Chapter 10 -1

Question 1

Examples of property, plant, and equipment include…

Answer 1

equipment, apple trees, mineral resource property. (no goodwill, patents or copyright)

Question 2

Characteristics of PPE

Answer 2

-They are acquired for use in operations. -They are long-term in nature. -They possess physical substance. BUT THEY ARE NOT always subject to depreciation.

Question 3

When accounting for borrowing costs incurred during construction of an asset, the approach consistent with IFRS is to (CHECK)

Answer 3

capitalize any avoidable borrowing costs incurred during construction.

Question 4

Under IFRS, biological assets should normally be measured at

Answer 4

fair value less costs to sell.

Question 5

In general, gains on exchanges of nonmonetary assets are:

Answer 5

accounted for on the same basis as monetary transactions, unless certain specific conditions are met

Question 6

Land costs include all of the following

Answer 6

closing costs such as legal fees. assumption of any liens and mortgages. preparation of the land for its intended use

Question 7

The total cost of natural resource properties includes:

Answer 7

acquisition, exploration, development, and restoration costs.

Question 8

The cost model of accounting for PP&E assets

Answer 8

can be applied to all classes of PP&E including investment property.

Question 9

The revaluation model of accounting for PP&E assets

Answer 9

uses a revaluation surplus account to hold net increases in the asset’s fair value.

Question 10

?When using the revaluation model of accounting for PP&E assets (asset-adjustment or elimination method)

Answer 10

a new depreciation rate must be calculated

Question 11

The fair value model of accounting for PP&E assets

Answer 11

should be applied to investment property only.

Question 12

The fair value model for measurement after acquisition is acceptable under IFRS for only:

Answer 12

investment properties.

Question 13

Which of the following expenditures are usually expensed in the period incurred?

Answer 13

Additions Replacements, major overhauls, and inspections Rearrangement and reinstallation *Repairs

Question 14

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

Answer 14

capitalized.

Question 15

Borrowing costs that are capitalized should

Answer 15

be amortized over the related asset’s useful life.

Question 16

When using the revaluation model of accounting for PP&E assets (proportionate method)

Answer 16

the asset account and its related contra-asset are both adjusted.

Question 17

Marrion Corp. owns equipment that originally cost \$100,000. At December 31, 2014, the equipment’s book value (after 2014 depreciation was booked) is \$60,000. It is determined that the fair value of the equipment at this date is \$90,000. Although Marrion’s policy is to apply the revaluation model using the proportionate method, this is the first time the company has done it. The adjusting entry to record the revaluation will include a

Answer 17

credit to Revaluation Surplus (OCI) of \$30,000.

Question 18

asset retirement costs

Answer 18

In order to be able to use the long-lived asset, companies often assume responsibility for the costs associated with dismantling the item, removing it, and restoring the site at the end of its useful life = meet the recognition criteria for capitalization and are added to the PP&E asset cost.