1.

The cost of an item of property, plant and equipment that is acquired in

exchange for combination of monetary and nonmonetary asset is
measured at the
a. Fair value of the asset given up plus the amount of any cash or
cash equivalent transferred.
b. Fair value of the asset received plus the amount of any cash or cash
equivalent transferred.
c. Carrying amount of the asset given up plus the amount of any cash or
cash equivalent transferred.
d. Carrying amount of the asset received plus the amount of any cash or
cash equivalent transferred.

2. When an entity purchases land with a building on it and immediately

tears down the building so that the land can be used for the construction of
a plant, the cost incurred to tear down the building is
a. Expensed immediately
b. Added to the cost of the plant
c. Added to the cost of the land
d. Allocated to the cost of the plant and cost of the land on a prorata
basis

3. Costs that are expensed immediately include all of the following, except
a. Cost of opening a new facility
b. Cost of introducing a new product or service, including costs of
advertising and promotional activities
c. Cost of conducting business in a new location, including cost of staff
training
d. Costs of testing whether the asset is functioning properly
4. Chang’e Company purchased a new machinery on January 2, 2018 and
incurred the following: Invoice price of machinery, P1,500,000; Cash
discount taken on the machinery, P75,000; Freight on the new machine,
P25,000; Actual cost of removing an old machinery P2,500 but the existing
provision is P3,000; Installation cost of new machine, P25,000. Operating
cost during the first month of regular use, P150,000. What is the cost of the
new machinery?
a. P1,475,000
b. P1,477,500
c. P1,550,000
d. P1,552,500

5. If payment for an asset is deferred beyond normal credit terms, the

difference between the total payment and cash price equivalent should be
a. Considered interest expense of the current year
b. Included as part of the asset cost
c. Amortized as interest expense over the life of the asset
d. Amortized as interest expense over the credit period

6. The cost of an item of property, plant and equipment comprises all 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 its intended use
d. Initial estimate of the cost of dismantling and removing the item
and restoring the site, the obligation for which the entity does
not incur when the item was acquired
7. Major spare parts and stand-by equipment which an entity expects to
use over more than one period would qualify as
a. Inventory
b. Property, plant, and equipment
c. Deferred charge
d. Expense
8. In June 2018, Irithel Company acquired a machine in exchange for
another machine with a cost of P1,200,000 and an accumulated
depreciation of P600,000 and paid a cash difference of P160,000. The
market value of the Irithel’s machine was P650,000. If the exchange has
commercial substance, what would be the cost of the new asset acquired
and the amount of gain to be recognized, respectively?
a. P440,000 & P50,000
b. P440,000 & P210,000
c. P810,000 & P50,000
d. P810,000 & P210,000

9. Dyrroth Company buys a delivery van with a list price of P300,000. The
dealer grants a 15% reduction in list price and an additional 2% cash
discount on the net price if payment is made in 30 days. The company paid
an extra P3,000 to have a special horn installed. What amount should the
van be initially recorded?
a. P249,900
b. P252,900
c. P253,900
d. P256,900
10.   
The cost of land includes allof the following, except
a. Commission related to acquisition
b. Property tax after date of acquisition assumed by the purchaser
c. Property tax to date of acquisition assumed by the purchaser
d. Cost of survey