Topic: Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS

Search 500 + past questions and counting.
Professional Bodies Filter
Program Filters
Subject Filters
More
Tags Filter
More
Check Box – Levels
Series Filter
More
Topics Filter
More
  • 1 Marks

FA – May 2016 – L1 – SA – Q18 – Accounting for Property, Plant, and Equipment (IAS 16)

Determining which item qualifies as capital expenditure.

Which of the following is a capital expenditure?
A. Purchase of inventories
B. Purchase of motor vehicle for sale
C. Subscription paid
D. Extension of building
E. Repair of generator

Answer: D. Extension of building

Explanation:
The correct answer is D because capital expenditure refers to funds used by an organization to acquire or upgrade physical assets such as property, buildings, or equipment. The extension of a building is a capital expenditure because it enhances the value of the existing building and is expected to provide long-term benefits.

Run down:
The selected answer is D since extending a building qualifies as capital expenditure. It involves upgrading a long-term asset, which aligns with the definition of capital expenditure.

  • 5 Marks

FA – May 2024 – L1 – SB – Q4a – Accounting for Property, Plant, and Equipment (IAS 16)

Describes how subsequent costs related to Property, Plant, and Equipment (PPE) are treated in accordance with IAS 16.

Describes how subsequent costs related to Property, Plant, and Equipment (PPE) are treated in accordance with IAS 16.

According to IAS 16, subsequent costs are capitalized and added to the carrying amount of an asset if they meet the following criteria:

  1. Enhancement of Future Economic Benefits:
    The costs are capitalized if they enhance the future economic benefits expected from the asset. This means that the expenditure must improve the asset’s performance, increase its useful life, or adapt it to new technology or standards.
  2. Replacement of Significant Parts:
    When a part of an asset is replaced, the cost of the replacement is capitalized, provided that the part being replaced is derecognized and removed from the asset’s carrying amount. The replacement part must bring future benefits to the entity.
  3. Major Inspections or Overhauls:
    If a major inspection or overhaul is necessary for the continued use of the asset, the cost of the inspection is capitalized as a replacement, provided that it meets the recognition criteria. Routine maintenance and repairs are not capitalized but expensed as incurred.

Conclusion: Routine maintenance and repairs that do not enhance the future economic benefits of the asset are expensed in the period incurred and not capitalized.

  • 1 Marks

FA – May 2024 – L1 – SA – Q4 – Accounting for Property, Plant, and Equipment (IAS 16)

Calculates the carrying amount of motor vehicles.

A company has several motor cars that are accounted for as non-current assets. As at April 1, Year 2, the cost of the cars was ₦300,000, and the accumulated depreciation was ₦160,000. What is the carrying amount of the motor cars as at April 1, Year 2?

Answer: B

Explanation: The correct answer is B (₦140,000). The carrying amount is calculated as the cost of the asset minus the accumulated depreciation. In this case:
Carrying Amount = Cost of Cars – Accumulated Depreciation
Carrying Amount = ₦300,000 – ₦160,000 = ₦140,000.

  • 1 Marks

FA – Mar/July 2020 – L1 – SA – Q16 – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS

Accounting standard for recognizing newly constructed buildings

Oladiya ventures is in the business of real estate and property management. In the current year, the business constructed several buildings which have been placed for sale.

Which of the following standards will be appropriate for the recognition of the newly constructed buildings?
A. IAS2 – Inventory
B. IAS16 – Property, Plant and Equipment
C. IAS40 – Investment Property
D. IAS37 – Provision, Contingent Liability and Contingent Asset
E. IFRS 15 – Revenue from Contract with Customers

A. IAS2 – Inventory

Explanation:
Since the buildings have been placed for sale, they are considered inventory, and IAS2 applies to the accounting treatment for inventories. IAS16 and IAS40 would apply if the buildings were held for use or investment purposes, but not for sale.

  • 1 Marks

FA – Mar/July 2020 – L1 – SA – Q4 – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS

Identifying an example of capital expenditure

Which of the following payments is an example of capital expenditure?
A. Refurbishment as part of upgrading a building
B. Carriage outwards in respect of goods sold
C. Legal fees incurred to recover customer debts
D. Bonuses to production operatives
E. Maintenance cost of building

A. Refurbishment as part of upgrading a building

Explanation:
Capital expenditure refers to spending on acquiring or improving long-term assets, like property or equipment. Upgrading a building is considered capital expenditure as it enhances the asset’s value.

Take control of your business data with insight and in-depth understanding by taking this course. 

Services

Contact Info

  • +233203701923
    +233543919232
  • info@noohrabusiness.com

Get In Touch

Follow us on our social media and get daily updates.

Facebook-f Twitter Linkedin-in Envelope