IAS 16 Property Plant and Equipment TANGIBLE SET2

IAS-16 Property, plant and equipment
1. Residual value is specifically:
A. The net cash amount that is received from the ultimate sale of the asset, at the end of
its life
B. Scrap value
C. The gross cash amount that is received from the ultimate sale of the asset, at the end
of its life
2. Useful life of an asset refers to the life:
A. B: Of the asset whilst it is available for use in the firm

B. The average of A and B
C. A: Of the asset throughout its life, in the hands of any number of owners
3. Spare parts and servicing equipment are usually accounted for as:
A. A separate class of fixed assets

B. Expenses written off to the profit or loss on buying
C. Inventory
4. Individually-insignificant items, such as moulds, tools and dies may be:
A. Ignored
B. Expensed on purchase
C. Aggregated as one asset
5. Repairs and maintenance costs are normally:
A. Expensed in the profit or loss as incurred

B. Recorded as deferred expenses
C. Capitalised
6. If the costs of a major inspection (for example, aircraft) are capitalised:
A. Any remaining costs of a previous inspection must be written off

B. They must be shown as a separate asset
C. The board of directors must be notified immediately
7. Elements of cost are:
(i)The purchase price.
(ii) Any costs directly attributable to bringing the asset to the location.
(iii)The initial estimate of the costs of dismantling, and removing the item.
(iv)Overheads of the purchasing department relating to the buy of the asset.
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(i) to (iii)
(i) only
(i) to (ii)
(i) to (iv)
8. Directly attributable costs include:
i. staff costs arising directly from the construction, or acquisition, of the item of property,
plant and equipment;
ii. site preparation costs;
iii. initial delivery and handling costs;
iv. costs of testing whether the asset is functioning properly, after deducting the net proceeds
from any samples, or sundry income; and
v. professional fees.
vi. costs of opening a new facility;
vii. costs of introducing a new product, or service (including costs of advertising and
promotional activities);
viii. costs of running a business in a new location, or with a new class of customer (including
costs of staff training); and
ix. administration and other general overhead costs.
A. (vi) to (ix) B. (i) to (vii) C. (i) to (ix) D. (i) to (v)
9. Recognition of costs (to be capitalised) ceases when:
A. The item is in the location and capable of operating

B. Full production capacity has been reached
C. The accounting period ends
10. The following costs should be accounted for as:
(i) 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;
(ii) initial operating losses, such as those incurred while demand for the item’s output builds
up; and (iii) costs of relocating, or reorganising part, or all, of an undertaking’s operations.
A. Expenses
B. Extraordinary items
C. (Capitalised as) fixed assets
11. Incidental income and expenses (such as using a site as a temporary car park) should be:
A. Taken to the profit or loss

B. Capitalised into the asset
C. Ignored
12. Internal profits generated, when creating a self-constructed asset, should be:
A. Included in the asset’s cost

B. Eliminated from the asset cost
C. Depreciated over the life of the asset
13. The cost of abnormal amounts of wasted material, labour, or other resources incurred in
self-constructing an asset should be:
A. Expensed
B. Capitalised
C. Deferred
14. If payment for a fixed asset is deferred beyond normal credit terms, any additional
payment above the cash cost of the asset will be accounted for as:
A. Borrowing cost
B. Cost of fixed asset
C. Repairs and maintenance
15. If one or more assets are exchanged for a new asset, the new asset is valued at:
A. Replacement
B. Cost
C. Fair value
D. Residual value
16. In the case of an exchange of assets, if the acquired asset cannot be valued:
A. The asset cannot be capitalized

B. The cost of the asset given up is used
C. The residual value is used
17. An undertaking can choose either the cost model or the revaluation model, as its
accounting policy, it must apply the chosen model to:
A. All fixed assets.

B. An entire class of fixed assets
C. Major assets
18. Using the cost model, the asset in accounted for at:
A. Cost less accumulated depreciation and any impairment losses
B. Cost less accumulated depreciation
C. Cost
19. Using the revaluation model, can fair values be estimated, if there is no market-based
evidence?
A. Yes, if the asset is specialized, and rarely sold, by using an income, or a depreciated
replacement cost approach.
B. Yes, if the asset is specialized, and rarely sold, by using indexation.
C. No.
20. Revaluations are required:
A. Annually
B. Every 3-5 years
C. When fair values change, or are expected to change
21. When an item is revalued, any accumulated depreciation at the date of the revaluation is
treated in which of the following ways:
A. B: Eliminated against the gross carrying amount of the asset and the net amount
restated to the revalued amount of the asset.
B. Either A or B
C. A: Restated proportionately, with the change in the gross carrying amount of the asset,
so that the carrying amount of the asset after revaluation equals its revalued amount.
22. Examples of separate classes of fixed assets are:
(i) land.
(ii) land and buildings.
(iii) machinery.
(iv) ships.
(v) aircraft.
(vi) motor vehicles.
(vii) furniture and fixtures.
(viii) office equipment.
(ix ) stationery
A. (i) to (vii) B. (i) to (viii) C. (i) to (v) D. (i) to (ix)
23. A class of assets may be revalued on a rolling basis, provided:
A. Only one class of assets is involved.
B. The revaluation is completed in a short period, and the revaluations are kept up to
date.
C. It is shown in the statement of financial position.
24. If an asset’s carrying amount is increased by revaluation, the increase is;
A. Shown as a gain in the profit or loss.

B. Taken to revaluation surplus, via other comprehensive income
C. Taken to revaluation surplus, via the profit or loss.
25. If an asset’s carrying amount is decreased by revaluation and there is no revaluation

reserve, the decrease should be:
A. Expensed.
B. Capitalised.
C. Treated as an extraordinary item.
26. Transfers of amounts between Equity - Revaluation Reserve and retained earnings are
allowed
A. Only on asset disposal.

B. When retained earnings are negative.
C. On asset disposal, and in each period, being the difference between the depreciation
charged on a revalued amount and the depreciation of the cost amount.
27. Depreciation charges for a period are recorded:
A. As an exceptional item.
B. In the profit or loss, or as part of the cost another asset (such as inventories).
C. Only in the profit or loss.
28. Changes in the estimated useful life should:
A. Be shown in statement of financial position.

B. Be accounted for under IAS 8
C. Be expensed immediately.
29. The carrying value of your asset is $10. Its fair value is $12. Do you continue
depreciation?
A. Yes, but at half the previous rate

B. Yes, until the end of its useful life.
C. No.
30. The carrying value of your asset equals the residual value. Do you continue to depreciate
it?
A. No.
C. Yes, but at half the previous rate.
31. Regular repair and maintenance preserves the value of your hotel. Do you continue to
depreciate it?
A. Yes, until the end of its useful life.

B. Yes, but at half the previous rate.
C. No
32. Your asset has a residual value. Do you continue to depreciate it?
A. Yes, but at half the previous rate.

B. Yes, until the end of its useful life, but deduct the amount of the residual value from
the amount to be depreciated.
C. No.
33. Depreciation can cease when an asset is idle.
A. False
B. Only under a units of production method.
C. Only due to factory closure
34. In determining the useful life of an asset, consider:
(i) Expected usage of the asset.
(ii) Expected physical wear and tear.
(iii) Technical, or commercial obsolescence.
(iv) Legal, or similar, limits on the use of the asset.
(v) Interest rates.
A. (i) to (iv) B. (i) to (ii) C. (i) to (v) D. (i) to (iii)
35. Land and buildings are separate assets, as:
A. They can always be sold separately.

B. Land usually has an unlimited life, but buildings do not.
C. Buildings can be revalued, but land cannot.
36. You buy land and building. The land is revalued at double its cost. Do you continue to
depreciate the building?
A. No.
C. Yes, but at half the previous rate.
37. If your land is leased under a finance lease, do you depreciate it?
A. No.
B. Yes, until the end of the lease.
C. Only if it has a building on it.
38. A variety of depreciation methods can be used. These methods include the straight-line
method, the diminishing balance method and the units of production method. The choice of
depreciation method is governed by:
A. The expected pattern of consumption of the asset.

B. The lowest cost option.
C. Tax laws.
39. Compensation from third parties for items impaired, lost or sequestrated should be
recorded as income:
A. When the cash is received.

B. When the compensation is receivable.
C. When the item is lost.
40. The carrying amount of an item of PPE will be derecognised:
A. B: When no future benefits are expected from its use.

B. A: On disposal.
C. Either A or B
41. A gain on the sale of an asset should be recorded as:
A. A capital gain in equity.

B. Revenue
C. A gain in the profit or loss.
42. The gain, or loss, arising on the sale of an asset is:
A. The cash proceeds

B. The net proceeds minus the residual value of the asset.
C. The net proceeds minus the carrying value of the asset.
ANSWERS
1. A. The net cash amount that is received from the ultimate sale of the asset, at the end of its
life
2. A. B: Of the asset whilst it is available for use in the firm
3. C. Inventory
4. C. Aggregated as one asset
5. A. Expensed in the profit or loss as incurred
6. A. Any remaining costs of a previous inspection must be written off
7. A. (i) to (iii)
8. D. (i) to (v)
9. A. The item is in the location and capable of operating
10. A. Expenses
11. A. Taken to the profit or loss
12. B. Eliminated from the asset cost
13. A. Expensed
14. A. Borrowing cost
15. C. Fair value
16. B. The cost of the asset given up is used
17. B. An entire class of fixed assets
18. A. Cost less accumulated depreciation and any impairment losses
19. A. Yes, if the asset is specialized, and rarely sold, by using an income, or a depreciated
replacement cost approach.
20. C. When fair values change, or are expected to change
21. B. Either A or B
22. B. (i) to (viii)
23. B. The revaluation is completed in a short period, and the revaluations are kept up to date.
24. B. Taken to revaluation surplus, via other comprehensive income
25. A. Expensed.
26. C. On asset disposal, and in each period, being the difference between the depreciation
charged on a revalued amount and the depreciation of the cost amount.
27. B. In the profit or loss, or as part of the cost another asset (such as inventories).
28. B. Be accounted for under IAS 8
29. B. Yes, until the end of its useful life.
30. A. No.
31. A. Yes, until the end of its useful life.
32. B. Yes, until the end of its useful life, but deduct the amount of the residual value from the
amount to be depreciated.
33. Only under a units of production method.
34. A . (i) to (iv)
35. B. Land usually has an unlimited life, but buildings do not.
36. B. Yes, until the end of its useful life.
37. B. Yes, until the end of the lease.
38. A. The expected pattern of consumption of the asset.
39. B. When the compensation is receivable.
40. C. Either A or B
41. C. A gain in the profit or loss.
42. C. The net proceeds minus the carrying value of the asset.
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IAS-16 Property, plant and equipment

1. Residual value is specifically:

2. Useful life of an asset refers to the life:

A. B: Of the asset whilst it is available for use in the firm

A. A separate class of fixed assets

4. Individually-insignificant items, such as moulds, tools and dies may be:

5. Repairs and maintenance costs are normally:

A. Expensed in the profit or loss as incurred

6. If the costs of a major inspection (for example, aircraft) are capitalised:

A. Any remaining costs of a previous inspection must be written off

7. Elements of cost are:

(i)The purchase price.

(iv)Overheads of the purchasing department relating to the buy of the asset.

8. Directly attributable costs include:

ii. site preparation costs;

iii. initial delivery and handling costs;

vi. costs of opening a new facility;

ix. administration and other general overhead costs.

A. (vi) to (ix) B. (i) to (vii) C. (i) to (ix) D. (i) to (v)

9. Recognition of costs (to be capitalised) ceases when:

A. The item is in the location and capable of operating

10. The following costs should be accounted for as:

A. Taken to the profit or loss

A. Included in the asset’s cost

A. The asset cannot be capitalized

A. All fixed assets.

A. Cost less accumulated depreciation and any impairment losses

20. Revaluations are required:

22. Examples of separate classes of fixed assets are:

(ii) land and buildings.

(vi) motor vehicles.

(vii) furniture and fixtures.

(viii) office equipment.

A. (i) to (vii) B. (i) to (viii) C. (i) to (v) D. (i) to (ix)

23. A class of assets may be revalued on a rolling basis, provided:

A. Only one class of assets is involved.

24. If an asset’s carrying amount is increased by revaluation, the increase is;

A. Shown as a gain in the profit or loss.

25. If an asset’s carrying amount is decreased by revaluation and there is no revaluation

A. Only on asset disposal.

27. Depreciation charges for a period are recorded:

28. Changes in the estimated useful life should:

A. Be shown in statement of financial position.

A. Yes, but at half the previous rate

A. Yes, until the end of its useful life.

A. Yes, but at half the previous rate.

33. Depreciation can cease when an asset is idle.

34. In determining the useful life of an asset, consider:

(i) Expected usage of the asset.

(ii) Expected physical wear and tear.

(iii) Technical, or commercial obsolescence.

(iv) Legal, or similar, limits on the use of the asset.

(v) Interest rates.

A. (i) to (iv) B. (i) to (ii) C. (i) to (v) D. (i) to (iii)

35. Land and buildings are separate assets, as:

A. They can always be sold separately.

A. The expected pattern of consumption of the asset.

A. When the cash is received.

40. The carrying amount of an item of PPE will be derecognised:

A. B: When no future benefits are expected from its use.

41. A gain on the sale of an asset should be recorded as:

A. A capital gain in equity.