EGCC ACC 112 CHAPTER 14 & 15 PROPERTY, PLANT AND EQUIPMENT
PART 1 PACTICE EXAM WITH CORRECT ANSWERS LATEST UPDATE 2026
1. PAS 16 shall be applied to which of the following
a. land held for future plant site
b. building not used in normal operations but is being leased out under operating lease
c. equipment held for sale under PFRS 5
d. biological assets related to agricultural activity
2. The principal issues in the accounting for property, plant and equipment include which of the following?
I. The recognition of the assets.
II. The determination of carrying amounts and the depreciation charges and impairment
losses to be recognized in relation to assets recognized. III. The complex computation of
revaluation surplus.
a. I, II b. I, III c. III d. I, II, III
3. Which of the following is not a major characteristic of a plant asset?
a. Possesses physical substance c. Acquired for use
b. Acquired for resale d. Yields services over a number of years (AICPA)
4. Which of these is not a major characteristic of a plant asset?
a. Possesses physical substance
b. Acquired for use in operations
c. Yields services over a number of years
d. All of these are major characteristics of a plant asset.
5. Property, plant & equipment has all of the following characteristics except:
a. They are intended for use in operating activities, and are not acquired for sale in the ordinary
course of business.
b. They are classified as noncurrent tangible assets
c. Their service potential normally diminishes with use.
d. They don't typically make up a large part of a corporation's operating assets.
6. Which of the following statements is consistent with the provisions of PAS 16?
I. If fair value can be measured reliably, an entity may carry all items of property, plant and
equipment of a class at a revalued amount, which is the fair value of the items at the date of the
revaluation less any subsequent accumulated depreciation and accumulated impairment losses.
II. An entity is required to determine the depreciation charge separately for each significant part of an
item of property, plant and equipment.
III. An entity is required to measure the residual value of an item of property, plant and
equipment as the amount it estimates it would receive currently for the asset if the asset were
already of the age and in the condition expected at the end of its useful life.
IV. An entity is required to begin depreciating an item of property, plant and equipment when it is
available for use and to continue depreciating it until it is derecognized, even if during that period the item
is idle.
a. I, II b. I, II, IV c. I, II, III d. I, II, III, IV
,7. Which of the following statements is inconsistent with the provisions of PAS 16?
a. An entity is required to derecognize the carrying amount of an item of property, plant and
equipment that it disposes of on the date the criteria for the sale of goods would be met.
b. An entity is required to derecognize the carrying amount of a part of an item of property, plant and
equipment if that part has been replaced and the entity has included the cost of the replacement in the
carrying amount of the item.
c. An entity cannot classify as revenue a gain it realizes on the disposal of an item of property,
plant and equipment
d. An entity is required to measure the residual value of an item of property, plant and
equipment as the amount it estimates it would receive in the future for the asset if the asset were
already of the age and in the condition expected at the end of its useful life.
8. Accounting recognition should be given to some or all of the gain realized on a nonmonetary
exchange of plant assets except
a. when the exchange is one with no commercial substance and no cash is involved and that no
impairment losses are needed to be recognized.
b. where the assets exchanged are dissimilar and additional cash is paid
c. where the assets exchanged are dissimilar and additional cash is received
d. when the exchange is one with no commercial substance whether or not there is cash involved and
that no impairment losses are needed to be recognized.
9. The cost of land most likely does not include
a. costs of grading, filling, draining, and clearing.
b. costs of removing old buildings.
c. costs of improvements with unlimited useful lives.
d. special assessments.
10. When the fair value of the non-monetary asset exchanged in a transaction with commercial
substance is indeterminable, the non-monetary asset received will be valued at
a. fair value of asset given up adjusted for cash received or given
b. fair value of asset received
c. fair value of asset received adjusted for cash received or given
d. carrying amount of asset given up adjusted for cash received or given
11. Decrease in equity arise from
a. transfers from an entity to its owners
b. investments in an entity by its owners
c. non-reciprocal transfers to an entity from other than owners
d. upward valuation of property, plant and equipment
12. 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. Write-off d. Depreciation
, 13. If a corporation purchases a lot and building and subsequently tears down the building and uses the
property as a parking lot, the proper accounting treatment of the cost of the building would depend on
a. the significance of the cost allocated to the building in relation to the combined cost of the lot and
building.
b. the length of time for which the building was held prior to its demolition.
c. the contemplated future use of the parking lot.
d. the non-financial asset’s highest and best use determined from the perspective of market
participants, even if the entity intends a different use or intends not to use the non-financial asset.
14. Accounting for tangible operational assets is primarily in conformity with the:
a. historical cost principle
b. historical cost principle and reporting principle
c. matching principle and reporting principle
d. matching principle
e. matching principle and historical cost principle
15. Are the following statements regarding the cost of an asset true or false, according to PAS16 Property,
plant and equipment?
(1) The cost includes cash equivalents paid to acquire an asset.
(2) The cost includes the fair value of any non-monetary consideration given to acquire an asset.
a. False False b. False True c. True False d. True True
16. The debit for a non-refundable sales tax properly levied and paid on the purchase of machinery preferably
would be a charge to
a. the machinery account.
b. a separate deferred charge account.
c. miscellaneous tax expense (which includes all taxes other than those on income).
d. accumulated depreciation--machinery.
17. Small tools and containers used repeatedly for more than a year are classified on the balance sheet as
a. current assets b. fixed assets c. deferred charges d. investments (AICPA)
18. Hotel California Corporation recently purchased Eagles Hotel and the land on which it is located with
the plan to tear down the Eagles Hotel and build a new luxury hotel on the site. The cost of the Eagles
Hotel should be
a. depreciated over the period from acquisition to the date the hotel is scheduled to be torn down.
b. written off as an extraordinary loss in the year the hotel is torn down.
c. capitalized as part of the cost of the land.
d. capitalized as part of the cost of the new hotel.
19. Which of the following statements are correct per PAS16 Property, plant and equipment?
I. Assets are depreciated even if their fair value exceeds their carrying amount
II. Land and buildings are accounted for separately, even when acquired together
III. A non-current asset acquired as the result of an exchange of assets is not recognized
IV. A gain on disposal of a non-current asset is classified as revenue
a. I, II b. I, II, III c. I, II, IV d. I, II, III, IV
PART 1 PACTICE EXAM WITH CORRECT ANSWERS LATEST UPDATE 2026
1. PAS 16 shall be applied to which of the following
a. land held for future plant site
b. building not used in normal operations but is being leased out under operating lease
c. equipment held for sale under PFRS 5
d. biological assets related to agricultural activity
2. The principal issues in the accounting for property, plant and equipment include which of the following?
I. The recognition of the assets.
II. The determination of carrying amounts and the depreciation charges and impairment
losses to be recognized in relation to assets recognized. III. The complex computation of
revaluation surplus.
a. I, II b. I, III c. III d. I, II, III
3. Which of the following is not a major characteristic of a plant asset?
a. Possesses physical substance c. Acquired for use
b. Acquired for resale d. Yields services over a number of years (AICPA)
4. Which of these is not a major characteristic of a plant asset?
a. Possesses physical substance
b. Acquired for use in operations
c. Yields services over a number of years
d. All of these are major characteristics of a plant asset.
5. Property, plant & equipment has all of the following characteristics except:
a. They are intended for use in operating activities, and are not acquired for sale in the ordinary
course of business.
b. They are classified as noncurrent tangible assets
c. Their service potential normally diminishes with use.
d. They don't typically make up a large part of a corporation's operating assets.
6. Which of the following statements is consistent with the provisions of PAS 16?
I. If fair value can be measured reliably, an entity may carry all items of property, plant and
equipment of a class at a revalued amount, which is the fair value of the items at the date of the
revaluation less any subsequent accumulated depreciation and accumulated impairment losses.
II. An entity is required to determine the depreciation charge separately for each significant part of an
item of property, plant and equipment.
III. An entity is required to measure the residual value of an item of property, plant and
equipment as the amount it estimates it would receive currently for the asset if the asset were
already of the age and in the condition expected at the end of its useful life.
IV. An entity is required to begin depreciating an item of property, plant and equipment when it is
available for use and to continue depreciating it until it is derecognized, even if during that period the item
is idle.
a. I, II b. I, II, IV c. I, II, III d. I, II, III, IV
,7. Which of the following statements is inconsistent with the provisions of PAS 16?
a. An entity is required to derecognize the carrying amount of an item of property, plant and
equipment that it disposes of on the date the criteria for the sale of goods would be met.
b. An entity is required to derecognize the carrying amount of a part of an item of property, plant and
equipment if that part has been replaced and the entity has included the cost of the replacement in the
carrying amount of the item.
c. An entity cannot classify as revenue a gain it realizes on the disposal of an item of property,
plant and equipment
d. An entity is required to measure the residual value of an item of property, plant and
equipment as the amount it estimates it would receive in the future for the asset if the asset were
already of the age and in the condition expected at the end of its useful life.
8. Accounting recognition should be given to some or all of the gain realized on a nonmonetary
exchange of plant assets except
a. when the exchange is one with no commercial substance and no cash is involved and that no
impairment losses are needed to be recognized.
b. where the assets exchanged are dissimilar and additional cash is paid
c. where the assets exchanged are dissimilar and additional cash is received
d. when the exchange is one with no commercial substance whether or not there is cash involved and
that no impairment losses are needed to be recognized.
9. The cost of land most likely does not include
a. costs of grading, filling, draining, and clearing.
b. costs of removing old buildings.
c. costs of improvements with unlimited useful lives.
d. special assessments.
10. When the fair value of the non-monetary asset exchanged in a transaction with commercial
substance is indeterminable, the non-monetary asset received will be valued at
a. fair value of asset given up adjusted for cash received or given
b. fair value of asset received
c. fair value of asset received adjusted for cash received or given
d. carrying amount of asset given up adjusted for cash received or given
11. Decrease in equity arise from
a. transfers from an entity to its owners
b. investments in an entity by its owners
c. non-reciprocal transfers to an entity from other than owners
d. upward valuation of property, plant and equipment
12. 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. Write-off d. Depreciation
, 13. If a corporation purchases a lot and building and subsequently tears down the building and uses the
property as a parking lot, the proper accounting treatment of the cost of the building would depend on
a. the significance of the cost allocated to the building in relation to the combined cost of the lot and
building.
b. the length of time for which the building was held prior to its demolition.
c. the contemplated future use of the parking lot.
d. the non-financial asset’s highest and best use determined from the perspective of market
participants, even if the entity intends a different use or intends not to use the non-financial asset.
14. Accounting for tangible operational assets is primarily in conformity with the:
a. historical cost principle
b. historical cost principle and reporting principle
c. matching principle and reporting principle
d. matching principle
e. matching principle and historical cost principle
15. Are the following statements regarding the cost of an asset true or false, according to PAS16 Property,
plant and equipment?
(1) The cost includes cash equivalents paid to acquire an asset.
(2) The cost includes the fair value of any non-monetary consideration given to acquire an asset.
a. False False b. False True c. True False d. True True
16. The debit for a non-refundable sales tax properly levied and paid on the purchase of machinery preferably
would be a charge to
a. the machinery account.
b. a separate deferred charge account.
c. miscellaneous tax expense (which includes all taxes other than those on income).
d. accumulated depreciation--machinery.
17. Small tools and containers used repeatedly for more than a year are classified on the balance sheet as
a. current assets b. fixed assets c. deferred charges d. investments (AICPA)
18. Hotel California Corporation recently purchased Eagles Hotel and the land on which it is located with
the plan to tear down the Eagles Hotel and build a new luxury hotel on the site. The cost of the Eagles
Hotel should be
a. depreciated over the period from acquisition to the date the hotel is scheduled to be torn down.
b. written off as an extraordinary loss in the year the hotel is torn down.
c. capitalized as part of the cost of the land.
d. capitalized as part of the cost of the new hotel.
19. Which of the following statements are correct per PAS16 Property, plant and equipment?
I. Assets are depreciated even if their fair value exceeds their carrying amount
II. Land and buildings are accounted for separately, even when acquired together
III. A non-current asset acquired as the result of an exchange of assets is not recognized
IV. A gain on disposal of a non-current asset is classified as revenue
a. I, II b. I, II, III c. I, II, IV d. I, II, III, IV
