IAS 16 MCQ Test

Which of the following costs CANNOT be capitalized as part of the cost of property, plant, and equipment (PPE)?

• Costs of site preparation.

• Initial delivery and handling costs.

• Costs of training personnel to use the asset.

• Professional fees directly attributable to bringing the asset to its working condition.

An entity revalues its building. If the carrying amount of the building increases, the increase should be credited to:

• Retained earnings.

• Profit or loss.

• Revaluation surplus in equity.

• Deferred revenue.

Which depreciation method assumes that the asset provides more benefits in its early years and less in its later years?

• Straight-line method.

• Units of production method.

• Diminishing balance method.

• All of the above.

An entity purchased a machine for $100,000. It has an estimated useful life of 5 years and a residual value of $10,000. Using the straight-line method, what is the annual depreciation expense?

• $18,000

• $20,000

• $22,000

• $24,000

Which of the following is a key requirement when an entity chooses to revalue its PPE?

• All PPE must be revalued annually.

• Only assets with increasing fair values must be revalued.

• The entire class of PPE to which the asset belongs must be revalued.

• Individual assets can be revalued selectively.

Costs of day-to-day servicing of PPE are generally:

• Capitalized as part of the asset's cost.

• Recognized as an expense in profit or loss.

• Credited to the revaluation surplus.

• Deferred and amortized over the asset's useful life.

An entity has a machine with a cost of $50,000 and accumulated depreciation of $30,000. The machine is sold for $25,000. What is the gain or loss on disposal?

• $5,000 gain.

• $5,000 loss.

• $15,000 gain.

• $15,000 loss.

According to IAS 16, which of the following is a required disclosure?

• The names of all suppliers of PPE.

• The depreciation methods used.

• The market value of all PPE.

• The original purchase invoices of all PPE.

An entity's building has a cost of $500,000, accumulated depreciation of $200,000, and a fair value of $400,000 at the date of revaluation. What is the revaluation surplus?

• $100,000

• $200,000

• $300,000

• $400,000.

When an entity dismantles and removes an asset, the costs of dismantling and removing the asset should be:

• Capitalized as a new asset.

• Recognized as an expense in the period incurred.

• Capitalized as part of the asset's original cost if the obligation was incurred when the asset was acquired.

• ignored.