Question 1

The units-of-production method of recognising depreciation is only suitable for use by entities involved in manufacturing.

Accepted Answer

A) True 
 B)False  False

Question 2

A non-current property,plant and equipment asset is depreciated using the straight-line method over a 10 year useful life.The asset was revalued upwards after four years of use.There is no change in the remaining useful life of six years or to the residual value.Which of the following relationships reflects the effect of the revaluation on the future depreciation of the asset?
Depreciation Annual depreciation
Rate expense

Accepted Answer

A)  Same Higher
B)  Same Same
C)  Higher Higher
D)  Higher Same A

Question 3

One of the reasons for selecting the cost model over the revaluation model is because of the increased relevance of such measures.

Accepted Answer

A) True 
 B)False  False

Question 4

The residual value of a non-current asset is the amount or consideration actually received by an entity at the date of the asset's disposal.

Accepted Answer

A) True 
 B)False

Question 5

Hunt Limited applied the straight-line method of depreciation to its non-current assets.The cost of the buildings was $850 000,the residual value is $150 000 and the useful life is 10 years.The annual depreciation expense is:

Accepted Answer

A)  $100 000.
B)  $15 000.
C)  $85 000.
D)  $70 000.

Question 6

Webcke Limited acquired an item of machinery with an expected useful life of 4 years.The expected total production output over this period was: year 1,30 000 units; year 2,25 000 units; year 3,15 000 units; year 4,10 000 units.The machinery cost $85 000 and the residual value is $15 000.The amount of depreciation expense recorded in the first year is:

Accepted Answer

A)  $26 250.
B)  $31 875.
C)  $21 875.
D)  $17 500.

Question 7

When an item of property,plant and equipment is sold,the resulting gain or loss is calculated as the difference between the:

Accepted Answer

A)  net proceeds from sale and the asset's original cost.
B)  asset's estimated fair value and its carrying amount at the date of sale.
C)  asset's original cost and its accumulated depreciation at the date of sale.
D)  net proceeds from sale and the asset's carrying amount at the date of sale.

Question 8

Copely Limited had an existing asset revaluation surplus in respect to an item of plant that had been derecognised.An appropriate journal entry to transfer the surplus to retained earnings would include which of the following?

Accepted Answer

A)  DR Gain on revaluation - OCI
B)  CR Asset revaluation surplus
C)  DR Retained earnings
D)  CR Retained earnings

Question 9

Under the cost model,after initial recognition an item of property,plant and equipment must be carried at its:

Accepted Answer

A)  estimated liquidation value.
B)  cost less accumulated depreciation and less accumulated impairment losses.
C)  initial cost.
D)  current replacement cost.

Question 10

Which of the following is not an example of a separate class of property,plant and equipment?

Accepted Answer

A)  Office equipment
B)  Land and buildings
C)  Inventory
D)  Motor vehicles

Question 11

Disclosures under AASB 116 Property,Plant and Equipment are required on an asset-by-asset basis where the revaluation model has been used.

Accepted Answer

A) True 
 B)False

Question 12

After an asset has been initially recognised,an entity has a choice between the cost model and the:

Accepted Answer

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

Question 13

The depreciation expense calculated using the diminishing balance method reflects:

Accepted Answer

A)  an increasing pattern of benefits over the asset's useful life.
B)  a decreasing pattern of benefits over the asset's useful life.
C)  a constant pattern of benefits over the asset's useful life.
D)  a fluctuating pattern of benefits over the asset's useful life.

Question 14

Under AASB 116 Property,Plant and Equipment,subsequent to initial recognition property,plant and equipment assets can only be measured using the revaluation model.

Accepted Answer

A) True 
 B)False

Question 15

Property,plant and equipment includes items that are:

Accepted Answer

A)  intangible.
B)  held for resale.
C)  held for investment.
D)  used in an entity's production process.

Question 16

According to AASB 116 Property,Plant and Equipment,the cost of property,plant and equipment is only recognised as an asset if it is probable that the future economic benefits will flow to the entity and if:

Accepted Answer

A)  the cost can be reliably measured.
B)  it is a physical asset.
C)  the asset has been received by the purchaser.
D)  the asset is held for rental.

Question 17

The cost of an asset less its residual value is referred to as its:

Accepted Answer

A)  book value.
B)  residual amount.
C)  depreciable amount.
D)  carrying amount.

Question 18

An entity acquired an item of plant in exchange for an item of equipment.The equipment has a carrying amount of $15 000 and a fair value of $20 000.The journal entry to record the acquisition of the plant will show:

Accepted Answer

A)  a loss on acquisition of $5000.
B)  a gain on sale of $5000.
C)  proceeds on sale of equipment of $15 000.
D)  proceeds on sale of plant of $15 000.

Question 19

Property,plant and equipment are assets that:

Accepted Answer

A)  are expected to be used up within the current financial period.
B)  are held for resale within the current period.
C)  are tangible in nature.
D)  have a remaining productive life of less than one financial year.

Question 20

Under AASB 116 Property,Plant and Equipment,the revaluation model is applied to:

Accepted Answer

A)  all assets on an individual basis.
B)  individual current assets only.
C)  individual property,plant and equipment assets only.
D)  property,plant and equipment assets on a class-by-class basis.

Exam 9: Property, Plant and Equipment

The units-of-production method of recognising depreciation is only suitable for use by entities involved in manufacturing.

One of the reasons for selecting the cost model over the revaluation model is because of the increased relevance of such measures.

The residual value of a non-current asset is the amount or consideration actually received by an entity at the date of the asset's disposal.

Hunt Limited applied the straight-line method of depreciation to its non-current assets.The cost of the buildings was $850 000,the residual value is $150 000 and the useful life is 10 years.The annual depreciation expense is:

When an item of property,plant and equipment is sold,the resulting gain or loss is calculated as the difference between the:

Copely Limited had an existing asset revaluation surplus in respect to an item of plant that had been derecognised.An appropriate journal entry to transfer the surplus to retained earnings would include which of the following?

Under the cost model,after initial recognition an item of property,plant and equipment must be carried at its:

Which of the following is not an example of a separate class of property,plant and equipment?

Disclosures under AASB 116 Property,Plant and Equipment are required on an asset-by-asset basis where the revaluation model has been used.

After an asset has been initially recognised,an entity has a choice between the cost model and the:

The depreciation expense calculated using the diminishing balance method reflects:

Under AASB 116 Property,Plant and Equipment,subsequent to initial recognition property,plant and equipment assets can only be measured using the revaluation model.

Property,plant and equipment includes items that are:

According to AASB 116 Property,Plant and Equipment,the cost of property,plant and equipment is only recognised as an asset if it is probable that the future economic benefits will flow to the entity and if:

The cost of an asset less its residual value is referred to as its:

An entity acquired an item of plant in exchange for an item of equipment.The equipment has a carrying amount of $15 000 and a fair value of $20 000.The journal entry to record the acquisition of the plant will show:

Property,plant and equipment are assets that:

Under AASB 116 Property,Plant and Equipment,the revaluation model is applied to: