Property Plant and Equipment MCQs

    

Property Plant and Equipment MCQs Paper

1Which of the following is not an appropriate basis for measuring the cost of property, plant, and equipment?

A. The purchase price, freight costs, and installation costs of a productive asset should be included in the assets cost.
B. Proceeds obtained in the process of readying land for its intended purpose, such as from the sale of cleared timber, should be recognized immediately as income.

C. The costs of improvements to equipment incurred after its acquisition should be added to the assets cost if they increase future service potential.
D. All costs incurred in the construction of a plant building, from excavation to completion, should be considered as part of the assets cost.

Ans:B

2. An entity installed an assembly line in Year 1. Four years later, $100,000 was invested to automate the line. The automation increased the market value and productive capacity of the assembly line but did not affect its useful life. Proper accounting for the cost of the automation should be to

A. Report it as an expense in Year 5
B. Establish a separate account for the $100,000.
C. Allocate the cost of automation between the asset and accumulated depreciation accounts.
D. Debit the cost to the property, plant, and equipment account.

Ans: D

3. A theme park purchased a new, exciting ride and financed it through the manufacturer. The following facts pertain:"
Purchase price	$800,000
Delivery cost	50,000
Installation cost	70,000
Cost of trial runs	40,000
Interest charges for first year	60,000

"The straight-line method is to be used. Compute the depreciation on the equipment for the first year assuming an estimated service life of 5 years."

A. $160,000
B. $184,000
C. $192,000

D. $204,000

Ans: C

4. Which of the following is not an appropriate basis for measuring the historical cost of property, plant, and equipment?

A. Delivery and handling costs and installation costs of a productive asset should be included in the assets cost.
B. The cost should include the purchase price without a deduction for trade discounts.

C. The costs of improvements to equipment incurred after its acquisition should be added to the assets cost if they provide future economic benefits exceeding the originally assessed standard of performance.
D. All costs incurred in the construction of a plant building, from excavation to completion, should be considered as part of the assets cost.

Ans:B

5. In making a cash flow analysis of property, plant, and equipment (PPE), the internal auditor discovered that depreciation expense for the period was $10,000. PPE with a cost of $50,000 and related accumulated depreciation of $30,000 was sold for a gain of $1,000. If the carrying amount of PPE increased by $80,000 during the period, how much PPE was purchased this period?

A. $91,000
B. $100,000
C. $110,000

C. $119,000

Ans: C

6. On January 1, Year 1, an entity purchased an abandoned quarry for $1,200,000 to be used as a landfill to service its trash collection contracts with nearby cities for the next 20 years. The entity depletes the quarry using the units-of-production method based on a surveyors measurements of volume of the quarrys pit. This amount was 500,000 cubic yards when purchased and 350,000 cubic yards at year-end Year 5. What is the net amount that should be shown on the entitys December 31, Year 5, statement of financial position for the quarry?

A. $1,200,000
B. $900,000
C. $840,000

D. $360,000

Ans: C

7

A new machine has an initial cost of $300,000, an estimated useful life of 2,000 hours of use over a 3-year period, and an estimated residual value of $70,000. Usage rates are estimated as 500 hours in the first year, 700 hours in the second year, and 800 hours in the third year. Depreciation expense in Year 2 under the units-of-production method of depreciation will be

A. $57,500
B.$75,000
C.$80,500

D. $105,000

Ans: C

8. A company uses straight-line depre accelerated depreciation for tax purposes. Which of the following account balances would be lower in the financial statements used for tax purposes than it would be in the general purpose financial statements?

A. Accumulated depreciation.
B. Cash.
C. Retained earnings.

D. Gross property, plant, and equipment.

Ans: C

9. All of the following would be included as part of the cost of a depreciable asset except the

A. Costs to level land to make it usable for the companys purposes.

B. Freight costs to ship new equipment to the companys facility.
C. Actual interest costs incurred during the construction of a new building.
D. Costs to construct a driveway on the companys property.

Ans:A

10. The board of directors of Ingold Industries, Inc., authorized Don Burger, president of Ingold, to pay as much as $90,000 to purchase a tract of land adjacent to the main factory. Burger negotiated a price of $75,800 for the land, and legal fees for closing costs amounted to $820. A contractor cleared, filled, and graded the land for $6,800, and dug the foundation for a new building for $4,300. A prefabricated building was erected at a cost of $181,000. The building has an estimated useful life of 20 years with no residual value. The contractors bill indicated that the cost of the parking lot and driveways was $7,060. The parking lot and the driveways will need to be replaced in 15 years. The proper amount to be recorded in Ingolds land account is

A. $76,620
B. $83,420

C. $87,720
D. $90,480

Ans: B