PPE

Question 1

Recognition Criteria for PPE

Answer 1

probable and measurable

Question 2

Initial Measurement

Answer 2

Cost

Question 3

Included in Initial Measurement

Insurance costs
what to do if there’s proceeds from sample?

Answer 3

• Purchase Price
  1. Import Duties & Non-refundable taxes
  2. Freight in & Handling costs
  3. Insurance costs (in transit)
• DACs and Conversion costs (to proper location)
• Dismantling and testing costs
• Testing costs (net of proceeds from sample)
• Employee benefits from construction of PPE

Question 4

Included as PPE

rental to others
spare parts

Answer 4

• rental of movable property
  1. if immovable = investment property
• major spare parts
  1. if minor = inventory / prepaid supplies
• bearer plants
• animal-related recreational activity
• PPE used to maintain a,b,c

Question 5

Exluded as PPE

what type of lease

Answer 5

finance lease
a. biological assets
b. exploration and evaluation assets
c. mineral reserves and rights

Question 6

Ways of Acquisition of PPE

On Account

Answer 6

discount is deducted (whether taken or not)

Question 7

Ways of Acquisition of PPE

Deferred

Answer 7

1. Cash Price Equivalent - interest expense is amortized
2. Present Value - with discount

Question 8

Ways of Acquisition of PPE

Lump Sum

Answer 8

Allocate based on relative FV

Question 9

Ways of Acquisition of PPE

Donation
What if from shareholder? unconditional? conditional?
Costs incurred in relation to donation

Answer 9

FV

dr. PPE / cr. ???
- shareholder = donated capital
- unconditional = income
- conditional = deferred income

Costs incurred - what is credited is debited (not expense)

Question 10

Ways of Acquisition of PPE

Construction

Answer 10

DM + DL + OH + Borrowing Costs

Question 11

Ways of Acquisition of PPE

Trade In (with dealer)
How to compute gain/loss?

Answer 11

1. FV of asset given + Payment
2. FV of asset received

vs CA = gain/loss

Question 12

Ways of Acquisition of PPE

Shares

Answer 12

1. FV of asset given up
2. FV of shares
3. Par Value of shares

with Share Premium

Question 13

Ways of Acquisition of PPE

Bonds

Answer 13

1. FV of asset given up
2. FV of bonds
3. Face Amount of bonds

Question 14

Ways of Acquisition of PPE

Exchange (with not a dealer)
What if with no commercial substance?
How to compute gain/loss?

Answer 14

1. FV of asset given up + payments - receipts
2. FV of asset received
3. CA of asset given up + payments - receipts

No Commercial Substance = use no.3

vs CA = gain/loss

Question 15

Things to Remember

Real Property Taxes

Answer 15

Unpaid and Assumed - capitalize to land
x - expensed (silent)

Question 16

Things to Remember

Payment to Tenants (to prepare land, not new building)

Answer 16

capitalize to land

Question 17

Things to Remember

Options to Buy Land

Answer 17

Land is Acquired - capitalize to land
x - expensed

Question 18

Things to Remember

Land Improvements (no depreciation)

Answer 18

capitalize to land

Question 19

Things to Remember

Land Improvements (with depreciation)

Answer 19

Part of Blueprint - capitalize to building
x - capitalize to land improvements (silent)

Question 20

Things to Remember

Building Fixtures (for improvements)

Answer 20

Immovable - capitalize to building
Movable - Furniture and Fixture (depreciated)

Question 21

Things to Remember

Ventilation, Elevator, Lighting Systems

Answer 21

During Construction - capitalize to building
x - improvements (depreciated)

Question 22

Land + Building

Single Cost

Answer 22

Old Bldg is usable - allocated based on FV
Old Bldg is unusable - allocate to land only

Question 23

Land + Building

Demolition Cost

Answer 23

For New Bldg - capitalize to building
x - capitalize to land

Question 24

Land + Building

Cost of Old Building

Answer 24

Inventory - capitalize
PPE / Investment Property - expensed

Question 25

Land + Building

Proceeds from sale of Salvaged Materials

Answer 25

deducted to arrive at net cost