Cost of property, plant and equipment is the with the specific requirements of other PFRSs.

a. Amount at which an asset is recognized after

deducting any accumulated depreciation
NAME :
and accumulated impairment losses.
b. Present value of the cash flows an entity expects to DATE :
arise from the continuing use of an
asset and from its disposal at the end of its useful life or
expects to incur when settling FINANCIAL ACCOUNTING AND REPORTING
a liability.
c. Price that would be received to sell an asset or paid to 1. Cost of property, plant and equipment is the
transfer a liability in an orderly A. Amount at which an asset is recognized after
transaction between market participants at the measurement deducting any accumulated depreciation and
date. accumulated impairment losses.
d. Amount of cash or cash equivalents paid or the fair B. Present value of the cash flows an entity expects to
value of the other consideration arise from the continuing use of an asset and from its
given to acquire an asset at the time of its acquisition or disposal at the end of its useful life or expects to
construction or, where incur when settling a liability.
applicable, the amount attributed to that asset when initially C. Price that would be received to sell an asset or paid
recognized in accordance to transfer a liability in an orderly transaction
with the specific requirements of other PFRSs. between market participants at the measurement
Cost of property, plant and equipment is the date.
a. Amount at which an asset is recognized after D. Amount of cash or cash equivalents paid or the fair
deducting any accumulated depreciation value of the other consideration given to acquire an
and accumulated impairment losses. asset at the time of its acquisition or construction
b. Present value of the cash flows an entity expects to or, where applicable, the amount attributed to that
arise from the continuing use of an asset when initially recognized in accordance with
asset and from its disposal at the end of its useful life or the specific requirements of other PFRSs.
expects to incur when settling
a liability. 2. The principal issues in accounting for property, plant and
c. Price that would be received to sell an asset or paid to equipment include
transfer a liability in an orderly I. Recognition of the assets
transaction between market participants at the measurement II. Determination of their carrying amounts
date. III. Determination of depreciation charges
d. Amount of cash or cash equivalents paid or the fair IV. Impairment losses to be recognized in relation to
value of the other consideration them
given to acquire an asset at the time of its acquisition or
construction or, where A. I, II, III and IV
applicable, the amount attributed to that asset when initially B. I, II and III only
recognized in accordance C. I, II and IV only
with the specific requirements of other PFRSs. D. I, III and IV only
Cost of property, plant and equipment is the
a. Amount at which an asset is recognized after 3. Property, plant and equipment are
deducting any accumulated depreciation A. Identifiable on-monetary assets without physical
and accumulated impairment losses. substance.
b. Present value of the cash flows an entity expects to B. Properties held to earn rentals or for capital
arise from the continuing use of an appreciation or both.
asset and from its disposal at the end of its useful life or C. Assets held for sale in the ordinary course of
expects to incur when settling business
a liability. D. Tangible items that are held for use in the
c. Price that would be received to sell an asset or paid to production or supply of goods or services, for rental
transfer a liability in an orderly to others, or for administrative purposes; and are
transaction between market participants at the measurement expected to be used during more than one period.
date.
d. Amount of cash or cash equivalents paid or the fair 4. The residual value of an item of property, plant and
value of the other consideration equipment is
given to acquire an asset at the time of its acquisition or A. The amount the entity estimates it would receive
construction or, where currently for the asset if the asset were already of
applicable, the amount attributed to that asset when initially
recognized in accordance
 the age and in the condition expected at the end of
its useful life.
B. The amount, inclusive of the effects of inflation, that
an entity expects to receive in the future on the
asset’s actual retirement date.
C. Either a or b
D. Neither a nor b
5. PAS 16 applies to
A. Property, plant and equipment classified as held for
sale in accordance to PFRS 5
B. Biological assets related to agricultural activity
C. Mineral rights and mineral reserves such as oil,
natural gas and similar non regenerative resources.
D. Property, plant and equipment used to develop or
maintain biological assets and mineral rights and
mineral resources
6. Useful life of property, plant and equipment is
A. The period over which an asset is expected to be
available for use by an entity.
B. The number of production or similar units expected
to be obtained from the asset by an entity.
C. Either a or b
D. Neither a nor b
7. Which statement is incorrect regarding spare parts and
servicing equipment?
A. Spare parts and servicing equipment are usually
carried as inventory and recognized in profit or loss
as consumed.
B. Major spare parts and stand-by equipment qualify as
property, plant and equipment when an entity
expects to use them during more than one period.
C. Spare parts and servicing equipment that can be
used only in connection with an item of property,
plant and equipment are accounted for as property,
plant and equipment
D. None of the above
8. Items of property, plant and equipment acquired for
safety or environmental reasons
A. Qualify as assets because the acquisition of such
property, plant and equipment directly increases the
future economic benefits of existing item of
property, plant and equipment.
B. Qualify as assets because they enable an entity to
derive future economic benefits from related assets
in excess of what could be derived had those items
not been acquired.
C. Do not qualify as assets because the acquisition of
such property, plant and equipment does not directly
increase the future economic benefits of existing
item of property, plant and equipment.
D. Do not qualify as assets because the acquisition of
such property, plant and equipment is not necessary
for an entity to obtain the future economic benefits
from its other assets.
9. A condition of continuing to operate an item of property,
plant and equipment (for example, an aircraft) may be
performing regular major inspections for faults regardless
of whether parts of the items are replaced. When each
major inspection is performed, its cost is
A. Recognized in profit or loss as incurred
B. Often described as for the repairs and maintenance
of the item of property, plant and equipment
C. Recognized in other comprehensive income as
incurred
D. Recognized in the carrying amount of the item of
property, plant and equipment as a replacement if
the recognition criteria are satisfied.
10. An item of property, plant and equipment that qualifies
for recognition as an asset shall be measured at
A. The amount of cash or cash equivalents paid.
B. The fair value of the other consideration given to
acquire an asset at the time of its acquisition or
construction
C. The amount attributed to that asset when initially
recognized in accordance with the specific
requirements of other PFRSs.
D. Any of the above.
11. The following information pertains to Jearvis Company’s
property, plant and equipment:
Carrying amount, beginning P500,000
Acquisitions 180,000
Capitalized subsequent expenditures 50,000
Repairs and maintenance 16,000
Reclassifications to 38,000
Reclassifications from 41,000
Disposals/retirements 124,000
Depreciation 63,000
Impairment 29,000
The carrying amount of Jearvis’ property, plant and
equipment at the end of the period is
A. P511,000 C. P517,000
B. P514,000 D. P527,000
12. The cost of an item of property, plant and equipment
comprises:
I. Its purchase price, including import duties and
non-refundable purchase taxes, after deducting
trade discounts and rebates.
II. Any costs directly attributable to bringing the
asset to the location and condition necessary for
it to be capable of operating in the manner
intended by management.
III. The initial estimate of the costs of dismantling
and removing the item and restoring the site on
which it is located, the obligation for which an
entity incurs either when the item is acquired or
as a consequence of having used the item during
 a particular period for purposes other than to
produce inventories during that period.
A. I, II and III C. I and III only
B. I and II only D. I only
13. Costs directly attributable to bringing the asset to the
location and condition necessary for it to be capable of
operating in the manner intended by management
exclude
A. Costs of employee benefits arising directly from the
construction or acquisition of the time of property,
plant and equipment
B. Costs of site preparation
C. Initial delivery and handling costs
D. Administration and other general overhead costs.
14. Examples of costs that are not of an item of property,
plant and equipment exclude
A. Costs of introducing a new product or service
B. Costs of advertising and promotional activities
C. Costs of conducting business in a new location or
with a new class of customer.
D. Professional fees.
15. Costs directly attributable to bringing the asset to the
location and condition necessary for it to be capable of
operating in the manner intended by management
exclude
A. Installation and assembly costs
B. Costs of testing whether the asset is functioning
properly
C. Professional fees
D. Costs of opening new facility
16. The following costs are not included in the carrying
amount of an item of property, plant and equipment,
except
A. Costs incurred while an item capable of operating in
the manner intended by management has yet to be
brought into use or is operated at less than full
capacity.
B. Initial operating losses, such as those incurred while
demand for the item’s output builds up.
C. Costs of relocating or reorganizing part or all of an
entity’s operations.
D. None of the above
17. The cost of an item of property, plant and equipment
includes the costs of its dismantlement, removal or
restoration, the obligation for which an entity incurs as a
consequence of
A. Installing the item
B. Using the item during a particular period for the
purposes other than to produce inventories during
that period.
C. Both a and b
D. Neither a nor b
18. Income earned through using a building site as a car park
until construction starts is
A. Recognized in profit or loss
B. Deducted from the cost of building
C. Deducted from the cost of land
D. Deducted form he cost of land and building pro rata
19. The cost of a self-constructed asset may include
A. Internal profits
B. Cost of abnormal amounts of wasted material, labor,
or other resources.
C. Borrowing costs
D. All of the above.
20. The cost of an item of property, plant and equipment is
the cash price equivalent at the recognition date. If
payment is deferred beyond normal credit terms, the
difference between the cash price equivalent and the total
payment is recognized as
A. Interest over the period of credit unless such
interest is capitalized in accordance with PAS 23
B. Part of the carrying amount of the asset
C. Either as interest over the period of credit or as part
of the carrying amount of the asset depending on the
entities accounting policy
D. Interest at the recognition date.
21. An entity is required to measure an item of property,
plant and equipment acquired in exchange for a non-
monetary asset or assets, or a combination of monetary
and non-monetary assets, at fair value unless
A. The exchange transaction lacks commercial
substance
B. The exchanged assets are similar
C. Both a and b
D. Neither a nor b
22. If the fair value of neither the asset received nor the asset
given up is reliably measurable, the acquired item is
measured at
A. The carrying amount of the asset given up
B. The carrying amount of the asset received
C. Either a or b
D. Neither a nor b
23. Which statement is incorrect regarding acquisition of
property, plant and equipment in exchange for a non-
monetary asset, or a combination of monetary and non-
monetary asset?
A. An entity determines whether an exchange
transaction has commercial substance by considering
the extent to which its future cash flows are
expected to change as a result of the transaction.
B. For the purpose of determining whether an
exchange transaction has commercial substance,
the entity-specific value of the portion of the
entity’s operations affected by the transaction shall
reflect pre-tax cash flows.
 C. The cost of such an item of property, plant and
equipment is measured at fair value.
D. If the acquired item is not measured at fair value, its
cost is measured at the carrying amount of the asset
given up.

24. An entity acquired a piece of land with existing building

with the intention to demolish the old building right away
in order to construct a new building on its site as part of
its planned redevelopment. In accordance with PIC Q&A
No. 2012- 02, it is appropriate for the entity to account for
the carrying value of the old building as part of the cost of
the new building
A. That will be used as an owner-occupied property.
B. That will be held as an investment property.
C. That will be sold as an inventory.
D. None of the above.

25. An entity acquired a piece of land with existing building

with the intention to initially use the old building as an
owner-occupied property and then demolish it in a future
period and replace it with a new building. In accordance
with PIC Q&A No. 2012-02, it is appropriate for the entity
to account for the carrying value of the old building as
part of the cost of the new building
A. That will be used as an owner-occupied property.
B. That will be held as an investment property.
C. That will be sold as an inventory.
D. None of the above.

---Nothing Follows---
KEY ANSWERS:

1. D
2. A
3. D
4. A
5. D
6. C
7. D
8. B
9. D
10. D
11. A
12. A
13. D
14. D
15. D
16. D
17. B
18. A
19. D
20. A
21. A
22. A
23. B
24. D
25. D