Property, Plant, and Equipment Flashcards
Tangible items held for use in production/supply of goods/services, for rental to others, or for administrative purposes
Property, Plant and Equipment (PPE)
In order to be classified as PPE, it should be expected to be used during more than 2 periods.
False.
More than 1 period, not 2.
Spare/replacement parts can be classified as PPE.
True, if it meets the criteria of PPE.
The cost of an item of PPE includes (P D I)
P - Purchase price (including import duties, nonrefundable purchase taxes, after deducting trade discounts and rebates)
D - Directly attributable costs
I - Initial estimated cost of dismantling and removing the asset
The following are examples of directly attributable costs, except for one:
a. Professional fees
b. Cost of site preparation
c. Initial delivery and handling costs
d. Cost of training staff to operate the asset properly
d.
This is expensed
Net proceeds arising from sale of samples produced when testing if asset is properly functioning or not shall be recognized in profit/loss. True or false?
True.
The following information pertains to X Company’s purchase of a truck:
Cost (VAT not included): Php900,000
Value-added Tax: Php108,000
Cost of testing to ensure that the truck works as intended: Php25,000
If X Company is a VAT-registered entity, how much should be the cost of the truck?
Php925,000
VAT is excluded because this is a refundable tax. Recall the entry for purchase of inventories with VAT:
Dr. Purchases
Dr. Input VAT
Cr. Cash
When sold:
Dr. Cash
Cr. Sales
Cr. Output VAT
To determine VAT payable (refund):
Dr. Output VAT
Cr. Input VAT
Therefore, there is a “refund” on this case.
The following information pertains to X Company’s purchase of a truck:
Cost (VAT not included): Php900,000
Value-added Tax: Php108,000
Cost of testing to ensure that the truck works as intended: Php25,000
If X Company is a non-VAT registered entity, how much should be the cost of the truck?
Php1,033,000 (all of the items shown)
Is there an instance where VAT can be included in the computation of cost of PPE?
Yes, if entity is a non-VAT registered entity, then the VAT forms part of his cost of PPE.
The following can be classified as PPE. Choose the exception:
a. Delivery truck
b. Furnitures and fixtures
c. Chickens
d. Apple tree
c.
