Test I.MULTIPLE CHOICE: Encircle the letter of the best answer.

1. Property, plant and equipment are tangible items that

I. Are held for use in production or supply of goods and services, for rental to others or for
administrative purposes
II. Are expected to be used during more than one period
a. I only c. Both I and II
b. II only d. Neither I nor II
2. Which is not a major characteristic of property, plant and equipment?
a. The property, plant and equipment are tangible assets
b. The property,plant and equipment are used in business
c. The property,plant and equipment are expected to be used over a period of more than 1 year.
d. The property,plant and equipment are subject to depreciation
3. An entity of property,plant and equipment shall be recognized as an asset when
I. It is probable that future economic benefits associated with the asset will flow to the entity
II. The cost of the asset to the entity can be measured reliably
a. I only c. Both I and II
b. II only d. Neither I nor II
4. Under the cost model, subsequent to initial recognition as an asset, an item of property,plant
and equipment shall be carried at
a. Cost
b. Revalued amount
c. Cost less accumulated depreciation and any accumulated impairment loss
d. Revalued amount less accumulated depreciation and any accumulated impairment loss
5. The cost of an item of property,plant and equipment comprises all of the ff.,except
a. Purchase price
b. Import duties and nonrefundable purchase taxes
c. Any cost directly attributable in bringing the asset to the location and condition for its intended use
d. Initial estimated of the cost of dismantling and removing the item and restoring the site,
the obligation for which the entity does not incur when the item was acquired
6. Costs directly attributable to bringing the asset to the location and condition for its intended use
include all of the ff.,except
a. Cost of employee benefit not arising directly from the construction and acquisition of property,
plant and equipment
b. Cost of site preparation
c. Initial delivery and handling cost
d. Installation and assembly cost
7. Costs are expensed immediately include all of the ff., except
a. Cost of opening a new facility
b. Cost of introducing a new product or service, including cost of advertising and promotional
activities
c. Cost of conducting business in a new location, including cost of staff training
d. Cost of testing whether the asset is functioning properly
8. It is the present value of the cash flows an entity expects to arise from the continuing use of an
asset and from its disposal at the end of its useful life or expects to incur when settling a liability
a. Entity-specific value c. Value in use
b. Fair value d. Discounted value
9. The cost of an item of property,plant and equipment acquired in a nonmonetary exchange is
measured at the
a. Carrying amount of the asset given up c. Carrying amount of the asset received
b. Fair value of the asset given up d. Fair value of the asset received
10. The cost of an item of property,plant and equipment that is acquired in exchange for combination
of monetary and nonmonetary asset is measured at the
a. Fair value of the asset given up plus the amount of any cash or cash equivalent transferred
b. Fair value of the asset received plus the amount of any cash or cash equivalent transferred
c. Book value of the asset given up plus the amount of any cash or cash equivalent transferred
d. Book value of the asset received plus the amount of any cash or cash equivalent transferred
11. If an item of property,plant and equipment is acquired in exchange for a nonmonetary asset
and the exchange lacks commercial substance, the cost of the asset acquired is measured at
a. Fair value of the asset given up c. Carrying amount of the asset given up
b. Fair value of the asset received d. Carrying amount of the asset received
12. Grants in recognition of specific costs are recognized as income
a. Over the same period as the relevant expense
b. Immediately
c. Over a maximum of 5 years using straight line
d. Over a maximum of 5 years using sum of digits
13. Grants related to depreciable assets are usually recognized as income
a. Immediately
b. Over the useful life of the assets using straight line
c. Over the useful life of the assets using sum of years' digits
d. Over the useful life of the assets and in proportion to the depreciation of the assets
14. Grants related to nondepreciable assets that require fulfillment of certain conditions
a. Should not be recognized as income
b. Should be recognized as income immediately
c. Should be recognized as income over 40 years
d. Should be recognized as income over the periods which bear the cost of meeting the conditions
15. When an entity purchases land with 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
a. Expensed as incurred c. Added to the cost of the land
b. Added to the cost of the plant d. Amortized over the estimated time period
16. An entity purchased land to be used as the site for the construction of a plant. Timber was cut
from the building site so that construction of the plant could begin. The proceeds from the sale
of the timber shall be
a. Classified as other income c. Deducted from the cost of the plant
b. Netted against the cost to clear the land d. Deducted from the cost of land
and expensed as incurred
17. Land was purchased to be used as the site for the construction of plant. A building on the
property was sold and removed by the buyer so that construction on the plant could begin. The
proceeds from the sale of the building shall be
a. Netted against the cost to clear the land and expensed as incurred
b. Netted against the cost to clear the land and amortized over the life of the plant
c. Deducted from the cost of the land
d. Classified as other income
18. The term "betterment" refers to
a. An expenditure made for new facilities which increase "capacity".
b. An expenditure made to restore "capacity" after abandonment or retirement
c. An expenditure made to improve existing facilities by increasing "capacity"
d. An expenditure made to help insure continuity of service capacity
19. An improvement made to a machine which increased its fair value and its production capacity
without extending the machine's useful life should be
a. Expensed immediately c. Capitalized in the machine account
b. Debited to accumulated depreciation d. Allocated between accumulated depreciation
and the machine account
20. Which of the ff. would ordinarily be treated as a revenue expenditure rather than a capital
expenditure?
a. Cost of servicing and overhaul to restore or maintain the originally assessed standard of performance
b. The replacement of a major component of building
c. An addition to an existing building
d. Rearrangement cost that is expected to provide discernible future benefit
21. The cost of building shall include all of the ff.,except
a. Any renovating or remodeling cost incurred to put the building purchased in a condition for it
intended use
b. Cost of excavation
c. Expenditure for service equipment and fixture made a permanent part of the structure
d. Cost incurred to have existing building removed to make room for construction of new building
22. The cost of land shall include all of the ff.,except
a. Commission related to acquisition
b. Property tax after date of acquisition assumed by the purchaser
c. Property tax to date of acquisition assumed by the purchaser
d. Cost of survey
23. Which of the ff. expenditures may properly be capitalized?
a. Expenditure for massive advertising campaign
b. Insurance on plant during construction
c. Research and development related to a long-term asset which is giving the entity a competitive
market advantage
d. Title search and other legal cost related to a piece of property which was not acquired
24. Which of the ff. is the most appropriate policy as regards the allocation of joint overhead
cost to plant equipment constructed by the entity for its 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
25. A donated plant asset for which the fair value has been determined and for which directly
attributable costs were incurred, shall be recorded at an amount equal to
a. Directly attributable costs incurred
b. Fair value and directly attributable costs incurred
c. Carrying amount and directly attributable costs incurred
d. Carrying amount
26. An entity purchased a plant asset under a deferred payment contract. The agreement was to
pay P10,000 per year for 5 years. The plant asset shall be measured at
a. P50,000
b. P50,000 plus imputed interest
c. Present value of P10,000 annuity for 5 years at an imputed interest
d. Present value of P10,000 annuity for 5 years discounted at the bank prime interest rate
27. If the present value of a note issued in exchange for a plant asset is less than its face amount,
the difference shall be
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
28. Gains and losses arising from the derecognition of an item 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 the carrying amount of the asset
c. Net disposal proceeds and the cost of the asset
d. Net disposal proceeds and the carrying amount of the asset
29. Which of the ff. terms best describes the removal of an asset from an entity's statement of
financial position?
a. Derecognition c. Writeoff
b. Impairment d. Depreciation
30. This is defined as "assistance in the form of transfers of resources to an entity in return for past or
future compliance with certain conditions relating to the operating activities of the entity.
a. Government grants c. Government donation
b. Government assistance d. Government aid

Test II. Enumeration

1-3. Subclassifications of tangible operational assets

4-5. Two models of measurement after initial recognition
6-12. The manners of acquiring property,plant and equipment
13-17. Costs incurred after acquisition
18-19. Two classifications of expenditures
20. Give at least 1 type of repair