BACC 15 July PPE part 1

What are Property, Plant and Equipment (PPE) also called?

• Current assets

• Intangible assets

• Liquid assets

• Fixed assets

Which of the following costs should be included when determining the cost of PPE?

• Uninsured theft

• Import duties

• Mistakes in installation

• Vandalism

What type of expenditures are known as capital expenditures for PPE?

• Expenditures to enhance the value

• Expenditures to increase operating efficiency, productive capacity or useful life

• Expenditures to decrease useful life

• Expenditures to repair or maintain assets

In the Straight-Line Method of depreciation, what is the formula to calculate annual depreciation?

• Cost of PPE - Residual value / Useful Life

• Cost of PPE + Residual value / Useful Life

• Cost of PPE x Residual value / Useful Life

• Cost of PPE / Useful Life

How should companies record the disposal of PPE by sale?

• Crediting the Asset account

• Crediting Accumulated Depreciation

• Debiting Accumulated Depreciation and crediting the Asset account

• Debiting Cash account

What occurs when the proceeds from the sale of PPE exceed the net book value?

• Depreciation expense increases

• No impact on financial statements

• A loss on disposal occurs

• A gain on disposal occurs

Which method of depreciation has a decreasing annual depreciation expense over the asset's useful life?

• Reduction Balance Method

• Straight-Line Method

• Units of Production Method

• Double-Declining Balance Method

What should be included when determining the cost of PPE?

• Vandalism

• Fines for not obtaining proper permits

• Mistakes in installation

• Freight and handling charges

What type of expenditures are known as revenue expenditures for PPE?

• Expenditures to enhance the value

• Expenditures to decrease useful life

• Expenditures to repair or maintain assets in working order

• Expenditures to increase operating efficiency

In the Reducing Balance Method of depreciation, what is the key difference compared to the Straight-Line Method?

• Depreciation expense is the same amount for each year

• Depreciation rate is given in the question

• Salvage value is used in calculation

• Depreciation expense decreases as years go by