Which cost is normally included in the initial cost of an item of property, plant and equipment?
Correct answer: C. Installation and testing costs
- A. Staff training after installation
- B. Advertising for the new product
- C. Installation and testing costs
- D. General office administration costs
Explanation
Installation and testing are directly attributable costs of bringing the asset to the location and condition required for operation. Training, advertising, and general administration usually benefit the business but do not prepare the asset for use.
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About Depreciation and Non-Current Assets
Non-current assets are long-term resources recorded at cost and reduced by accumulated depreciation to show their carrying amount. Coverage includes straight-line and reducing-balance methods, residual value, useful life, depreciation adjustments, capital and revenue expenditure, and the profit or loss arising when an asset is disposed of.
Practise Depreciation and Non-Current Assets
33 free Depreciation and Non-Current Assets MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
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More Depreciation and Non-Current Assets questions
Under the straight-line method, when does depreciation of a newly purchased machine normally begin?
When the recoverable amount of a non-current asset falls below its carrying amount, what should be recognized?
A change in the estimated useful life of a non-current asset is normally accounted for as what type of change?
A machine costs Rs. 1,000,000, has a residual value of Rs. 100,000, and is expected to produce 90,000 units. If it produces 12,000 units in the first year, what is depreciation for that year under the units-of-production method?
Under the revaluation model of IAS 16, where is a normal upward revaluation of property, plant and equipment generally recognized?
A building contains a roof that has a useful life different from the building structure. How should these significant components normally be depreciated?