IAS 16, Property, plant and equipment

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  1. Multipart has purchased a budget airline and is discussing the way in which it should depreciate the aircraft as aircraft have a lifespan of 10 years, engines have a lifespan of seven years and tyres have a lifespan of 18 months. The aircraft should be depreciated on a straight-line basis over -

  2. IAS 16 requires a revaluation surplus resulting from initial revaluation of PPE to be treated in one of the following ways -

  3. An entity owns a fleet of company cars and executive vehicles, and has other property and equipment in order to service the fleet. It decided to revalue some of its property, plant and equipment. Which one of the following options complies with IAS 16?

  4. An entity manufactures components for the car industry and uses self-made tools, which it continually develops. Costs of tooling are depreciated over four years and the tools are manufactured in its one factory, where 4% of the space is allocated to development. The factory depreciation charge should -

  5. An entity constructs a machine for its own use. Construction is started on 1 January 2009 and is completed on 1 March 2009. The machine is installed on 1 April 2009 and the entity does not begin using the machine until 1 May 2009. The entity should begin charging depreciation on -

  6. An asset is purchased for $3,000.The estimated residual value at purchase was $300 and it has a useful life of nine years. The entity uses the straight-line method of depreciation. The estimate of useful life does not change until the beginning of year four, when the residual value is expected to be $600. The depreciation charge in year four will be -

  7. An entity operates a chain of hotels and is proposing to stop depreciating the hotel equipment and expense the cost of replacement each year. The entity should -

  8. An entity purchased an asset on 1 January 2006 for $10m. The asset has a useful life of 10 years and uses the straight-line method of depreciation. On 1 January 2009, the asset’s useful life is revised to add a further three years to it. The asset has no residual value. The depreciation charge for the year to 31 December 2009 should be -

  9. An entity has a policy of revaluing its PPE. An asset cost $5m on 1 January 2008 and has a useful life of five years and is depreciated on a straight-line basis to a zero residual value. The value of the asset at 31 December 2008 was $3.8m. The fall in value will be accounted for as follows -

  10. An entity has a policy of revaluing its PPE. An asset cost $15m on 1 January 2008, has a useful life of 15 years and is depreciated on a straight-line basis to a zero residual value. The value of the asset at 31 December 2008 was $14.5m. At 31 December 2009, the market value of the asset was $12.5m. The accounting entry at 31 December 2009 would be -