Accounting for Property, Plant and Equipment

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What is the cost of an asset that includes import duty and non-refundable purchase price?

Net realizable value

Historical cost

Purchase price including import duty and non-refundable purchase price (correct)

Current market value

What are the costs that can be capitalized as part of the cost of property, plant and equipment?

All costs incurred during the acquisition

Only purchase price and import duty

Only directly attributable costs (correct)

Directly attributable costs and indirect costs

What is the treatment of proceeds from selling samples produced during the testing of an asset?

Recognized as revenue

Included in the cost of property, plant and equipment

Included in profit or loss (correct)

Included in other comprehensive income

What is the initial estimate of the cost of dismantling and removing an asset?

Directly attributable cost Signup and view all the answers

What is the cost of an asset that excludes trade discount and rebate?

Net cost Signup and view all the answers

What is the cost of testing whether an asset is functioning properly?

Directly attributable cost Signup and view all the answers

When payment for an item of property, plant and equipment is deferred beyond normal credit terms, what is the cost?

The cash price equivalent Signup and view all the answers

How is the excess of the installment price over the cash price treated?

As an interest expense Signup and view all the answers

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 Signup and view all the answers

What is the purpose of recording the asset at the cash price?

To reflect the true cost of the asset Signup and view all the answers

Over what period is the interest expense amortized?

The credit period Signup and view all the answers

What is the basis for measuring proceeds when shares are issued for consideration other than actual cash?

Fair value of the consideration received Signup and view all the answers

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 Signup and view all the answers

What is the measurement basis for a piece of land acquired through the issuance of share capital?

Fair value of the land Signup and view all the answers

What is the par value of the 20,000 shares issued in the illustration?

P1,000,000 Signup and view all the answers

What is the purpose of measuring the property acquired through the issuance of share capital?

To determine the fair value of the property received Signup and view all the answers

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 Signup and view all the answers

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 Signup and view all the answers

What is the face amount of the bonds payable in the illustration?

P5,000,000 Signup and view all the answers

What is the asset acquired in the illustration?

Building Signup and view all the answers

What is the fair value of the asset received in the illustration?

Not provided Signup and view all the answers

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 Signup and view all the answers

When is an exchange transaction recognized at carrying amount?

When the fair value of the asset given or received is reliably measurable Signup and view all the answers

What is commercial substance in an exchange transaction?

The event or transaction causing the cash flows of the entity to change significantly Signup and view all the answers

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 Signup and view all the answers

What is entity-specific value?

The present value of the cash flows expected to arise from the continuing use of an asset Signup and view all the answers

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 Signup and view all the answers