Quiz_chapter-15_ppe-part-1-1

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Chapter 15 PPE Part 1 NAME: Professor:

Section:

Date: Score:

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.

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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

“From the ends of the earth I call to you, I call as my heart grows faint; lead me to the rock that is higher than I.” (Psalms 61:2)

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NAME: Professor:

Section:

Date: Score:

QUIZ 2: 1. Merry Co. purchased a machine costing ₱125,000 for its manufacturing operations and paid shipping costs of ₱20,000. Merry spent an additional ₱10,000 in testing and preparing the machine for use. What amount should Merry record as cost of the machine? a. 155,000 b. 145,000 c. 135,000 d. 125,000 2. Peterson, Inc. purchased a machine under a deferred payment contract on December 31, 20x1. Under the terms of the contract, Peterson is required to make eight annual payments of ₱140,000 each beginning December 31, 20x2. The appropriate interest rate is 8%. The purchase price of the machine is a. 1,389,190 b. 1,120,000 c. 868,900 d. 804,520 3. Marburg Manufacturing Company purchased a machine on January 2, 20x2. The invoice price of the machine was ₱40,000, and the vendor offered a 2 percent discount for payment within ten days. The following additional costs were incurred in connection with the machine: Transportation-in 1,200 Installation cost 700 Testing costs prior to regular operation 550 If the invoice is paid within the discount period, Marburg should record the acquisition cost of the machine at a. 41,650 b. 41,100 c. 40,400 d. 39,200 4. On July 1, 20x1, Town Company purchased for ₱540,000 a warehouse building and the land on which it is located. The following data were available concerning the property: Current appraised value Seller’s original cost Land 200,000 140,000 Warehouse building 300,000 280,000 Totals 500,000 420,000 Town should record the land at a. 140,000 b. 180,000

c. 200,000

d. 216,000

5. The Oscar Corporation acquired land, buildings, and equipment from a bankrupt company at a lump-sum price of ₱180,000. At the time of acquisition, Oscar paid ₱12,000 to have the assets appraised. The appraisal disclosed the following values: Land 120,000 Buildings 80,000 Equipment 40,000 What cost should be assigned to the land, buildings, and equipment, respectively? a. 64,000, 64,000, and 64,000 b. 90,000, 60,000, and 30,000

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c. 96,000, 64,000, and 32,000 d. 120,000, 80,000, and 40,000 6. On December 1, 20x1, Boyd Co. purchased a ₱400,000 tract of land for a factory site. Boyd razed an old building on the property to make way for the construction of the new factory. Boyd sold the materials it salvaged from the demolition. Boyd incurred additional costs and realized salvage proceeds during December 20x1 as follows: Demolition of old building Legal fees for purchase contract and recording ownership Title guarantee insurance Proceeds from sale of salvaged materials

₱50,000 10,000 12,000 8,000

In its December 31, 20x1 statement of financial position, Boyd should report a balance in the land account of a. 464,000 b. 460,000 c. 442,000 d. 422,000 7. On February 12, Laker Company purchased a tract of land as a factory site for ₱175,000. An existing building on the property was razed and construction was begun on a new factory building in March of the same year. Additional data are available as follows: Cost of razing old building 35,000 Title insurance and legal fees to purchase land 12,500 Architect's fees 42,500 New building construction cost 875,000 The recorded cost of the completed factory building should be a. 910,000 b. 917,500 c. 930,000 d. 952,500 8. Amble, Inc. exchanged a truck with a carrying amount of ₱12,000 and a fair value of ₱20,000 for a truck and ₱5,000 cash. The fair value of the truck received was ₱15,000. At what amount should Amble record the truck received in the exchange? a. 7,000 b. 9,000 c. 12,000 d. 15,000 9. On March 31, 20x1, Winn Company traded in an old machine having a carrying amount of ₱16,800, and paid a cash difference of ₱6,000 for a new machine having a total cash price of ₱20,500. On March 31, 20x1, what amount of loss should Winn recognize on this exchange? a. 0 b. 2,300 c. 3,700 d. 6,000 10. On October 1, Takei, Inc. exchanged 8,000 shares of its ₱25 par value ordinary share for a parcel of land to be used as site for a new plant. Takei's ordinary share had a fair value of ₱80 per share on the exchange date. Takei received ₱36,000 from the sale of scrap when an existing building on the site was razed. The land should be carried at a. 200,000 b. 236,000 c. 604,000 d. 640,000 “He who obeys instructions guards his life, but he who is contemptuous of his ways will die.” (Proverbs 19:16)

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