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- 1. Multiple Choice
The cost of land usually includes all of the following except
Commission related to acquisition
Property tax after date of acquisition
Property tax to date of acquisition
Cost of survey
- 2. Multiple Choice
The single cost acquiring land and an unusable old building is
Charged to the land only.
Charged to the building only.
Allocated between land and building based on relative fair-value.
Allocated between land and building based on carrying amount.
- 3. Multiple Choice
When an entity acquired land with an old building and immediately demolished the old building so that the land can be used for the construction of a plant, the cost incurred to demolish the old building should be
Expensed as incurred
Added to the cost of the plant
Added to the cost of the land
Amortized over the estimated time period between the demolition of the building and the completion of the plant
- 4. Multiple Choice
An entity purchased land to be used as an investment property. Timber was cut from the site so development of the land could begin. The proceeds from the sale of the timber should be
Classified as other income
Credited to retained earnings
Deducted from the cost of the land
Classified as deferred income and amortized over five years
- 5. Multiple Choice
The term “betterment” refers to
An expenditure made for new facilities which increase capacity.
An expenditure made to restore capacity after abandonment or retirement.
An expenditure made to improve existing facilities by increasing capacity.
An expenditure made to help insure continuity of service capacity.
- 6. Multiple Choice
Which of the following would ordinarily be treated as a revenue expenditure rather than a capital expenditure?
Cost of servicing and overhaul to restore or maintain the originally assessed standard of performance.
The replacement of a major component of building.
An addition to an existing building.
Cost of improvement that is expected to provide discernible future benefit.
- 7. Multiple Choice
Which of the following costs should not be capitalized?
Replacement of roof of building every 15 years.
Cost of site preparation
Installation and assembly cost
Replacement of small spare parts annually
- 8. Multiple Choice
Which of the following subsequent expenditures should be expensed immediately?
Expenditure made to increase the efficiency or effectiveness of an existing asset.
Expenditure made to extend the useful life of an existing asset.
Expenditure made to maintain an existing asset in operating condition.
Expenditure made to add new asset.
- 9. Multiple Choice
Which statement is incorrect with respect to depreciation?
The depreciation method shall reflect the pattern in which the asset’s economic benefits are consumed by the entity.
Depreciation of an asset begins when it is available for use or when it is in the location and condition necessary for the intended use.
Depreciation cases at the earlier between the date the asset is classified as held for sale and the date the asset is derecognized.
Depreciation is not recognized if the fair value of an asset exceeds carrying amount.
- 10. Multiple Choice
In which of the following situations is the production method of depreciation most appropriate?
An asset’s service potential declines with use.
An asset’s service potential declines with the passage of time.
An asset is subject to rapid obsolescence.
An asset incurs increasing repairs and maintenance with use.
- 11. Multiple Choice
Depreciation is best described as a method of
Asset valuation
Current value allocation
Cost allocation
Useful life determination
- 12. Multiple Choice
The most common method of computing depletion is
Percentage depletion method
Decreasing charge method
Straight line
Production method
- 13. Multiple Choice
Which of the following is not a difference between the accounting treatment for depreciation and depletion?
Depletion applies to natural resources while depreciation applies to plant and equipment.
Depletion refers to the physical exhaustion or consumption of the asset while depreciation refers to the wear and tear, and obsolescence of the asset.
Many formulas are used in computing depreciation but only one is used to any extent in computing depletion.
The cost of the asset is the starting point for the computation of the amount of depreciation but the fair value reassessed each year is the starting point for the periodic charge for depletion.
- 14. Multiple Choice
Which measurement model applies to exploration and evaluation asset subsequent to initial recognition?
The cost model
The revaluation model
Either the cost model or the revaluation model
The recoverable amount model
- 15. Multiple Choice
What is the revalued amount of property, plant, and equipment?
Fair value
Depreciated replacement cost
Replacement cost
Fair value and depreciation replacement cost
- 16. Multiple Choice
The revaluation surplus that is realized because of the use of the asset or disposal of the asset may be transferred directly to
Retained earnings
Income
Share capital
Share premium
- 17. Multiple Choice
Under the revaluation model for accounting for property, plant, and equipment
Assets must be revalued quarterly
Assets must be revalued annually
Assets must be revalued biannually
There is no rule regarding the frequency of revaluation
- 18. Multiple Choice
What is the recoverable amount if an asset?
Fair value less cost of disposal
Value in use
Fair value less cost of disposal or value in use, whichever is higher
Fair value less cost of disposal or value in use, whichever is lower
- 19. Multiple Choice
All of the following statements are true with regard to impairment of asset, except
If impairment indicators are present, the entity must conduct an impairment test.
The impairment test compares the carrying amount with the lower of fair value less cost of disposal and value in use.
If the recoverable amount is lower than carrying amount, an impairment loss is recognized.
If recoverable amount is higher than carrying amount, no impairment loss is recognized.
- 20. Multiple Choice
The impairment rules for long-lived assets apply to all of the following, except
Building currently used in business
Financial institution
Land
Computer used to run a production process
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