Question 1

Which of the following statements is correct?

Accepted Answer

A)  IFRS treats major overhauls that allow the continued use of an asset, as replacements; ASPE usually treats them as expenses. 
B)  ASPE treats major overhauls that allow the continued use of an asset, as replacements; IFRS usually treats them as expenses. 
C)  Both IFRS and ASPE treat major overhauls that allow the continued use of an asset, as replacements. 
D)  Both IFRS and ASPE treat major overhauls that allow the continued use of an asset, as expenses. 
A)  IFRS treats major overhauls that allow the continued use of an asset, as replacements; ASPE usually treats them as expenses. 
B)  ASPE treats major overhauls that allow the continued use of an asset, as replacements; IFRS usually treats them as expenses. 
C)  Both IFRS and ASPE treat major overhauls that allow the continued use of an asset, as replacements. 
D)  Both IFRS and ASPE treat major overhauls that allow the continued use of an asset, as expenses.

Question 2

Measurement models
Identify and briefly describe the three main models to accounting for PP&E assets.

Accepted Answer

The following three models are available

Question 3

Round Up Corporation uses the cost model to account for its property, plant, and equipment, which were acquired on January 1, 2020, for $ 200,000. Round Up uses straight-line depreciation and estimates the assets will have an eight-year life with no residual value. Assuming Round Up did not experience any impairment losses, the December 31, 2021, net book value of the assets is

Accepted Answer

A)  $ 200,000. 
B)  $ 175,000. 
C)  $ 150,000. 
D)  $ 125,000. 
A)  $ 200,000. 
B)  $ 175,000. 
C)  $ 150,000. 
D)  $ 125,000.

Question 4

Revaluation model (proportionate method)
Mongolia Inc. owns equipment that it purchased on January 1, 2021, for $ 4 million.
The following additional information is available:
Dec. 31, 2021 – Book value (after recording 2021 depreciation): $ 3,600,000
Dec. 31, 2021 – Fair value: $ 4,100,000
The company uses the revaluation model (proportionate method) to account for its property, plant, and equipment.
Instructions 10-104
Assuming the entry for the current year's depreciation has already been recorded, prepare the entr(ies) to adjust the asset's carrying amount to fair value.

Accepted Answer

The answer of Revaluation model (proportionate method)
Mongolia Inc. owns equipment...

Question 5

Mozambique Ltd. received a $ 250,000 grant from the federal government to help buy equipment as an incentive for them to establish manufacturing operations in Ottawa. Assuming that Mozambique uses the cost reduction method for such transactions, they should record this transaction as a

Accepted Answer

A)  memo entry only. 
B)  credit to Equipment for $ 250,000. 
C)  credit to Deferred Revenue for $ 250,000. 
D)  credit to Contribution Revenue for $ 250,000. 
A)  memo entry only. 
B)  credit to Equipment for $ 250,000. 
C)  credit to Deferred Revenue for $ 250,000. 
D)  credit to Contribution Revenue for $ 250,000.

Question 6

Application of the fair value model
On January 20, 2021, Trail Corp. purchased a luxury apartment complex in British Columbia for $ 10 million cash. In addition to the purchase price, Trail paid transfer fees of $ 150,000 and legal fees of $ 20,000.
Wages were paid to maintenance staff during each of the following three years:
 $$\begin{array} { l l } 
\mathbf { 2 0 2 1 } : & \mathbf { 5 1 0 3 , 0 0 0 } \
\mathbf { 2 0 2 2 } : & \mathbf { \$ 1 0 7 , 0 0 0 } \
\mathbf { 2 0 2 3 } : & \mathbf { 5 1 1 0 , 0 0 0 }
\end{array}$$ Fair value information:
 Dec 31, 2021: $\quad 59.1$ million
Dec 31, 2022: $\quad  \$ 10.9$ million
Dex 31, 2023: $\quad \$ 11.7$ million Other information:
The complex qualifies as investment property.
Trail applies the fair value model to all its investment property.
Instructions
Prepare all required journal entries for 2021, 2022, and 2023.

Accepted Answer

The answer of Application of the fair value model
On January...

Question 7

If a corporation purchases a lot and building and subsequently tears down the building and uses the property as a parking lot, the proper accounting treatment of the cost of the building would depend on

Accepted Answer

A)  the significance of the cost allocated to the building in relation to the combined cost of the lot and building. 
B)  the length of time for which the building was held prior to its demolition. 
C)  management's plans for the property when the building was acquired. 
D)  the planned future use of the parking lot. 
A)  the significance of the cost allocated to the building in relation to the combined cost of the lot and building. 
B)  the length of time for which the building was held prior to its demolition. 
C)  management's plans for the property when the building was acquired. 
D)  the planned future use of the parking lot.

Question 8

Use the following information to solve the following questions:
Morocco Corp. purchased land as a factory site for $ 250,000. They paid $ 10,000 to tear down two buildings on the land, and the salvage from these old buildings was sold for $ 1,350. Legal fees of $ 870 were paid for title investigation and making the purchase. Architect's fees were $ 10,300. Title insurance cost $ 600, and liability insurance during construction cost $ 650. Excavation costs were $ 2,610. A contractor was paid $ 600,000 to construct the new building. An assessment made by the city for pavement was $ 1,600. Interest costs during construction were $ 42,500.
-The cost of the land should be recorded at

Accepted Answer

A)  $ 260,120. 
B)  $ 261,720. 
C)  $ 262,470. 
D)  $ 264,070. 
A)  $ 260,120. 
B)  $ 261,720. 
C)  $ 262,470. 
D)  $ 264,070.

Question 9

Borrowing costs incurred for the acquisition of assets may be capitalized if certain conditions are met. Which of the following issues is irrelevant in making that determination?

Accepted Answer

A)  the capitalization period 
B)  the avoidable borrowing costs 
C)  whether the asset is a "qualifying asset" 
D)  the depreciation period 
A)  the capitalization period 
B)  the avoidable borrowing costs 
C)  whether the asset is a "qualifying asset" 
D)  the depreciation period

Question 10

Non-interest-bearing note
Togo Auto purchased several trucks by issuing a $ 40,000, 4-year, non-interest-bearing note to Rabat Motors. The market interest rate for this type of transaction is 8%.
Instructions
Prepare the journal entry to record the purchase of these trucks.

Accepted Answer

@#IMG-DLM& * OR 4 N

Question 11

Which of the following statements is correct?

Accepted Answer

A)  ASPE considers investment, mining, and oil and gas properties to be part of property, plant, and equipment; IFRS has different standards for each of these. 
B)  IFRS considers investment, mining, and oil and gas properties to be part of property, plant, and equipment; ASPE has different standards for each of these. 
C)  Both ASPE and IFRS consider investment, mining, and oil and gas properties to be part of property, plant, and equipment. 
D)  Both ASPE and IFRS have different standards for investment, mining, and oil and gas properties; they do not consider them to be part of property, plant, and equipment. 
A)  ASPE considers investment, mining, and oil and gas properties to be part of property, plant, and equipment; IFRS has different standards for each of these. 
B)  IFRS considers investment, mining, and oil and gas properties to be part of property, plant, and equipment; ASPE has different standards for each of these. 
C)  Both ASPE and IFRS consider investment, mining, and oil and gas properties to be part of property, plant, and equipment. 
D)  Both ASPE and IFRS have different standards for investment, mining, and oil and gas properties; they do not consider them to be part of property, plant, and equipment.

Question 12

Kenya Ltd. acquires a new machine. It is comprised of two different components (A and B) that are expected to be overhauled at different times. The acquisition costs of the components are as follows:
$\begin{array}{llcc}
  \text { Comportent A: } &\$198,000  \

\text {Component B:  } &\$240,000\
\end{array}$

Component A is expected to have a useful life of 5 years and a residual value of $ 20,000 before the first major overhaul is required. Component B is expected to have a useful life of 7 years and a residual value of $ 15,000 before its first overhaul. Kenya uses straight-line depreciation for all its equipment. At the beginning of year 6, component A undergoes a major overhaul at a cost of 100,000. The work is expected to extend its life by 3 years, but the residual value will then be zero. What is the net book value of component A one year after the overhaul?

Accepted Answer

A)  $ 120,000 
B)  $ 80,000 
C)  $ 66,667 
D)  $ 40,000 
A)  $ 120,000 
B)  $ 80,000 
C)  $ 66,667 
D)  $ 40,000

Question 13

Ben's Delivery buys a van with a list price of $ 60,000. The dealer grants a 15% reduction in list price and an additional 2% cash discount on the net price if payment is made in 30 days, which Ben's did. Non-refundable sales taxes are $ 800 and Ben's paid an extra $ 600 to have a GPS device installed. What amount should Ben's record as the cost of the van?

Accepted Answer

A)  $ 51,380. 
B)  $ 49,980. 
C)  $ 51,290. 
D)  $ 50,780. 
A)  $ 51,380. 
B)  $ 49,980. 
C)  $ 51,290. 
D)  $ 50,780.

Question 14

The revaluation model of accounting for PP&E assets

Accepted Answer

A)  uses a revaluation surplus account to hold net increases in the asset's fair value. 
B)  may be applied to all classes of PP&E including investment property. 
C)  may be applied to investment property under ASPE. 
D)  is not allowed under IFRS. 
A)  uses a revaluation surplus account to hold net increases in the asset's fair value. 
B)  may be applied to all classes of PP&E including investment property. 
C)  may be applied to investment property under ASPE. 
D)  is not allowed under IFRS.

Question 15

Chiquita Corp. purchased a large area of land with the intention to transform it into a banana plantation. Before the new seedlings can be planted, the site, which is prone to flooding, must be drained. The cost of the draining should be

Accepted Answer

A)  capitalized as part of the cost of the land. 
B)  expensed only after the first crop of bananas has been harvested. 
C)  expensed immediately. 
D)  reported as loss from discontinued operations. 
A)  capitalized as part of the cost of the land. 
B)  expensed only after the first crop of bananas has been harvested. 
C)  expensed immediately. 
D)  reported as loss from discontinued operations.

Question 16

Revaluation model (proportionate method)
Aden Motels Inc. owns a motel that it had purchased on January 1, 2020, for $ 1.5 million cash and is accounted for in a separate account, classified as "Structures." The company is using the revaluation model to account for its structures and revalues them annually. Aden uses straight-line depreciation over the asset's 15-year useful life with no residual value.
The asset's fair value was equal to its book value on Dec. 31, 2020, and was $ 1,450,000 on Dec. 31, 2021.
Instructions
Assuming Aden uses the proportionate method to adjust for revaluation, prepare all required journal entries for 2020 and 2021.

Accepted Answer

The answer of Revaluation model (proportionate method)
Aden Motels Inc. owns...

Question 17

Application of the revaluation model
Aden Motels Inc. owns a motel that it had purchased on January 1, 2020, for $ 1.5 million cash and is accounted for in a separate account, classified as "Structures." The company is using the revaluation model to account for its structures and revalues them annually. Aden uses straight-line depreciation over the asset's 15-year useful life with no residual value.
The asset's fair value was equal to its book value on Dec. 31, 2020, and was $ 1,450,000 on Dec. 31, 2021.
Instructions
Assuming Aden uses the asset adjustment (elimination) method for revaluation, prepare all required journal entries for 2020 and 2021.

Accepted Answer

The answer of Application of the revaluation model
Aden Motels Inc....

Question 18

Non-monetary exchange
Athens Inc. exchanged machinery with an appraised value of $ 1,170,000, a recorded cost of $ 1,800,000 and accumulated depreciation of $ 900,000, for machinery that Sparta Corp. owns. Sparta’s machinery has an appraised value of $ 1,140,000, a recorded cost of $ 2,160,000, and accumulated depreciation of $ 1,188,000. Sparta also gave Athens $ 30,000 in the exchange. Assume depreciation has been updated to the date of exchange.
Instructions
a)Prepare the entries on both companies’ books assuming that the transaction has commercial substance.
b)Prepare the entries on both companies’ books assuming that the transaction lacks commercial substance.

Accepted Answer

a)Commercial substance
@#IMG-DLM&
b)No commercial

Question 19

A major overhaul made to a machine increased its fair value and its production capacity by 25% without extending the machine's useful life. The cost of the improvement should be

Accepted Answer

A)  expensed. 
B)  debited to accumulated depreciation. 
C)  capitalized. 
D)  allocated between accumulated depreciation and the machine account. 
A)  expensed. 
B)  debited to accumulated depreciation. 
C)  capitalized. 
D)  allocated between accumulated depreciation and the machine account.

Question 20

Ghana Football Club had a player contract with Mowgli that is recorded in its books at $ 300,000 on July 1, 2020. Ivory Coast Football Club had a player contract with Eeyore that is recorded in its books at $ 375,000 on July 1, 2020. On this date, Ghana traded Mowgli to Ivory Coast for Eeyore and paid a cash difference of $ 37,500. The fair value of the Eeyore contract was $ 450,000 on the exchange date. After the exchange, the Eeyore contract should be recorded in Ghana's books at

Accepted Answer

A)  $ 337,500. 
B)  $ 375,000. 
C)  $ 412,500. 
D)  $ 450,000. 
A)  $ 337,500. 
B)  $ 375,000. 
C)  $ 412,500. 
D)  $ 450,000.

Which of the following statements is correct?

Measurement models Identify and briefly describe the three main models to accounting for PP&E assets.

Mozambique Ltd. received a $ 250,000 grant from the federal government to help buy equipment as an incentive for them to establish manufacturing operations in Ottawa. Assuming that Mozambique uses the cost reduction method for such transactions, they should record this transaction as a

If a corporation purchases a lot and building and subsequently tears down the building and uses the property as a parking lot, the proper accounting treatment of the cost of the building would depend on

Borrowing costs incurred for the acquisition of assets may be capitalized if certain conditions are met. Which of the following issues is irrelevant in making that determination?

Non-interest-bearing note Togo Auto purchased several trucks by issuing a $ 40,000, 4-year, non-interest-bearing note to Rabat Motors. The market interest rate for this type of transaction is 8%. Instructions Prepare the journal entry to record the purchase of these trucks.

Which of the following statements is correct?

The revaluation model of accounting for PP&E assets

Chiquita Corp. purchased a large area of land with the intention to transform it into a banana plantation. Before the new seedlings can be planted, the site, which is prone to flooding, must be drained. The cost of the draining should be

A major overhaul made to a machine increased its fair value and its production capacity by 25% without extending the machine's useful life. The cost of the improvement should be

The Canadian Financial Reporting Environment

Conceptual Framework Underlying Financial Reporting

Measurement

Reporting Financial Performance

Financial Position and Cash Flows

Revenue Recognition

Cash and Receivables

Inventory

Investments

Depreciation, Impairment, and Disposition

Intangible Assets and Goodwill

Accounting Information Systems and Adjusting Entries: A Comprehensive Guide

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Exam 10: Property, Plant, and Equipment: Accounting Model Basics

Which of the following statements is correct?

Measurement models Identify and briefly describe the three main models to accounting for PP&E assets.

Mozambique Ltd. received a $ 250,000 grant from the federal government to help buy equipment as an incentive for them to establish manufacturing operations in Ottawa. Assuming that Mozambique uses the cost reduction method for such transactions, they should record this transaction as a

If a corporation purchases a lot and building and subsequently tears down the building and uses the property as a parking lot, the proper accounting treatment of the cost of the building would depend on

Borrowing costs incurred for the acquisition of assets may be capitalized if certain conditions are met. Which of the following issues is irrelevant in making that determination?

Non-interest-bearing note Togo Auto purchased several trucks by issuing a $ 40,000, 4-year, non-interest-bearing note to Rabat Motors. The market interest rate for this type of transaction is 8%. Instructions Prepare the journal entry to record the purchase of these trucks.

Which of the following statements is correct?

The revaluation model of accounting for PP&E assets

Chiquita Corp. purchased a large area of land with the intention to transform it into a banana plantation. Before the new seedlings can be planted, the site, which is prone to flooding, must be drained. The cost of the draining should be

A major overhaul made to a machine increased its fair value and its production capacity by 25% without extending the machine's useful life. The cost of the improvement should be

The Canadian Financial Reporting Environment

Conceptual Framework Underlying Financial Reporting

Measurement

Reporting Financial Performance

Financial Position and Cash Flows

Revenue Recognition

Cash and Receivables

Inventory

Investments

Depreciation, Impairment, and Disposition

Intangible Assets and Goodwill

Accounting Information Systems and Adjusting Entries: A Comprehensive Guide

Filters