Question 1

Plant assets may properly include idle equipment awaiting sale.

Accepted Answer

False

Question 2

Land and buildings held for rent and/or capital appreciation are considered Investment Property under IFRS and may be accounted for using the Fair Value Model.

Accepted Answer

False

Question 3

The cost of rearranging the factory equipment to increase efficiency should be recorded as a capital expenditure in the normal situation.

Accepted Answer

Rearranging factory equipment to increase efficiency is considered a long-term investment in the company's operations and will benefit the company over a long period of time. Therefore, it is recorded as a capital expenditure.

Question 4

Under IFRS,Property,Plant and Equipment should be broken down to its major components and depreciated accordingly.

Accepted Answer

Under IFRS, Property, Plant and Equipment should be broken down to its major components and depreciated accordingly. This means that each major component of an asset should be separately identified and depreciated based on its useful life. This approach is known as componentization and is aimed at reflecting the economic reality of the assets' useful lives and ensuring more accurate financial reporting.

Question 5

When a basket purchase of several ling-lived assets is made,the purchase price will normally be assigned using the relative fair values of those assets.

Accepted Answer

The answer of When a basket purchase of several ling-lived...

Question 6

The cost of a major inspection of an airplane engine would be capitalized if it occurred several times per year.

Accepted Answer

The cost of a major inspection of an airplane engine would be expensed as a maintenance cost when it occurs, rather than capitalized. Capitalization is reserved for costs that increase the long-term value or usefulness of an asset, such as an engine overhaul or upgrade.

Question 7

If an asset is purchased by giving a non-interest-bearing note payable,the use of an unrealistically low interest rate will cause the asset to be recorded at a cost that is too low and the interest expense amount reported on the income statement also will be too low.

Accepted Answer

The use of an unrealistically low interest rate in accounting for a non-interest-bearing note payable will actually cause the asset to be recorded at a cost that is too high, not too low, because the present value of the note payable will be higher. Conversely, the interest expense reported over time will be higher as well, not lower, because the difference between the recorded payable and the cash to be paid in the future represents interest expense.

Question 8

A primary principle in recording and reporting capital assets other than land is that they are recorded at cost when acquired and subsequently are reported at cost or cost less accumulated amortization.

Accepted Answer

This statement is true. Capital assets other than land are recorded at cost when acquired and are subsequently reported at cost or cost less accumulated amortization.

Question 9

Minor spare parts will normally be included in inventory,while major spare parts will be considered property,plant and equipment.

Accepted Answer

Minor spare parts are usually considered inventory because they are typically held for use in the production process or for sale, whereas major spare parts, which can provide economic benefits to a business for more than one period, are classified as property, plant, and equipment (PPE) under many accounting standards, including IFRS (International Financial Reporting Standards) and GAAP (Generally Accepted Accounting Principles).

Question 10

Property taxes accrued u
to the date of the purchase of a capital asset should be included in the recorded cost of the asset.

Accepted Answer

Property taxes are considered part of the cost of acquiring a capital asset and should be included in the recorded cost of the asset. This is in accordance with the generally accepted accounting principles (GAAP) and helps to ensure that the cost of the asset is accurately reflected on the balance sheet.

Question 11

Involuntary safety costs must always be capitalized under both IFRS and ASPE.

Accepted Answer

Involuntary safety costs do not always have to be capitalized under both IFRS and ASPE. The decision to capitalize or expense such costs depends on whether they provide future economic benefits and meet the asset recognition criteria under the respective framework.

Question 12

Under the fair value model,buildings must be depreciated over their useful lives.

Accepted Answer

Under the fair value model, buildings are not depreciated but are reported at their fair value less any accumulated depreciation and impairment losses.

Question 13

When a capital asset (such as land or buildings) is purchased,any unpaid property taxes (for the period prior to the purchase date) that are paid by the purchaser should be recorded as part of the cost of the asset.

Accepted Answer

Unpaid property taxes that are paid by the purchaser should be added to the cost of the asset as they are necessary to acquire and make the asset ready for its intended use.

Question 14

Under the Fair Value Model,tangible and intangible assets with a fair market value are revalued to fair value every year.

Accepted Answer

Under the Fair Value Model, typically applied in the context of investment property under IAS 40, assets are indeed revalued to fair value, but not all tangible and intangible assets are subject to annual revaluation to fair value as a requirement. The model primarily applies to investment properties, and the revaluation of other types of tangible and intangible assets is subject to different accounting standards and may not require annual revaluation.

Question 15

Goodwill is the premium above fair market value that a company is willing to pay for an acquired company's superior earnings potential.

Accepted Answer

Goodwill represents the value of an acquired company's intangible assets, such as brand recognition, customer loyalty, and intellectual property, that cannot be individually identified and measured. It is the premium that a company pays for the potential earning power of these intangible assets.

Question 16

Idle land is least likely to be classified in property,plant and equipment.

Accepted Answer

Idle land is still classified under property, plant, and equipment (PP&E) in accounting, as it is a tangible asset owned by a company for use in production or investment, not necessarily requiring current active use to qualify.

Question 17

Company B purchased a large machine at a cash equivalent cost of $25,000 on January 1,2001.On that date the company paid $10,000 cash and gave a one-year,10 percent interest-bearing note payable for the remaining $15,000.Therefore,the company should debit the machinery account for $25,000.

Accepted Answer

The cost of the machinery is $25,000, regardless of the payment method. Therefore, the machinery account should be debited for the full amount.

Question 18

Subsequent to acquisition,the cost of capital assets Land may include title search

Accepted Answer

The cost of capital assets Land may include title search expenses incurred after acquisition.

Question 19

In the case of exchanges of both similar and dissimilar assets,the asset acquired should never be recorded at an amount that is more than its market value.

Accepted Answer

This principle is known as the "cost principle" in accounting, which requires that assets should be recorded at their purchase price or cost. In the case of exchanges of similar assets, the cost is often the market value of the asset given up. However, in the case of exchanges of dissimilar assets, the cost is often the fair value of the asset received, which must not be recorded at an amount greater than its market value.

Question 20

Biological Assets may be classified as Property,plant and equipment or as inventory.

Accepted Answer

Biological assets can be classified as property, plant, and equipment or as inventory, depending on their nature and use in the business of the entity.

Quiz 9: Property,Plant,and Equipment; Intangibles; and Goodwill