Ch. 8 - quiz Flashcards
Is the following (part of an item of) property, plant, and equipment in accordance with IAS 16 ?
Factory building in which a company manufactures its products
Yes or No
Yes
Is the following (part of an item of) property, plant, and equipment in accordance with IAS 16 ?
Building that a company holds to earn rentals under lease contracts
Yes or No
No
Is the following (part of an item of) property, plant, and equipment in accordance with IAS 16 ?
Fleet of cars that are used by a company’s sales staff
Yes or No
Yes
Is the following (part of an item of) property, plant, and equipment in accordance with IAS 16 ?
Car for the exclusive business and private use of a company’s chief
financial officer
Yes or No
Yes
Is the following (part of an item of) property, plant, and equipment in accordance with IAS 16 ?
Specialised servicing equipment that is unique to the servicing requirements of a manufacturing plant that a company uses to produce chemicals
Yes or No
Yes
Is the following (part of an item of) property, plant, and equipment in accordance with IAS 16 ?
Common low-value tools that a company uses to service a plant that is used to produce bricks; the tools are not unique to the servicing
requirements of the plant
Yes or No
No
Is the following (part of an item of) property, plant, and equipment in accordance with IAS 16 ?
Costs of the inspection of an aircraft that a company operates for executive aviation services; the inspection is required by the national aviation authority every two years
Yes or No
Yes
Which of the following is not part of the cost of an item of property, plant, and equipment in accordance with IAS 16 ?
A. Costs of materials used in preparing the site on which an item of PPE is to be constructed
B. Wages and salaries arising on the construction of an item of PPE
C. Costs incurred while an item of PPE that is capable of operating in the manner intended by management has yet to be brought into use
D. Costs of dismantling and removing an item of PPE and restoring the site on which it is located
C
Which statement best describes the revaluation model for the Measurement of items of property, plant, and equipment according to IAS 16 ?
A. If a company revalues an item of PPE, it does not have to revalue the entire class of PPE to which that asset belongs.
B. The volatility of changes in the fair values of items of PPE being revalued has no impact on the frequency of the revaluations.
C. If the carrying amount of an item of PPE is increased as a result of a
revaluation, the increase has to be recognised in profit or loss.
D. If the carrying amount of an item of PPE is increased as a result of a revaluation, the increase has to be recognised in other comprehensive income. However, the increase has to be recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss
D
Which of the following statements does not apply to the depreciation of items of property, plant, and equipment according to IAS 16 ?
A. The depreciable amount of an item of PPE has to be allocated on a
systematic basis over its useful life.
B. The depreciation method used has to reflect the pattern in which the future economic benefits of the item of PPE are expected to be consumed by the company.
C. The depreciation method applied to an item of PPE has to be reviewed at least at each financial year-end. Even if there has only been an insignificant change in the expected pattern of consumption of the future economic benefits embodied in the item of PPE, the depreciation method has to be
changed to reflect the changed pattern.
D. In determining the useful life of an item of PPE, a company considers the expected usage, the expected physical wear and tear and the technical or commercial obsolescence of the item of PPE as well as legal or similar limits on the use of the item of PPE.
C
Which statement best describes the fair value model for the measurement of investment property in accordance with IAS 40?
A. A company that chooses the fair value model has to measure all of its investment property at fair value except there is clear evidence when the investment property is first acquired that the fair value of the investment property is not reliably measurable on a continuing basis.
B. The fair value of an investment property is not reliably measurable on a continuing basis if the market for comparable properties is inactive even if alternative reliable measurements of fair value (e.g., discounted cash flow projections) are available.
C. A gain arising from an increase in the fair value of investment property has to be recognised in other comprehensive income; a loss arising from a decrease in the fair value of investment property has to be recognised in profit or loss.
D. If a company has measured an investment property at fair value and comparable market transactions become less frequent, the company may choose to continue to measure the property at fair value until disposal or to measure the property at cost less accumulated depreciation and accumulated impairment.
A
In acquiring an item of equipment a company incurs:
- price of the equipment (incl. 19%VAT): € 95,200
- costs of transporting the equipment to the company (incl. 19% VAT): € 595
- costs of installing the equipment (incl. 19% VAT): € 3,570
- costs of the procurement staff for selecting and purchasing the equipment:€ 4,995
The 19% value-added tax (VAT) is refundable.
What is the cost of the equipment at initial recognition?
A. € 104,360
B. € 88,495
C. € 83,500
D. € 79,930
B
On 1 January 2034 a company acquires a plant for € 500,000. The management of the company estimates that the useful life of the plant is five years and the residual value of the plant is € 20,000. The management assumes that the
straight-line method best reflects the pattern in which it expects to consume the plant’s future economic benefits. On 30 December 2034 the plant is damaged and the company incurs an impairment loss of € 120,000. What is the carrying amount of the plant on 31 December 2034?
A. € 404,000
B. € 400,000
C. € 284,000
D. € 280,000
C
