1.

Which of the following terms best describes the removal of an asset from the statement
of financial position?
a. Derecognition b. Impairment c. Writeoff d. Depreciation

2. The carrying amount of property, plant and equipment shall be derecognized

a. On disposal
b. When no future economic benefits are expected from the use of the asset.
c. On acquisition
d. On disposal and when no future economic benefits are expected from the use
of the asset.

3. Gain and loss arising from the derecognition of property, plant and equipment shall be
determined as the difference between
a. Gross disposal proceeds and cost of the asset.
b. Gross disposal proceeds and carrying amount.
c. Net disposal proceeds and the cost of the asset.
d. Net disposal proceeds and carrying amount

4. Entities are encouraged to disclose all of the following in relation to property, plant and
equipment, except
a. The carrying amount of temporarily idle property, plant and equipment.
b. The gross carrying amount of fully depreciated property, plant and equipment
still in use.
c. The carrying amount of property, plant and equipment classified as held for
sale.
d. The fair value of property, plant and equipment that is not materially different
from carrying amount when the cost model is used.

5. Which of the following shall not be capitalized as cost of property, plant and
equipment?
a. Cost of excess materials from a purchasing error
b. Cost of testing whether the asset works correctly.
c. Initial delivery and handling cost
d. Cost of preparing the site for installation

6. The initial operating losses should be

a. Deferred and amortized over a reasonable period.
b. Expensed and charged to the income statement.
c. Capitalized as part of the cost of plant.
d. Taken to retained earnings.

7. An entity imported machinery to be installed in the new factory premises before year-
end. What is the proper treatment of freight and interest on the loan to fund the cost
of machinery?
a. Both expenses are capitalized.
b. Interest may be capitalized but freight is expensed.
c. Freight is capitalized but interest cannot be capitalized.
 d. Both expenses are expensed.

8. Which of the following statements in relation to the cost of an asset is true?

a. The cost includes cash equivalents paid.
b. The cost includes the fair value of any nonmonetary consideration given to
acquire an asset.
c. The cost includes nonrefundable purchase taxes.
d. All of the statements are true.

9. The configuration of cash flows in an exchange includes which of the following?

a. The implicit interest rate, maturity date of loan and amount of loan.
b. The risk, timing and amount of cash flows of the assets.
c. The entity-specific value of the asset.
d. The estimated present value of the assets exchanged.

10. A nonmonetary exchange is recognized at fair value of the assets exchanged unless
a. Exchange has commercial substance.
b. Fair value is not determinable.
c. The assets are similar in nature.
d. The assets are dissimilar.

11. In an exchange, which will require the asset to be recognized at carrying amount of
the asset relinquished?
a. A delivery truck exchanged tor a delivery van that can deliver four times the
quantity of goods.
b. The exchange transaction is intended to facilitate sales to customers.
c. The cash flows differ significantly.
d. The assets are both productive assets.

12. When determining the commercial substance of the exchange, which of the following
is not considered?
a. Cash flow of exchanged asset.
b. Cash flow of new asset.
c. Cash flow from tax effect on the exchange to avoid taxes.
d. Cash flow from potential sale of new equipment.

13. Which of the following statements describes the proper accounting for loss in a
nonmonetary exchange?
a. A loss is recognized immediately.
b. A loss is deferred.
c. An unrelated loss should be recorded.
d. A loss can occur only when asset is sold for cash.

14. The cost of an item of property, plant and equipment comprises the purchase price
and
a. The implied interest on the debt financing
b. The fair value of any noncash asset surrendered
 c. The estimated residual value of the asset
d. All directly attributable costs to bring the asset to the location and condition for
the intended use

15. . When property is acquired by issuing shares, which of the following is the best basis
for establishing the cost or the acquired asset?
a. Historical cost of the asset to the seller
b. Historical cost of a similar asset
c. Fair value of the asset received or the fair value or the shares issued,
whichever is more reliable
d. Historical cost of the asset is zero

16. When a plant asset is acquired by deferred payment which condition generally does
not indicate the need to consider the imputation of interest?
a. The interest rate stated on the deferred obligation is significantly different from
market interest rate.
b. The cash price of the plant asset is significantly different from the deferred
obligation.
c. The instrument representing the deferred obligation is noninterest bearing.
d. The face amount of the deferred obligation is equal to the market value of the
plant asset exchanged.

17. When payment for property, plant equipment is deferred beyond normal credit terms,
the difference between the cash price equivalent and the total payments is recognized
as
a. Interest expense of the current year
b. Component of cost of the property, plant and equipment
c. Interest expense over the credit period
d. Interest expense over the life of the asset

18. If the present value of a note issued in exchange for a plant asset is less than the face
amount, the difference is
a. Included in the cost of the asset
b. Amortized as interest expense over the life of the note
c. Amortized as interest expense over-the life of the asset
d. Included in interest expense in the year of issuance

19. An entity purchased a plant asset under a deferred payment contract. The agreement
was to pay P10,000 per year for five years. What is the initial measurement of the plant
asset?
a. P50,000
b. P50,000 plus imputed interest
c. Present value of P50,000 annuity for five years at an imputed interest
d. Present value of P10,000 annuity for five years discounted at the bank prime
interest rate
20. Which of the following is the most appropriate policy as regards the allocation of joint
overhead cost to plant and equipment constructed by the entity for own use?
a. Assign no overhead.
b. Assign only variable overhead.
c. Assign overhead equal to the amount that would have been assigned to
production that is curtailed because of the construction.
d. Assign a proportionate share of overhead to the construction on the same basis
as that used for the assignment to normal production.