PROPERTY, PLANT & EQUIPMENT 8. Which cost should be expensed immediately?

a. Administrative overhead
1. Property, plant and equipment are defined as b. Initial operating loss
a. Tangible assets held for sale in the ordinary c. Cost of relocating or reorganizing part or all of an
course of business entity’s operation
b. Tangible assets held to earn rentals or for capital d. All of these are expensed immediately
appreciation 9. A nonmonetary exchange is recognized at fair value
c. Tangible assets held for use in the production or of the asset exchanged unless
supply of goods or services or for administrative a. Exchange has a commercial substance
purposes b. Fair value is not determinable
d. Tangible assets held for use in the production or c. The assets are similar in nature
supply of goods or services, for rental to others, d. The assets are dissimilar
or for administrative purposes and expected to be 10. In an exchange with commercial substance
used during more than one reporting period a. Gain or loss is recognized entirely.
2. Which of the following is not a characteristic of b. Gain or loss is not recognized.
property, plant and equipment? c. Only gain should be recognized.
a. The property, plant and equipment are tangible d. Only loss should be recognized.
assets. 11. The cost of property, plant and equipment acquired in
b. The property, plant and equipment are used in exchange is measured at the
business. a. Fair value of the asset given plus cash payment
c. The property, plant and equipment are expected b. Fair value of the asset received plus cash
to be used over a period of more than one year. payment
d. The property, plant and equipment are subject to c. Carrying amount of the asset given plus cash

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depreciation.

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payment
3. Spare parts and servicing equipment that can be used d. Carrying amount of the asset received plus the

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only in connection with an item of property, plant and cash payment

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equipment and depreciated over 12. Which exchange has commercial substance?
a. Their useful life a. Exchange of assets with no difference in future

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b. Their useful life of the related asset cash flows.

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c. Their useful life or the useful life of the related b. Exchange by entities in the same line of business
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asset, whichever is longer c. Exchange of assets with difference in future cash
d. Their useful life or the useful life of the related flows.
asset, whichever is shorter d. Exchange of assets that causes the entities to
4. What valuation model an entity used to measure remain in essentially the same economic position.
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property, plant and equipment? 13. For a nonmonetary exchange, the configuration of
a. The revaluation or the fair value model
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cash flows includes which of the following?

b. The cost model or the revaluation model a. The implicit rate, maturity date of loan and
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c. The cost model or the fair value through profit or amount of loan
loss model b. The risk, timing and amount of cash flow of the
d. The cost model or the fair value model assets
5. The cost of property, plant and equipment comprises c. The entity-specific value of the asset
ed d

of the following, except d. The estimated present value of the asset

a. Purchase price exchanged
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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
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14. If an entity is able to determine reliably the fair value
of the asset received and the fair value of the asset
given in an exchange transaction, the cost is
measured at

asset for which the entity has no present a. Fair value

obligation.
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6. Costs directly attributable to bring the asset to the ANSWER KEY

location and condition for the intended use include all.
Except 1. D
a. Cost of employee benefit not arising directly from 2. D
the acquisition of property, plant and equipment 3. D
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b. Cost of site preparation 4. B

c. Initial delivery and handling cost 5. D
d. Installation and assembly cost 6. A
7. Which cost should be expensed immediately? 7. D
a. Cost of opening a new facility 8. D
b. Cost of introducing a new product or service, 9. B
including cost of advertising and promotional 10. A
activities 11. A
c. Cost of conducting business in a new location 12. C
d. All of these are expensed immediately 13. B
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