IA1 - PPE (CHAP ) Flashcards
Which of the following is not a characteristic of property, plant and equipment?
A. The property, plant and equipment are tangible assets
B. The property, plant and equipment are used in business
C. The property, plant and equipment are expected to be used over a period of more than one year.
D. The property, plant and equipment are subject to depreciation.
D. The property, plant and equipment are subject to depreciation.
What valuation model should an entity use to neasure property, plant and equipment?
A. The revaluation model or the fair value model
B. The cost model or the revaluation model
C. The cost model or the fair value through OCI model
D. The cost model or the fair value model
B. The cost model or the revaluation model
The cost of property, plant and equipment comprises all of the following, except
A. Purchase price
B. Import duties and nonrefundable purchase taxes
C. Any cost directly attributable in bringing the asset to the location and condition for the intended use
D. Initial estimate of the cost of dismantling the asset for which the entity has no present obligation.
D. Initial estimate of the cost of dismantling the asset for which the entity has no present obligation.
Costs directly attributable to the asset include all, except
A. Initial operating loss
B. Cost of site preparation
C. Initial delivery and handling cost
D. Installation and assembly cost
A. Initial operating loss
Which cost should not be expensed immediately?
A. Cost of opening a new facility
B. Cost of introducing a new product or service, including cost of advertising and promotional activities
C. Cost of conducting business in a new location
D. Cost of testing whether the asset is functioning properly
D. Cost of testing whether the asset is functioning properly
A nonmonetary exchange is recognized at fair value of the asset exchanged unless
A. Exchange has commercial substance
B. Fair value is not determinable
C. The assets are similar in nature
D. The assets are dissimilar
B. Fair value is not determinable
In an exchange with commercial substance
A. Gain or loss is recognized entirely.
B. Gain or loss is not recognized.
C. Only gain should be recognized.
D. Only loss should be recognized.
A. Gain or loss is recognized entirely
The cost of property, plant and equipment acquired in an exchange is measured at the
A. Fair value of the asset given plus cash payment.
B. Fair value of the asset received plus cash payment.
C. Carrying amount of the asset given plus cash payment.
D. Carrying amount of the asset received plus the cash payment.
A. Fair value of the asset given plus cash payment
Which exchange has commercial substance?
A. Exchange of assets with no difference in future cash flows.
B. Exchange by entities in the same line of business.
C. Exchange of assets with difference in future cash flows.
D. Exchange of assets that causes the entities to remain in essentially the same economic position.
C. Exchange of assets with difference in future cash flows.
For a nonmonetary exchange, the configuration of cash flows includes which of the following?
A. The implicit rate, maturity date and amount of loan
B. The risk, timing and amount of cash flows of the assets
C. The entity-specific value of the asset
D. The estimated present value of the assets exchanged
B. The risk, timing and amount of cash flows of the assets
Which of the following is not capitalized into the cost of property, plant and equipment?
A. Cost of excess materials from a purchasing error
B. Cost of testing whether the asset works correctly
C. Initial delivery and handling cost
D. Cost of preparing the site for installation
A. Cost of excess materials from a purchasing error
The total payment on maturity for a machine includes both principal and interest. The cost of the machine would be the total payment multiplied by what time value of money concept?
A. Present value of annuity of 1
B. Present value of 1
C. Future amount of annuity of 1
D. Future amount of 1
B. Present value of 1
The cost of property, plant and equipment comprises the purchase price and
A. The implied interest on the debt financing
B. The fair value of any noncash asset surrendered
C. The estimated residual value of the asset
D. All directly attributable costs necessary to bring the asset to the location and condition for the intended use
D. All directly attributable costs necessary to bring the asset to the location and condition for the intended use
When a plant asset is acquired by deferred payment, which condition does not, need imputation of interest?
A. The interest rate stated on the deferred obligation is significantly different from market interest rate.
B. The cash price of the plant asset is significantly different from the deferred obligation.
C. The instrument representing the deferred obligation is noninterest bearing.
D. The face amount of the deferred obligation is equal to the fair value of the plant asset exchanged.
D. The face amount of the deferred obligation is equal to the fair value of the plant asset exchanged.
If the present value of a note issued in exchange for a plant asset is less than the face amount, the difference is
A. Included in the cost of the asset
B. Amortized as interest expense over the life of the note
C. Amortized as interest expense over the life of the asset
D. Included in interest expense in the year of issuance
B. Amortized as interest expense over the life of the note
