Question 11 pts

Under PAS 16, PPE includes all of the following except

Group of answer choices

biological assets related to agricultural activity and mineral rights

property used in production or supply of goods and services

property used for extraction of minerals, oil and natural gas

property for rental purposes and administrative purposes

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Question 21 pts
Plant assets may properly include
Group of answer choices

self-constructed assets currently in use

idle equipment awaiting sale

property held for investment purposes

land held for future plant site

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Question 31 pts
The Elwood Corporation recently purchased the Paramount Theater and the land on
which it is located. Elwood plans to tear down the building immediately and build a new,
modern theater on the site. The cost of the Paramount Theater should be
Group of answer choices

capitalized as part of the cost of the new theater

capitalized as a part of the cost of the land

depreciated over the period from the date of acquisition to the date the theater is to be
torn down

written off as an extraordinary loss

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Question 41 pts
Which of the following costs generally would be capitalized to a property, plant and
equipment account?
Group of answer choices

import duties incurred on purchase

interest on debt incurred to purchase the item

property taxes relating to periods after acquisitions

freight-out

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Question 51 pts
When a closely held corporation issues stock for a building, the building should be
recorded at the
Group of answer choices

fair market value of the building

total book value of the stock issued

total liquidating value of the stock issued

total par value of the stock issued

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Question 61 pts
Expenditures which provide future economic benefits are known as
Group of answer choices

capital expenditures

deferred expenditures

future expenditures

revenue expenditures

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Question 71 pts
Which of the following costs is not included in the cost of the machinery and
equipment?
Group of answer choices

maintenance costs

applicable taxes

in-transit insurance costs

invoice price net of the cash discounts

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Question 81 pts
SFAS NO. 25 permits the capitalization of interest on qualifying assets, which of the
following is qualifying assets?
Group of answer choices

assets constructed for company’s own use

assets in use or ready for use

assets purchased by issuing interest bearing note

routinely manufactured inventories

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Question 91 pts
Which of the following is not a characteristic of property, plant and equipment?
Group of answer choices

they are always subject to depreciation

they are tangible assets

they are expected to be used during more than one period

they are acquired for use in the normal course of business

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Question 101 pts
Donated land by a nonshareholder for which the fair value has been determine should
be recorded as debit to land and a credit to
Group of answer choices

other income

additional paid-in capital

retained earnings

deferred income

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Question 111 pts
Depreciation as it used in accounting, is
Group of answer choices

process of cost allocation

putting aside of cash for replacement

measurement of decline in market value

none of the above

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Question 121 pts
The group depreciation method
Group of answer choices

does not recognize gain or loss on the retirement of single assets in the group

excludes salvage value from the base on the depreciation calculation

is applied to a group of dissimilar assets

recognizes gain or loss on the retirement of single asset in the group

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Question 131 pts
When using the double declining balance method, the depreciation rate(percentage) is
multiplied by the
Group of answer choices

book value of the asset at the beginning of the period

depreciation base of cost minus salvage value

fair value of the asset at the beginning of the period

original cost of the asset

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Question 141 pts
Which of the following is not a factor entering into determination of depreciation
expense for plant assets?
Group of answer choices
the current replacement cost of the asset

the depreciation base of historical cost minus estimated salvage value

expected useful life of the asset

pattern of cost allocation, or depreciation method, being used by the entity

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Question 151 pts
A machine with a five-year estimated useful life and an estimated 10% salvage value
was acquired on January 1. Would depreciation expense using the double-declining
balance method of depreciation be higher than, lower than or equal to depreciation
expense using the sum-of-the-years’ digits method of depreciation in the first and
second years?
Group of answer choices

higher in the first year and equal in the second year

higher in both the first and second years

lower in both the first and second years

equal in both the first and second years

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Question 161 pts
A machine has an estimated 12% salvage value. At the end of its useful life, the
accumulated depreciation would equal to the original cost of the asset under which of
the following depreciation methods
Group of answer choices

both the productive output method and the sum of the years’ digits method

the productive output method

sum of the years’ digits method

neither the productive method nor the sum of the years’ digits method
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Question 171 pts
An asset is being constructed for an enterprise’s own use. The asset has been financed
with specific new borrowing. The interest cost incurred during the construction period
as a result of expenditures is
Group of answer choices

a part of the historical cost of acquiring the asset to be written off over the estimated
useful life of the asset

interest expense in the construction period

recorded as a deferred charge and amortized over the term of the borrowing

recorded as a deferred charge and amortized over the term of the borrowing

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Question 181 pts
According to SFAS No. 34, “Capitalization of Interest Cost,” interest should be
capitalized for assets that are
Group of answer choices

being constructed or otherwise being produced as discrete projects for an enterprise’s

own use

is use or ready for their intended use in the earning activities of the enterprise

not being used in the earnings activities of the enterprise and that are not undergoing
the activities necessary to get them ready for use

routinely produced but require an extended period of time and are used in the earnings
activities of the enterprise

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Question 191 pts
In order to calculate the third year’s depreciation on an asset using the sum-of-the-
years’ digits method, which of the following must be known about the asset
Group of answer choices

all of the choices must be known

its acquisition cost

its estimated useful life

its estimated salvage value

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Question 201 pts
When the estimate of an asset’s useful life is changed
Group of answer choices

only the depreciation expense in the remaining years is changed

depreciation expense for all past periods must be recalculated

no change in the amount of depreciation expense recorded for future years

none of the choices is true

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Question 211 pts
The sale of depreciable asset resulting in a loss indicates that the proceeds from the
sale were
Group of answer choices

less than book value

less than the current market value

greater than cost

greater than book value

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Question 221 pts
Which of the following statements is the assumption on which straight-line depreciation
is based?
Group of answer choices
service values declines as a function of time rather than use

the operating efficiency of the asset decreases in later years

service valued declines as a function of obsolescence rather than time

physical wear and tear are more important than economic obsolescence

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Question 231 pts
Which of the following depreciation methods most closely approximates the method
used to deplete the cost of natural resources?
Group of answer choices

units of production method

straight-line method

double-declining balance method

sum-of-the-year’s-digits method

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Question 241 pts
Revaluation Surplus account is reported as
Group of answer choices

separate component of stockholders’ equity

separate component of income from ordinary activities

a liability

a contra asset account

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Question 251 pts
There is an impairment of plant asset
Group of answer choices

the carrying amount of the asset is more than its recoverable amount

the carrying amount of the asset is less than the recoverable amount

the carrying amount of the asset is more than the expected gross cash inflow from its
use

the carrying amount of the asset is less than the expected gross cash inflow from its use

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Question 261 pts
A company purchased land to be used as the site for the construction of a plant. Timber
was cut from the building site so that the construction of the plant could begin. The
proceeds from the sale of the timber should be
Group of answer choices

deducted from the cost of the plant asset

classified as other income

netted against the costs to clear the land end expensed as incurred

deducted from the cost of the land

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Question 271 pts
When a company purchased 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 should be
Group of answer choices

added to the cost of the plant

amortized over the estimated time period between the tearing down of the building and
the completion of the plant

expensed as incurred
added to the cost of the plant

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Question 281 pts
A donated plant asset for which the fair value has been determined, and for which
incidental costs were incurred in acceptance for the asset, should be recorded at an
amount equal to its
Group of answer choices

fair value and incidental costs incurred

incidental costs incurred

book value on books of don or and incidental costs incurred

book value on books of donor

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Question 291 pts
When a company replaces an old asphalt roof on its plant with anew fiberglass
insulated roof, which of the following types of expenditures has occurred
Group of answer choices

betterment

ordinary repairs and maintenance

addition

rearrangements

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Question 301 pts
An improvement made to a machine increased its fair market value and its production
capacity by 25% without extending the machine’s useful life. The cost of the
improvement should be
Group of answer choices

capitalized in the machine account

expensed

debited to Accumulated Depreciation

allocated between Accumulated Depreciation and the machine account

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Question 311 pts
On August 13, 2020,Elgin Development, Inc. purchased a tract of land for P4,300,000.
Additional costs of P200,000 were incurred in subdividing the land during the rest of
2012. When this was done, Elgin had three classes of residential lots for sale as shown
below:
Lot Class No. of lots Sales price/lot
Large 150 P60,000
Medium 200 40,000
Small 400 25,000

Under the relative sales value method, the cost allocated to each “medium” lot should
be
Group of answer choices

P4,167

P6,667

P10,000

P60,000

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Question 321 pts
The Elite Company imported a new machine at a peso equivalent of P1,320,000. The
company has to pay additional cost of importing the asset such as P40,000 import
duties and P60,000 non-refundable purchase taxes. Costs of transporting the asset
was P20,000 and cost of preparing the asset for its intended use include P12,000
installation and P8,000 testing and trial run costs. How much is the initial cost of the
new machine?
Group of answer choices

P1,460,000

P1,320,000

P1,420,000

P1,440,000

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Question 331 pts
Epic Company acquired land and building for P5,500,000 on October 1, 2020. The land
was appraised at P2,400,000 and the building at P3,600,000. Unpaid property taxes
assumed by Epic amounted to P250,000. Additional costs incurred were:
Building renovation P500,000
Option on alternative land and building not acquired 20,000
Cost of survey 5,000

What is the proper cost of the land for financial accounting purposes?
Group of answer choices

P2,325,000

P2,305,000

P2,455,000

P2,475,000

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Question 341 pts
Equitable Co. started a construction of a new office building on January 1, 2020, and
moved into the finished building on July 1, 2021. Of the building’s P5,000,000 total
cost, P4,000,000 was incurred in 2018 evenly throughout the year. Equitable
incremental borrowing rate was 12% throughout 2020, and the total amount of interest
incurred during 2020 was P204,000. What amount should Equitable report as
capitalized interest on December 31, 2020?
Group of answer choices

P204,000

P240,000

P300,000

P480,000

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Question 351 pts
Erika Co. purchased a machine under a deferred payment contract on December 31,
2020. Under the terms of the contract, Erika is required to make eight annual payments
of P140,000 each beginning December 31, 2020. The appropriate interest rate is 8%.
The purchase price of the machine is
Group of answer choices

P869,400

P1,389,190

P1,120,000

P804,520

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Question 361 pts
On October 1, Epic Corp. exchanged 16,000 shares of its P25 par value common stock
for a parcel of land to be held for a future plant site. Epic’s common stock had a fair
market value of P80 per share on the exchange date. Epic received P72,000 from the
sale of scrap when an existing building on the site was razed. The land should be
carried at
Group of answer choices

P1,208,000

P1,280,000

P472,000
P800,000

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Question 371 pts
Edu Crop. Takes a full year’s depreciation expense in the year of disposition. Data
relating to one of Edu’s depreciable assets at December 31, 2020 are as follows:
Acquisition year 2017
Cost P1,100,000
Residual value 200,000
Accumulated deprecation 720,000
Estimated useful life 5 years

Use the same depreciation method as used in 2017, 2018 and 2019, how much
depreciation expense should Edu record in 2020 for this asset
Group of answer choices

P120,000

P240,000

P220,000

P180,000

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Question 381 pts
Escrow Co. purchased a new machine on July 1, 2019. It was expected to produce
200,000 units of product over its estimated useful life of eight years. Total cost of the
machine was P600,000 and salvage value was estimated to be P60,000. Actual units
produced by this machine in 2019 and 2020 are 16,000 and 30,000 units respectively.
Escrow reports on a calendar year-basis and uses the straight-line method of
depreciation computed to the nearest month. The amount of depreciation expense for
this machine in 2020 using sum-of-the-year’s digits method would be
Group of answer choices

P112,500
P135,000

P125,000

P105,000

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Question 391 pts
Escrow Co. purchased a new machine on July 1, 2019. It was expected to produce
200,000 units of product over its estimated useful life of eight years. Total cost of the
machine was P600,000 and salvage value was estimated to be P60,000. Actual units
produced by this machine in 2019 and 2020 are 16,000 and 30,000 units respectively.
Escrow reports on a calendar year-basis and uses the straight-line method of
depreciation computed to the nearest month. The amount of depreciation expense for
this machine in 2020 using productive output method would be
Group of answer choices

P 81,000

P124,200

P 90,000

P 74,250

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Question 401 pts
Ernest Company purchased a machine that was installed and placed in service on
January 2, 2020, at a total cost of P480,000. Residual value was estimated at
P80,000. The machine is being depreciated over ten years by the double-declining
balance method. For the year 2021, Ernest should record depreciation expense of
Group of answer choices

P76,800

P64,000

P80,000
P96,000

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Question 411 pts
At the start of its business, Ewell Corp. decided to use the composite method of
depreciation and prepared the following schedule of machinery owned.
Total Cost Salvage value Est. life in years
Machine A P275,000 P25,000 20
Machine B 100,000 10,000 15
Machine C 20,000 - 5
Ewell computes depreciation on the straight-line method. Based on the information
presented, the composite life of these assets (in years) should be
Group of answer choices

16.0

19.8

18.0

13.3

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Question 421 pts
A truck that cost P800,000 was originally being depreciated over four years using the
straight-line method with no salvage value. If after one year, it was decided that the
truck would last an additional 1 year (or a total of 5 years), the second year’s
depreciation would be
Group of answer choices

P150,000

P250,000

P200,000

P100,000
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Question 431 pts
Edel Carpet traded cleaning equipment with a cost of P68,000 and accumulated
depreciation of P13,000 for new similar equipment with a fair market value of P46,000.
Edel should record the new equipment at
Group of answer choices

P46,000

P59,000

P55,000

P30,000

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Question 441 pts
Earth Company acquired a tract of land containing an extractable natural resources.
Earth is required by the purchase contract to restore the land to a condition suitable for
recreational use after it has extracted the natural resources. Geological surveys
estimate that the recoverable reserves will be 1,500,000 tons and that the land will have
a value of P2,500,000 after restoration. Relevant information follows:
Land P9,000,000
Estimated restoration cost 1,000,000

What should be the depletion charge per ton of extracted material

Group of answer choices

P3.40

P4.00

P3.80

P3.60

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Question 451 pts
Ecrow Company acquired and paid for it in full by issuing P600,000 of its 10% bonds
payable and 40,000 shares of its ordinary shares, par P10. The stock was selling at
P19 per share and the bonds were trading at 102. What amount should Ecrow record
as the cost of the land?
Group of answer choices

P1,372,000

P 988,000

P1,000,000

P1,387,200

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Question 461 pts
Everlasting Company started construction on a building on January 1, of this year and
completed construction on December 31, of the same year. Everlasting had only two
interest notes outstanding during the year, and both of these notes were outstanding for
all 12 months of the year. The following information is available:

Average accumulated expenditures

P2,500,000
Ending balance in construction progress
before capitalization of interest 3,600,000
9% note incurred specifically for the project 1,500,000
6% long-term note 5,000,000

What amount of interest should Everlasting capitalize for the current year?
Group of answer choices

P195,000

P279,000

P180,000
P150,000

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Question 471 pts
Engelbert Company purchased land with a current market value of P2,400,000. It’s
book value in the account of the seller was P1,305,000. In exchange for the land,
Engelbert issued 200,000 shareS of its ordinary shares, P10 par, with an estimated
market value of P14 per share. Engelbert stock is not traded on an established stock
exchange. What amount Engelbert record as the cost of the land?
Group of answer choices

P2,400,000

P1,305,000

P2,000,000

P2,800,000

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Question 481 pts
An asset was acquired on January 1, 2016 for P800,000 and is expected to a have a 5-
year useful economic life. Straight line method of depreciation will be used. At January
1, 2018, the asset is appraised as having a sound value (depreciated replacement cost)
of P720,000. On January 1, 2020 the asset was appraised at a sound value of
P120,000. What is the impairment loss to be recognized in January 1, 2020?
Group of answer choices

P40,000

P-0-

P60,000

P80,000

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Question 491 pts
During December 2019, Eijie Company determined that there had been a significant
decrease in market value of its equipment used in its manufacturing process. At
December 31, 2020, Eijie complied the information below:
Original cost of equipment P2,000,000
Accumulated depreciation 1,000,000

Value in use P700,000

Net selling price 500,000

What is the amount of impairment loss that should be reported on Eijie’s income
statement for the year ended December 31, 2020?
Group of answer choices

P 300,000

P1,500,000

P1,300,000

P 100,000

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Question 501 pts
Elegance Company acquired a machine for P3,200,000 on August 31, 2017. The
machine has a 5-year life, a P500,000 salvage value and was depreciated using the
straight-line method. On May 31, 2020, a test for recoverability reveals that the
expected net future undiscounted cash inflows related to the continued use and
eventual disposal of machine total P1,500,000. The machine’s fair value on May 31,
2020 is P1,350,000 with no salvage value. Assuming a loss on impairment is
recognized on May 31, 2020, what is Elegance’s depreciation for June 2020?
Group of answer choices

P50,000

P63,520

P45,000
P31,480