Ch. 6 - Property, Plant and Equipmet

Question 1

PPE - Recognition Criteria

Answer 1

1. It is probable that future economic benefits will flow to the entity
2. The cost of the item can be measured reliably

Question 2

Costs to be capitalized to PPE:

Answer 2

1. purchase price, including import duties and non-refundable taxes
2. cost related to bringing the asset to the location and to a condition to be used
3. Initial estimate of costs for dismantling/removing the item, and restoring the location to how it originated

Question 3

Componentization:

Answer 3

Certain parts of large assets depreciate at different rates, and need to be recorded as such

Question 4

Capitalized costs in construction of an asset

Answer 4

1. construction permits
2. survey costs
3. construction costs
4. direct borrowing costs until occupation
5. professional fees

Question 5

Three methods of calculating depreciation

Answer 5

1. Straight-line
2. Declining balance
3. Units of production

Question 6

Options to treat depreciation in the year of addition/disposal

Answer 6

entity has the choice of:

1. pro-rating depreciation for the days in the year
2. taking half of the depreciation in the year of acquisition
3. taking no depreciation in the year of disposal

Question 7

Straight-line - calculation

Answer 7

(cost - residual) / estimated useful life

Question 8

Declining balance - calculation

Answer 8

carrying value x depreciation rate

Question 9

Units of production - calculation

Answer 9

((cost - residual) / total estimated pieces produced) x units produced

Question 10

IFRS - two measurement options

Answer 10

1. Revaluation model

2. Cost model

Question 11

Cost model

Answer 11

assets are measured at cost and depreciation is taken, less any impairment

Question 12

Revaluation model

Answer 12

assets are measured at FV, but depreciation is still taken each year

Question 13

Revaluations - recording increase to FMV

Answer 13

1. first to NI, to the extend losses have occurred

2. remaining to OCI

Question 14

Revaluations - recording decrease to FMV

Answer 14

1. first to OCI, to the extent gains have been recorded to OCI
2. remaining to NI

Question 15

Revaluation adjustments - two methods

Answer 15

1. elimination

2. proportional

Question 16

Revaluation - elimination method

Answer 16

accumulated amortization is adjusted to $0 and the cost is adjusted to FMV

Question 17

Revaluation - proportional method

Answer 17

adjusted the cost and AA proportionally so the carrying value equals the FMV

Question 18

ASPE - interest on borrowing costs on constructed assets

Answer 18

can chose to capitalize or expense, while IFRS requires capitalization

Question 19

ASPE - measurement basis

Answer 19

Cost model only, while IFRS allows the cost or revaluation model

Question 20

ASPE - Straight line depreciation

Answer 20

Greater of:
1. (cost - residual) / useful life; and
2. (cost - salvage) / asset life
while IFRS is:
1. (cost - residual) / useful life

Question 21

What is the residual value of an asset

Answer 21

estimated proceeds less costs to sell at the end of its useful life

Question 22

PPE - IAS #

Answer 22

16

Question 23

PPE - ASPE #

Answer 23

3061

Question 24

What is the salvage value

Answer 24

the scrap value at the end of the assets life

Question 25

PPE Definition (IFRS)

Answer 25

Tangible assets that are:

1. held for use in the production or supply of goods or services
2. are expected to be used for more than one period

Question 26

PPE Definition (ASPE)

Answer 26

Tangible items that are:

1. eld for use in the production or supply of goods or services
2. are expected to be used for more than one year
3. are not intended to be sold in the ordinary course of business