12/9/23, 3:13 PM Practice Test 6.2 Property Plant and Equipment: Attempt review | College - 1st Semester S.Y.

llege - 1st Semester S.Y. 2023-2024

Started on Friday, 8 December 2023, 6:08 PM

State Finished
Completed on Friday, 8 December 2023, 6:42 PM
Time taken 34 mins 25 secs

Question 1
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The Oscar Corporation acquired land, buildings, and equipment from a bankrupt company at a lump-sum price of ₱180,000. At the time of
acquisition, Oscar paid ₱12,000 to have the assets appraised. The appraisal disclosed the following values:

Land 120,000

Buildings 80,000

Equipment 40,000

What cost should be assigned to the land, buildings, and equipment, respectively?

64,000, 64,000, and 64,000

96,000, 64,000, and 32,000

90,000, 60,000, and 30,000

120,000, 80,000, and 40,000

Question 2
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Merry Co. purchased a machine costing ₱125,000 for its manufacturing operations and paid shipping costs of ₱20,000. Merry spent an
additional ₱10,000 in testing and preparing the machine for use. What amount should Merry record as cost of the machine?

155,000

135,000

125,000

145,000

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12/9/23, 3:13 PM Practice Test 6.2 Property Plant and Equipment: Attempt review | College - 1st Semester S.Y. 2023-2024

Question 3

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The residual value of an item of property, plant and equipment is

the amount, inclusive of the effects of inflation that an entity expects to receive in the future on the asset's actual retirement date.

the amount the entity estimates it would receive currently for the asset if the asset were already of the age and in the condition expected
at the end of its useful life.

either of the statements

Question 4

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On October 1, Takei, Inc. exchanged 8,000 shares of its ₱25 par value ordinary share for a parcel of land to be used as site for a new plant.
Takei's ordinary share had a fair value of ₱80 per share on the exchange date. Takei received ₱36,000 from the sale of scrap when an existing
building on the site was razed. The land should be carried at

200,000

236,000

640,000

604,000

Question 5
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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.

I and III only

I only

I, II, and III

I and II only

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12/9/23, 3:13 PM Practice Test 6.2 Property Plant and Equipment: Attempt review | College - 1st Semester S.Y. 2023-2024

Question 6

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Amble, Inc. exchanged a truck with a carrying amount of ₱12,000 and a fair value of ₱20,000 for a truck and ₱5,000 cash. The fair value of the
truck received was ₱15,000. At what amount should Amble record the truck received in the exchange?

9,000

15,000

12,000

7,000

Question 7

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Peterson, Inc. purchased a machine under a deferred payment contract on December 31, 20x1. Under the terms of the contract, Peterson is
required to make eight annual payments of ₱140,000 each beginning December 31, 20x2. The appropriate interest rate is 8%. The purchase
price of the machine is

1,389,190

868,900

1,120,000

804,520

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12/9/23, 3:13 PM Practice Test 6.2 Property Plant and Equipment: Attempt review | College - 1st Semester S.Y. 2023-2024

Question 8

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On February 12, Laker Company purchased a tract of land as a factory site for ₱175,000. An existing building on the property was razed and
construction was begun on a new factory building in March of the same year. Additional data are available as follows:

Cost of razing old building 35,000

Title insurance and legal fees to purchase land 12,500

Architect's fees 42,500

New building construction cost 875,000

The recorded cost of the completed factory building should be

952,500

917,500

930,000

910,000

Question 9

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On December 1, 20x1, Boyd Co. purchased a ₱400,000 tract of land for a factory site. Boyd razed an old building on the property to make way
for the construction of the new factory. Boyd sold the materials it salvaged from the demolition. Boyd incurred additional costs and realized
salvage proceeds during December 20x1 as follows:

Demolition of old building ₱50,000

Legal fees for purchase contract and recording ownership 10,000

Title guarantee insurance 12,000

Proceeds from sale of salvaged materials 8,000

In its December 31, 20x1 statement of financial position, Boyd should report a balance in the land account of

464,000

442,000

422,000

464,000

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12/9/23, 3:13 PM Practice Test 6.2 Property Plant and Equipment: Attempt review | College - 1st Semester S.Y. 2023-2024

Question 10

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The depreciable amount of an item of property, plant and equipment is the

Net amount which the enterprise expects to obtain for an asset at the end of its useful life after deducting the expected costs of disposal.

amount of cash or cash equivalent paid or the fair value of other consideration given to acquire an asset at the time of its acquisition or
construction.

amount at which an asset is recognized in the balance sheet after deducting any accumulated depreciation and accumulated impairment
losses thereon.

cost of the asset, or other amount substituted for cost in the financial statements less its residual value.

Question 11
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PAS 16 (PPE) applies to

property, plant and equipment classified as held for sale in accordance with PFRS 5

property, plant and equipment used to develop or maintain biological assets and mineral rights and mineral resources.

mineral rights and mineral reserves such as oil, natural gas, and similar non-regenerative resources.

biological assets related to agricultural activity

Question 12
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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

professional fees

costs of opening a new facility

costs of testing whether the asset is functioning properly

installation and assembly costs

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12/9/23, 3:13 PM Practice Test 6.2 Property Plant and Equipment: Attempt review | College - 1st Semester S.Y. 2023-2024

Question 13

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Useful life of property, plant and equipment is

the period over which an asset is expected to be available for use by an entity.

the number of production or similar units expected to be obtained from the asset by an entity.

neither of the statements.

either of the statements

Question 14
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Costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in a manner intended
by management exclude

administration and other general overhead costs.

initial delivery and handling costs

costs of site preparation

costs of employee benefits arising directly from the construction or acquisition of the item of property, plant and equipement.

Question 15

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Which statement is correct regarding recognition of PPE?

both of the statements

recognition principle is applied to all property, plant and equipment costs at the time they are incurred.

Items of PPE should be recognized as assets when it is probable that the future economic benefits associated with the asset will flow to
the enterprise and the cost of the asset can be measured reliably.

neither of the statements.

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12/9/23, 3:13 PM Practice Test 6.2 Property Plant and Equipment: Attempt review | College - 1st Semester S.Y. 2023-2024

Question 16

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Property, plant and equipment are defined as:

tangible assets held for use in the production or supply of goods or services, for rental to others, or for administrative purposes, and
expected to be used during more than one reporting period.

intangible assets held for sale in the ordinary course of business.

tangible assets held to earn rentals or for capital aprpreciation or both

tangible assets held for sale in the ordinary course of business.

Question 17
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Marburg Manufacturing Company purchased a machine on January 2, 20x2. The invoice price of the machine was ₱40,000, and the vendor
offered a 2 percent discount for payment within ten days. The following additional costs were incurred in connection with the machine:
Transportation-in 1,200

Installation cost 700

Testing costs prior to regular operation 550

If the invoice is paid within the discount period, Marburg should record the acquisition cost of the machine at

41,650

39,200

41,100

40,400

Question 18
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On March 31, 20x1, Winn Company traded in an old machine having a carrying amount of ₱16,800, and paid a cash difference of ₱6,000 for a
new machine having a total cash price of ₱20,500. On March 31, 20x1, what amount of loss should Winn recognize on this exchange?

6,000

2,300

3,700

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12/9/23, 3:13 PM Practice Test 6.2 Property Plant and Equipment: Attempt review | College - 1st Semester S.Y. 2023-2024

Question 19

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Examples of costs that are not costs of an item of property, plant and equipment exclude

costs of conducting business in a new location or with a new class of customer

costs of introducing a new product or service.

costs of advertising and promotional activities

professional fees

Question 20
Complete

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On July 1, 20x1, Town Company purchased for ₱540,000 a warehouse building and the land on which it is located. The following data were
available concerning the property:

Current appraised value Seller’s original cost

Land 200,000 140,000

Warehouse building 300,000 280,000

Totals 500,000 420,000

Town should record the land at

140,000

180,000

216,000

200,000

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