1.

The carrying amount of an item of property, plant and equipment shall be derecognized

I. On disposal

II. When no future economic benefits are expected from the use or disposal of the asset.

a. I only

b. II only

c. Either I or II

d. Neither I nor II

2. The cost of an item of property, plant and equipment comprises all of the following, except

a. Purchase price

b. Import duties and non refundable purchase taxes

c. Any cost directly attributable in bringing the asset to the location and condition for its intended use

d. Initial estimate of the cost of dismantling and removing the item and restoring the site, the obligation
for which the entity does not incur when the item was acquired

4. Major spare parts and stand by equipment which are expected to be used over a period of more than one year shall
be classified as

a. Property, plant and equipment

b. Inventory

c. Noncurrent investment

d. Expense

5. When the payment for item property, plant and equipment is deferred beyond normal credit terms, the difference
between the cash price equivalent and the total payments shall be recognized as

a. Interest expense of the current year

b. Component of cost of the property, plant and equipment

c. Interest expense over the credit period

d. Interest expense over the life of the asset

7.Which of the following terms best describes the removal of an asset from an entity’s statement of financial position?
 a. Derecognition

b. Impairment

c. Writeoff

d. Depreciation

8. Property, plant and equipment are tangible items that

I. Are held for use in production or supply of goods and services, for rental to others or for
administrative purposes.

II. Are expected to be used for more than one period.

a. I only

b. II only

c. Both I and II

d. Neither I nor II

10.The cost of an item of property, plant and equipment comprises its purchase price, import duties and nonrefundable
purchase taxes, and

a. The implied interest on the debt to finance the purchase

b. The fair value of any noncash asset surrendered to acquire the asset.

c. The estimated residual value of the asset

d. All directly attributable costs necessary to bring the asset to the location and condition for its
intended use

12.An entity installed a new production facility and incurred a number of expenses at the point of installation. The entity’s
accountant is arguing that most expenses do not qualify for capitalization. Included in those expenses are initial
operating losses. The initial operating losses shall be

a. Deferred and amortized over a reasonable period of time

b. Expensed and charged to the income statement

c. Capitalized as part of the cost of plant as a directly attributable cost.

d. Taken to retained earnings since it is unreasonable to present it as part of the current year’s income
statement.

13. If the present value of a note issued in exchange for a plant asset is less than its face amount, the difference shall be
 a. Included in the cost of the asset

b. Amortized as interest expense over the life of the note

c. Amortized as interest expense over the life of the asset

d. Included in interest expense in the year of issuance

14. The cost of an item of property, plant and equipment that is acquired in exchange for combination of monetary and
nonmonetary asset is measured at the

a. Fair value of the asset given up plus the amount of any cash and cash equivalent transferred.

b. Fair value of the asset received plus the amount of any cash and cash equivalent transferred.

c. Book value of the asset given up plus the amount of any cash and cash equivalent transferred.

d. Book value of the asset received plus the amount of any cash and cash equivalent transferred.

16. Gains and losses arising from the derecognition of an item of property, plant and equipment shall be determined as
the difference between

a. Gross disposal proceeds and the cost of the asset

b. Gross disposal proceeds and the carrying amount of the asset.

c. Net disposal proceeds and the cost of the asset.

d. Net disposal proceeds and the carrying amount of the asset.

18.Which of the following items shall not be capitalized into the cost of property, plant and equipment?

a. Cost of excess materials resulting from a purchasing error

b. Cost of testing whether the asset works correctly

c. Initial delivery and handling cost

d. Cost of preparing the site for installation

23.If an item of property, plant and equipment is acquired in exchange for a nonmonetary asset and the exchange lacks
commercial substance, the cost of the asset acquired is measured at

a. Fair value of the asset given up

b. Fair value of the asset received

c. Carrying amount of the asset given up

 d. Carrying amount of the asset received

24. If an entity is able to determine reliably the fair value of the asset received and the fair value of the asset given up in
an exchange transaction, the cost of the asset acquired is measured at

a. Fair value of asset given up

b. Fair value of asset received

c. Either the fair value of asset received or the fair value of asset given up

d. Neither the fair value of asset received nor the fair value of the asset given up

25. Under the cost model, subsequent to initial recognition as an asset an item of property, plant and equipment shall be
carried at

a. Cost

b. Revalued amount

c. Cost less accumulated depreciation and any accumulated impairment loss

d. Revalued amount less accumulated depreciation and any accumulated impairment loss

27. When an item of property, plant and equipment is acquired by issuing shares, which of the following is the best basis
for establishing the historical cost of the acquired asset?

a. Historical cost of the asset to the seller

b. Historical cost of a similar asset acquired in another transaction by the buyer

c. Fair value of the asset received or the fair value of the shares issued, whichever is more readily
determinable

d. Historical cost of the asset is zero since noncash is paid in the acquisition

29.Operating losses incurred during the start up years of a new business should be
a. Accounted for and reported like the operating losses of any other business
b. Written off directly against retained earnings
c. Capitalized as a deferred charge and amortized over 5 years.
d. Capitalized as an intangible asset and amortized over 5 years.

31.The residual value of an intangible asset should be presumed zero, unless

I. There is a commitment by a third party to purchase the asset at the end of its useful life.
II. There is an active market for the asset and residual value can be determined by reference to that market
and it is probable that such market will exist at the end of the asset’s useful life.
a. Both I and II b. Neither I nor II c. II only d. I only
 32. If a company constructs a laboratory building to be used as a research and
development facility, the cost of the laboratory building is matched against earnings
as
a. Research and development expense in the period of construction
b. Depreciation deducted as part of research and development cost
c. Depreciation or immediate writeoff depending on company policy
d. An expense at such time as productive research has been obtained from the facility

35. A lessee incurred costs to construct office space in a leased warehouse. The
estimated useful life of the office is 10 years. The remaining term of the
nonrenewable lease is 15 years. The cost should be
a. Capitalized as leasehold improvement and depreciated over 15 years.
b. Capitalized as leasehold improvement and depreciated over 10 years.
c. Capitalized as leasehold improvement and expensed in the year in which the lease expires
d. Expensed as incurred

37. Which is not within the definition of an intangible asset?

a. Held for use in the production or supply of goods or services, for rental to others, or for administrative
purposes.
b. Identifiable nonmonetary asset without physical substance.
c. A resource controlled by an enterprise as a result of past events.
d. A resource from which future economic benefits are expected to flow to the enterprise.

38. The appropriate method of amortizing intangible asset is best described by which of
the following?
a. The straight line method, unless the pattern in which the asset’s economic benefits are consumed by the
enterprise can be determined reliably.
b. The double declining balance in all circumstances
c. Management can make a subjective amount of periodic amortization without regard to any particular method
d. The straight line method in all circumstances

40.In accordance with the new international accounting standard, which statement is
correct?
I. Intangible assets with finite life are amortized over their useful life.
II. Intangible assets with indefinite life are not amortized but tested for impairment at least annually.
a. I only b. II only c. Both I and II d. Neither I nor II

41. The best definition of useful life of an intangible asset is

a. The legal life of the intangible.
b. The period over which management believes the intangible asset will contribute to the revenue-producing
process.
c. Twenty years.
d. The period over which the cost of the asset can be deducted for income tax purposes.

42. The proper accounting for the costs incurred in creating computer software products
is to
a. Capitalize all costs until the software is sold.
b. Charge research and development expense when incurred until technological feasibility has been
established for the product.
c. Charge research and development expense only if the computer software has alternative future use.
d. Capitalize all costs as incurred until a detailed program design or working model is created.
43. Net realizable value is
a. Current replacement cost
b. Estimated selling price
c. Estimated selling price less estimated cost to complete
d. Estimated selling price less estimated cost to complete and estimated cost to sell

45. Which one of the following is not a component of the cost of internally generated
intangible asset?
a. Cost of materials and services used or consumed in generating the intangible asset.
b. Cost of employee benefits arising from the generation of the intangible asset.
c. Fees to register a legal right
d. Expenditure on training staff to operate the asset.

46. Research is
I. Original and planned investigation undertaken with the prospect of gaining new scientific or technical
knowledge and understanding.
II. Application of research finding or other knowledge to a plan or design for the production of new or
substantially improved material, device, product, process, system or service, prior to the commencement of
commercial production or use.

a. I only b. II only c. Both I and II d. Neither I nor II

47. Identifiable intangible assets include all of the following, except

a. Computer software c. Franchise
b. Trademark d. Goodwill

49. Related standard: PAS 38

An entity shall choose either the cost model or revaluation model as its accounting
policy in measuring intangible asset. Which statement is correct?
I. The cost model means that an intangible asset shall be carried at cost less any accumulated amortization
and any accumulated impairment loss.
II. The revaluation model means that an intangible asset shall be carried at revalued amount less any
subsequent accumulated amortization and any subsequent accumulated impairment loss.
a. I only b. II only c. Both I and II d. Neither I nor II