Question 1

Which of the following is not an example of a separate class of property, plant and equipment?

Accepted Answer

A)   Office equipment
B)   Land and buildings
C)   Inventory
D)   Motor vehicles C

Question 2

The cost of an asset less its residual value is referred to as its:

Accepted Answer

A)   book value.
B)   residual amount.
C)   depreciable amount.
D)   carrying amount. C

Question 3

On 30 June 2014, Walters Limited had an item of plant with an original cost of $140 000 and accumulated depreciation of $56 000. At this date, the fair value of the plant was $100 000 and Walters Limited revalued the plant. Assuming a tax rate of 30%, the tax effect of the revaluation would be recorded as which of the following? $$\begin{array} { l l l l } 
\text { Ircome tax expendse - OCI } & \text { Dr } & 4800 \
\quad \text { Currert tax liability } & \text { Cr } & & 4800 \
\

\text { Deferred tax asset } & \text { Dr } & 4800  \
\text { Incorne tax expense - OCI } & \text { Dr } && 4800 \
\

\text { Deferred tax asset }& \text { Dr } & 4800 \
\text { Currert tax liability }& \text { Cr } & & 4800\
\
\text { Income tax expense - OCI } & \mathrm{Dr} & 4800 \
\text { Deferred tax liability } & \mathrm{Cr} & & 4800 
\end{array}$$

Accepted Answer

D

Question 4

Costs of testing whether an asset is functioning property should be capitalised into the initial cost of the asset under AASB 116 Property, Plant and Equipment.

Accepted Answer

A) True 
 B)False

Question 5

The expected physical wear and tear on an asset should be taken into account when determining the useful life of the asset.

Accepted Answer

A) True 
 B)False

Question 6

On initial recognition of property, plant and equipment, the cost only comprises the purchase price plus an initial estimate of dismantling and/or restoration costs.

Accepted Answer

A) True 
 B)False

Question 7

The residual value of a non-current asset is the amount or consideration actually received by an entity at the date of the asset's disposal.

Accepted Answer

A) True 
 B)False

Question 8

Under AASB 116 Property, Plant and Equipment, the purpose of calculating the depreciation charge for a period on an item of property, plant and equipment is to measure:

Accepted Answer

A)   the fall in the fair value of the asset across the period.
B)   a change in the re-sale value of the asset that has occurred over the period.
C)   a reduction in the estimated market value of the asset across the period.
D)   the consumption of economic benefits over the period.

Question 9

Items of property, plant and equipment may only be derecognised if they are sold.

Accepted Answer

A) True 
 B)False

Question 10

Estimated future restoration costs associated with mining land are:

Accepted Answer

A)   expensed in the period in which they are incurred.
B)   recorded directly into equity.
C)   regarded as contingent liability and are disclosed in the notes to the financial statements.
D)   capitalised into the cost of the land.

Question 11

When an item of property, plant and equipment is sold, the resulting gain or loss is calculated as the difference between the:

Accepted Answer

A)   net proceeds from sale and the asset's original cost.
B)   asset's estimated fair value and its carrying amount at the date of sale.
C)   asset's original cost and its accumulated depreciation at the date of sale.
D)   net proceeds from sale and the asset's carrying amount at the date of sale.

Question 12

Costs of removal or dismantling an asset at the end of its useful life are measured on a present value basis and capitalised into the initial cost of the asset.

Accepted Answer

A) True 
 B)False

Question 13

On 30 June 2014, Walters Limited had an item of plant with an original cost of $140 000 and accumulated depreciation of $56 000. At this date, the fair value of the plant was $100 000. The net effect of the journal entries necessary to record the revaluation of the plant by Walters to fair value on 30 June 2014 in accordance with AASB 116 Property, Plant and Equipment is which of the following? $$\begin{array} { l l l l } 
\text { Accurmlated depreciation - plarit } & \text { Dr } & 28000 \
\quad \text { Plarit } & \mathrm { Cr } & & 12000 \
\text { Asset revaluation suplus } & \mathrm { Cr } & & 16000 \
\
\text { Plart } & \mathrm { Dr } & 12000 & \
\quad \text { Asset revaluation suplus } & \mathrm { Cr } & & 12000 \
& & & \
\text { Gain on revaluation - OCI } & \mathrm { Dr } & 12000 & \
\text { Asset revaluation surplus } & \mathrm { Cr } & & 12000 \
& & & \
\text { Plart } & \mathrm { Dr } & 12000 & \
\text { Gair on revaluation - OCI } & \mathrm { Dr } & 16000 & \
\text { Accurnulated depreciation - plart } & \mathrm { Cr } & & 28000
\end{array}$$

Accepted Answer

The answer of On 30 June 2014, Walters Limited had...

Question 14

According to AASB 116 Property, Plant and Equipment, the cost of property, plant and equipment is only recognised as an asset if it is probable that the future economic benefits will flow to the entity and if:

Accepted Answer

A)   the cost can be reliably measured.
B)   it is a physical asset.
C)   the asset has been received by the purchaser.
D)   the asset is held for rental.

Question 15

For the purpose of the initial recognition of an item of property, plant and equipment, the date on which the fair values should be measured is referred to as the:

Accepted Answer

A)   acquisition date.
B)   recognition date.
C)   measurement date.
D)   fair value date.

Question 16

Hunt Limited applied the straight-line method of depreciation to its non-current assets. The cost of the buildings was $850 000, the residual value is $150 000 and the useful life is 10 years. The annual depreciation expense is:

Accepted Answer

A)   $100 000.
B)   $15 000.
C)   $85 000.
D)   $70 000.

Question 17

The units-of-production method of recognising depreciation is only suitable for use by entities involved in manufacturing.

Accepted Answer

A) True 
 B)False

Question 18

Fair value is defined in AASB 116 Property, Plant and Equipment as the amount for which an asset can be exchanged between knowledgeable willing parties in an arm's length transaction.

Accepted Answer

A) True 
 B)False

Question 19

The depreciation expense calculated using the diminishing balance method reflects:

Accepted Answer

A)   an increasing pattern of benefits over the asset's useful life.
B)   a decreasing pattern of benefits over the asset's useful life.
C)   a constant pattern of benefits over the asset's useful life.
D)   a fluctuating pattern of benefits over the asset's useful life.

Question 20

Under the cost model, after initial recognition an item of property, plant and equipment must be carried at its:

Accepted Answer

A)   estimated liquidation value.
B)   cost less accumulated depreciation and less accumulated impairment losses.
C)   initial cost.
D)   current replacement cost.

Exam 18: Property, Plant Equipment

Which of the following is not an example of a separate class of property, plant and equipment?

The cost of an asset less its residual value is referred to as its:

Costs of testing whether an asset is functioning property should be capitalised into the initial cost of the asset under AASB 116 Property, Plant and Equipment.

The expected physical wear and tear on an asset should be taken into account when determining the useful life of the asset.

On initial recognition of property, plant and equipment, the cost only comprises the purchase price plus an initial estimate of dismantling and/or restoration costs.

The residual value of a non-current asset is the amount or consideration actually received by an entity at the date of the asset's disposal.

Under AASB 116 Property, Plant and Equipment, the purpose of calculating the depreciation charge for a period on an item of property, plant and equipment is to measure:

Items of property, plant and equipment may only be derecognised if they are sold.

Estimated future restoration costs associated with mining land are:

When an item of property, plant and equipment is sold, the resulting gain or loss is calculated as the difference between the:

Costs of removal or dismantling an asset at the end of its useful life are measured on a present value basis and capitalised into the initial cost of the asset.

According to AASB 116 Property, Plant and Equipment, the cost of property, plant and equipment is only recognised as an asset if it is probable that the future economic benefits will flow to the entity and if:

For the purpose of the initial recognition of an item of property, plant and equipment, the date on which the fair values should be measured is referred to as the:

Hunt Limited applied the straight-line method of depreciation to its non-current assets. The cost of the buildings was $850 000, the residual value is $150 000 and the useful life is 10 years. The annual depreciation expense is:

The units-of-production method of recognising depreciation is only suitable for use by entities involved in manufacturing.

Fair value is defined in AASB 116 Property, Plant and Equipment as the amount for which an asset can be exchanged between knowledgeable willing parties in an arm's length transaction.

The depreciation expense calculated using the diminishing balance method reflects:

Under the cost model, after initial recognition an item of property, plant and equipment must be carried at its: