chosen treatment.

Accepted Answer

@#IMG-DLM&_TB2820_00 Only the portion of

Question 5

Francisco owns a machine that it purchased on July 1, 2010 for $600,000. The machine had an estimated useful life of 8 years and an estimated residual value of $10,000. The company uses straight-line depreciation and records monthly depreciation. The machine was sold on December 31, 2015 for $350,000. What was the depreciation expense for 2010?

Accepted Answer

A) $30,729 
B) $36,875 
C) $73,750 
D) $75,000 
A) $30,729 
B) $36,875 
C) $73,750 
D) $75,000

Question 6

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 7

Castle Rock owns a machine that it purchased on Jan 1, 2010 for $400,000. The machine had an estimated useful life of 10 years with a production capacity for 80,000 units and was expected to have no residual value. The company uses the units-of-production method to record depreciation. The machine produced 15,000 units in 2010, 18,000 units in 2011 and 25,000 units in 2012. The machine was sold on December 31, 2012 for $350,000. What was the depreciation expense for 2012?

Accepted Answer

A) $39,000 
B) $40,000 
C) $90,000 
D) $125,000 
A) $39,000 
B) $40,000 
C) $90,000 
D) $125,000

Question 8

What is the meaning of "declining balance 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 9

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

Accepted Answer

A) Must capitalize costs that would have been avoided if the expenditure had not been made. 
B) Must capitalize costs of any debt incurred for the inventory needs of the corporation. 
C) Must expense the directly attributable borrowing costs on qualifying assets. 
D) A company can make a policy choice on the treatment of borrowing costs. 
A) Must capitalize costs that would have been avoided if the expenditure had not been made. 
B) Must capitalize costs of any debt incurred for the inventory needs of the corporation. 
C) Must expense the directly attributable borrowing costs on qualifying assets. 
D) A company can make a policy choice on the treatment of borrowing costs.

Question 10

Scandsia Ltd. owns a machine that it purchased on Jan 1, 2010 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, 2013 for $200,000. What is the carrying value (net book value)at the date of sale?

Accepted Answer

A) $10,000 
B) $150,000 
C) $190,000 
D) $560,000 
A) $10,000 
B) $150,000 
C) $190,000 
D) $560,000

Question 11

Explain derecognition of property, plant or equipment.

Accepted Answer

When an item of PPE is sold, dismantled,

Question 12

What is the meaning of "replacement cost"?

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 13

On March 1, 2013, Penguin Company (PC)had been renting its office building for several years and decided to have a new office building constructed. On April 1, 2013, it acquired land with an abandoned warehouse on it for $100,000. Other costs included:   How much will be capitalized to "building" in fiscal 2013?

Accepted Answer

A) $380,000 
B) $400,000 
C) $420,000 
D) $440,000 
A) $380,000 
B) $400,000 
C) $420,000 
D) $440,000

Question 14

Historic Pieces Inc. purchased equipment on January 1, 2012 for $275,000. It was estimated that the equipment would have a residual value of $25,000 at the end of its useful life. The asset's useful life was estimated at 5 years or 10,000 units of output. The company has a December 31 year end. Assuming the company uses straight-line depreciation, what is the depreciation expense for 2012?

Accepted Answer

A) $27,500 
B) $50,000 
C) $55,000 
D) $60,000 
A) $27,500 
B) $50,000 
C) $55,000 
D) $60,000

Question 15

Will the method of depreciation affect the net cash outflow associated with the purchase and subsequent sale of property, plant and equipment?

Accepted Answer

The net cash flows will be identical. Is

Question 16

A truck has a new engine installed for $155,000 which will increase gas mileage by 25% and reduce pollution. Originally, the truck and engine were not set up as separate assets. Management confidently estimates that the cost of the engine is one-third of the overall cost of the truck. The truck's original cost was $420,000 and it is 40% depreciated.
Prepare the necessary journal entries to record the transaction. Provide a short justification for your chosen treatment.

Accepted Answer

The answer of A truck has a new engine installed...

Question 17

The following transactions occurred in fiscal 2012:
•Synthesize Inc. exchanged machinery with Energize Corp.
   •Synthesize Inc. purchased equipment by signing a 5 year non-interest bearing note payable for $200,000. The implicit rate of interest was 5%.
•Synthesize received a government grant of $10,000 to help purchase the equipment.
Required:
a)Assuming the machinery exchange has commercial substance, prepare the required journal entries for the exchange for both Synthesize and Energize.
b)Assuming the machinery exchange does not have commercial substance, prepare the required journal entries for the exchange for both Synthesize and Energize.
c)Prepare the required journal entry to record the purchase of the equipment purchased by the non-interest bearing note.
d)Prepare the required journal entries to record the government grant using both the gross method and the net method.

Accepted Answer

a)Assuming the machinery exchange has co

Question 18

Peter exchanged similar assets with Sunshine Company in a transaction without commercial substance. Peter gave up equipment that had a net book value of $47,000 (fair value $49,000)and Sunshine exchanged equipment with a net book value of $36,000 (fair value $35,000). What is the correct value at which Sunshine should record the new equipment?

Accepted Answer

A) $35,000 
B) $36,000 
C) $47,000 
D) $49,000 
A) $35,000 
B) $36,000 
C) $47,000 
D) $49,000

Question 19

Which of the following is a concern on the initial recognition of property, plant and equipment?

Accepted Answer

A) Whether a gain or loss to be recorded in the income statement. 
B) How much should be recorded on the balance sheet at the acquisition date. 
C) What amount should be recorded on the balance sheet at the reporting date. 
D) What expenditures should be capitalized on the balance sheet. 
A) Whether a gain or loss to be recorded in the income statement. 
B) How much should be recorded on the balance sheet at the acquisition date. 
C) What amount should be recorded on the balance sheet at the reporting date. 
D) What expenditures should be capitalized on the balance sheet.

Question 20

Explain what costs should be capitalized to property, plant and equipment. Include a discussion of costs incurred for acquired assets, self constructed assets and repairs.

Accepted Answer

•Enterprises should capitalize as PPE th

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

Explain how non-monetary transactions are accounted for.

What is the meaning of "declining balance method"?

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

Explain derecognition of property, plant or equipment.

What is the meaning of "replacement cost"?

Will the method of depreciation affect the net cash outflow associated with the purchase and subsequent sale of property, plant and equipment?

Which of the following is a concern on the initial recognition of property, plant and equipment?

Explain what costs should be capitalized to property, plant and equipment. Include a discussion of costs incurred for acquired assets, self constructed assets and repairs.

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Accrual Accounting

Revenue 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

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

Explain how non-monetary transactions are accounted for.

What is the meaning of "declining balance method"?

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

Explain derecognition of property, plant or equipment.

What is the meaning of "replacement cost"?

Will the method of depreciation affect the net cash outflow associated with the purchase and subsequent sale of property, plant and equipment?

Which of the following is a concern on the initial recognition of property, plant and equipment?

Explain what costs should be capitalized to property, plant and equipment. Include a discussion of costs incurred for acquired assets, self constructed assets and repairs.

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Accrual Accounting

Revenue Recognition

Cash and Receivables

Inventories

Financial Assets

Intangible Assets, Goodwill, Mineral Resources, and Government Grants

Applications of Fair Value to Non-Current Assets

Filters