University of Texas - MATH 1301 Chapter 15 PPE Part 1 QUIZ 1: 1)Property, plant, and equipment may properly include a

University of Texas - MATH 1301

Chapter 15

PPE Part 1

QUIZ 1:

1)Property, plant, and equipment may properly include

a.            deposits on machinery not yet received.

b.            idle equipment classified as held for sale asset under PFRS 5.

c.             land held for speculation, rather than for use in the entity’s normal business activities.

d. none of these.

2.            Which of these is not a major characteristic of a PPE?

a.            Possesses physical substance

b.            Acquired for use in operations

c.             Yields services over a number of years

d.            All of these are major characteristics of a PPE.

3.            PPE purchased on long-term credit contracts should be initially recognized at

a.            the total amount of the future payments.

b.            the future amount of the future payments.

c.             the present value of the future payments.

d. none of these.

4.            Nimbus Inc. purchased certain plant assets under a deferred payment contract. The agreement was to pay ?30,000 per year for ten years. The plant assets should be initially measured at

a.            ?300,000.

b.            ?300,000 plus imputed interest.

c.             present value of ?30,000 annuity for ten years at an imputed interest rate.

d.            future value of ?30,000 annuity for ten years at an imputed interest rate.

5.            A company 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 should be

a.            classified as other income.

b.            netted against the costs to clear the land and expensed as incurred.

c.             deducted from the cost of the plant.

d. deducted from the cost of the land.

6.            Cotton Hotel Corporation recently purchased Holiday Hotel and the land on which it is located with the plan to tear down the Holiday Hotel and build a new luxury hotel on the site. The demolition costs of the Holiday Hotel should be

a.            depreciated over the period from acquisition to the date the hotel is scheduled to be torn down.

b.            written off as an extraordinary loss in the year the hotel is torn down.

c.             capitalized as part of the cost of the land.

d.            capitalized as part of the cost of the new hotel.

7.            The cost of land typically includes the purchase price and all of the following costs except

a.            improvements, such as grading, filling, draining, and clearing.

b.            survey costs.

c.             cost of private driveways and parking lots.

d.            assumption of any liens or mortgages on the property.

8.            A donated plant asset for which the fair value has been determined, and for which incidental costs were incurred in acceptance of the asset, should be recorded at an amount equal to its

a.            incidental costs incurred.

 b. fair value.

c.             book value on books of donor and incidental costs incurred.

d.            book value on books of donor.

9.            The debit for a non-refundable sales tax properly levied and paid on the purchase of machinery preferably would be a charge to

a.            the machinery account.

b.            a separate deferred charge account.

c.             miscellaneous tax expense (which includes all taxes other than those on income).

d.            accumulated depreciation--machinery.

10.          A cost may be capitalized (capital expenditure) if

a.            it clearly increases the useful life of an asset.

b.            it increases the quantity of an asset.

c.             it clearly increases the quality of an asset beyond its original state.

d.            Any of these