Chapter 10 - PPE, Goodwill and Intangible Assets

Which of the following is not a characteristic of Property, Plant, and Equipment (PPE)?

• Held for use in the business

• Used in the operation of the business to help create revenue

• Intended for sale as inventory

• Relatively expensive

According to the cost principle of measurement, how should a business carry an asset on the balance sheet?

• At its estimated market value

• At its cost or the amount paid for the asset

• At its depreciated value

• At its replacement cost

Grace is calculating the cost of a piece of land. Which of the following would she not include in the cost of the land?

• A. Purchase price

• B. Brokerage commission

• C. Cost of a new fence around the property

• D. Cost for demolishing an unwanted building on the land

Land improvements are distinct from land because:

• They are typically less expensive than land.

• They are subject to amortization.

• They do not wear out.

• They are not considered long-term assets.

Lucas purchased a building and incurred several costs. Which of the following costs would be included in the cost of the building?

• Property taxes in arrears

• Architectural fees

• Cost of demolishing an old building

• Landscaping costs

Kate is setting up a new factory and needs to record the cost of new machinery. Which of these expenses should be capitalized as part of the machinery's cost?

• Routine maintenance after installation

• Provincial sales tax (PST) on the purchase

• Insurance after the asset is in use

• Installation costs

Umit is leasing an office space and makes several alterations, such as painting and installing special equipment. These alterations are called:

• Repairs and maintenance

• Rent expense

• Leasehold improvements

• Capital cost allowance

Leasehold improvements should be amortized over:

• The life of the building regardless of the lease term.

• A maximum of 10 years.

• The shorter of the lease term (including renewal options) or the useful life of the leased asset.

• The useful life of the leased asset only.

• $200,000

• $270,000

• $180,000

• $360,000

Sebastian's company made an expenditure that increased the efficiency of an asset. This expenditure should be:

• Debited to an expense account.

• Debited to an asset account.

• Ignored for accounting purposes.

• Credited to an asset account.