Reference no: EM132983172

Problem 1: Land improvements

a) Should be included in the cost of land.

b) Are subject to depreciation.

c) Should be charged as an expense in the year purchased.

d) Should be deducted from the cost of land.

Problem 2: Small tools and containers used repeatedly for more than a year are classified on the balance sheet as?

a) Current assets

b) Fixed assets (PPE)

c) Deferred charges

d) Investments

Problem 3: Which of the following is not a capital expenditure?

a) Repairs that maintain an asset in operating condition

b) An addition

c) A betterment

d) A replacement

Problem 4: An entity imported machinery to install in its new factory before year-end. However, due to circumstances beyond its control, the machinery was delayed by a few months but reached the factory premises before year-end. While this was happening, the entity learned from the bank that it was being charged interest on the loan it had taken to fund the cost of the plant. What is the proper treatment of freight and interest expense under PAS 16?

a) Both expenses should be capitalized.

b) Freight charges should be capitalized but interest cannot be capitalized under these circumstances.

c) Interest may be capitalized but the freight should be expensed.

d) Both expenses should be expensed.