Chapter 4 - Property, plant and equipment

Which of the following items qualifies as property, plant and equipment?

• A machine bought for resale to a customer

• A machine bought for use in more than one accounting period

• A machine bought for use during a single accounting period

• Tools bought for use in during a single accounting period

The "carrying amount" of an item of property, plant and equipment generally refers to:

• The depreciable amount of the item

• The amount at which the item is recognized in the financial statements

• The replacement cost of the item

• The cost of the item

A company pays £40,000 to replace a major component of a factory

machine. The faulty component that is replaced is sold for £2,000. The

carrying amount of the machine just before this replacement occurs is

£450,000, of which £10,000 relates to the faulty component that is being

replaced. The revised carrying amount of the machine after the

replacement occurs and the profit or loss on disposal of the faulty

component are:

• Carrying amount £480,000, Loss £10,000

• Carrying amount £490,000, Profit £2,000

• Carrying amount £490,000, Loss £8,000

• Carrying amount £480,000, Loss £8,000

Which of the following would not be included in the cost of an item of

property, plant and equipment?

• Testing costs

• Refundable value added tax

• Site preparation costs

• Delivery and installation charges

Depreciation is defined as the fall in value of an asset during an

accounting period. True or False?

• True

• False

On 1 January 2021, a company which prepares financial statements to 31 December each year buys an item of equipment for £20,000. Useful life is estimated to be six years and residual value is expected to be approximately £1,500. The company uses the diminishing balance method of depreciation at a rate of 35% per annum. To the nearest pound, the depreciation of this item for the year to 31 December 2022 would be:

• £3,083

• £4,209

• £7,000

• £4,550

Which of the following would not be included in the cost of an item of

property, plant and equipment?

• Testing costs

• Refundable value added tax

• Site preparation costs

• Delivery and installation charges

Which of the following would not be included in the cost of an item of

property, plant and equipment?

• Testing costs

• Refundable value added tax

• Site preparation costs

• Delivery and installation charges

Borrowing costs that are directly attributable to the acquisition of a

qualifying asset must be capitalized as part of the cost of that asset. True or False?

• True

• False

If a company adopts the revaluation method in relation to an item of property, plant and equipment, it is no longer necessary to charge depreciation in relation to that item. True or False?

• True

• False