QUESTION 1

A major difference between IFRS and GAAP regarding valuation of property, plant, and equipment is that

		IFRS allow valuation increases to be recorded in certain circumstances, but GAAP does not permit increases
		IFRS and GAAP differ greatly on accounting for nonmonetary exchanges
		IFRS require capitalization of all repairs and maintenance while GAAP does not
		IFRS allocate lump-sum purchase costs based on relative book values rather than relative market values

QUESTION 2

According to GAAP , interest cost incurred to finance construction of an asset must be capitalized in which of the following situations?

		when the asset is inventory that is routinely manufactured in large quantities on a repetitive basis
		when an asset is used in other than the earning activities of the firm
		when an asset is ready for its intended use
		when an asset is being constructed for a firm's own use

QUESTION 3

The Jacob Corporation acquired land, buildings, and equipment from a bankrupt company at a lump-sum price of $500,000. At the time of acquisition, Jacob paid $20,000 to have the assets appraised. The appraisal disclosed the following values:

Land	$100,000
Buildings	200,000
Equipment	300,000

What costs should be assigned to the buildings?

		$166,667
		$173,333
		$200,000
		$260,000

QUESTION 4

Concerning current accounting for oil and gas properties, which statement is true?

		The successful-efforts method must be used.
		The reserve-recognition method must be used.
		Either the successful-efforts method or the full-cost method may be used.
		The full-cost method must be used.

QUESTION 5

All of the following would be classified as property, plant, and equipment except

		office buildings
		machinery owned for standby purposes
		equipment held for resale
		equipment used in the operation of the business