27 Questions
What is the cost of an asset that includes import duty and non-refundable purchase price?
Purchase price including import duty and non-refundable purchase price
What are the costs that can be capitalized as part of the cost of property, plant and equipment?
Only directly attributable costs
What is the treatment of proceeds from selling samples produced during the testing of an asset?
Included in profit or loss
What is the initial estimate of the cost of dismantling and removing an asset?
Directly attributable cost
What is the cost of an asset that excludes trade discount and rebate?
Net cost
What is the cost of testing whether an asset is functioning properly?
Directly attributable cost
When payment for an item of property, plant and equipment is deferred beyond normal credit terms, what is the cost?
The cash price equivalent
How is the excess of the installment price over the cash price treated?
As an interest expense
A machinery is purchased at an installment price of P350,000. The terms are P50,000 down and the balance payable in three equal annual installments. What is the cash price of the machinery?
Cannot be determined
What is the purpose of recording the asset at the cash price?
To reflect the true cost of the asset
Over what period is the interest expense amortized?
The credit period
What is the basis for measuring proceeds when shares are issued for consideration other than actual cash?
Fair value of the consideration received
In what order is the property measured when acquired through the issuance of share capital?
Fair value of the property received, then fair value of the share capital, then par value or stated value
What is the measurement basis for a piece of land acquired through the issuance of share capital?
Fair value of the land
What is the par value of the 20,000 shares issued in the illustration?
P1,000,000
What is the purpose of measuring the property acquired through the issuance of share capital?
To determine the fair value of the property received
What is the initial measurement of a financial liability when an entity acquires an asset by issuing bonds payable?
Fair value of bonds payable plus transaction costs
What is the order of measurement when an entity acquires an asset by issuing bonds payable?
Fair value of bonds payable, face amount of bonds payable, fair value of asset received
What is the face amount of the bonds payable in the illustration?
P5,000,000
What is the asset acquired in the illustration?
Building
What is the fair value of the asset received in the illustration?
Not provided
What is the basis for measuring the cost of an item of property, plant and equipment acquired in exchange for a nonmonetary asset or a combination of monetary and nonmonetary assets?
Fair value
When is an exchange transaction recognized at carrying amount?
When the fair value of the asset given or received is reliably measurable
What is commercial substance in an exchange transaction?
The event or transaction causing the cash flows of the entity to change significantly
How does an entity assess whether an exchange transaction has commercial substance?
By considering if the amount, timing and risk of the cash flows from the new asset are different from the cash flows of the old asset
What is entity-specific value?
The present value of the cash flows expected to arise from the continuing use of an asset
When is an exchange transaction recognized at fair value?
When the fair value of the asset given or the fair value of the asset received is reliably measurable
This quiz covers the recognition and measurement of property, plant and equipment, including the elements of cost, purchase price, and trade discounts. It also deals with the initial recognition and subsequent measurement of assets. Test your understanding of this important accounting topic!
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