 In this presentation, we will take a look at multiple choice questions related to property plant and equipment. First question. Property plant and equipment are A. Current assets B. Held to sell at profit C. Intangible D. Expensed at the time of purchase E. Used in business operations. We'll go through this again using the process of elimination. Property plant and equipment are A. Current assets. Property plant and equipment is not typically going to be current, it's going to be something that's going to be used over a year's time period and will be depreciated over the useful life. Therefore, not A. Doesn't look correct. B. Held to sell at profit. That's going to be an interesting one because note that the same type of property could be either property plant and equipment or inventory depending on whether it's being held in order to sell for profit. In other words, if we had like a forklift and we had it to use, it would be property plant and equipment. However, if we were planning on selling it at a profit, that'd be more like inventory. We bought it, we're buying and selling forklifts. So it wouldn't be held to sell for a profit. Intangible says C says intangible and it's not going to be intangible. Property plant and equipment will typically be something that will be tangible, meaning it has physical presence. We can touch it. We can feel it. We can hold it typically. It might be too heavy to hold, but it's tangible. We could touch it in any case. D says, D, Expensed at the time of purchase. And it's not going to be expense at the time of purchase because we're going to put it on the books as an asset at the time of purchase. So it looks like E must be the answer. E says used in business operations. And that is correct. So once again, property plants and equipment are E used in business operations. And note that's going to be a major difference if we were trying to problem solve this. We didn't know what the correct answer is between E and held for a profit, B. Those are two types of reasons we could be holding the property plants and equipment. And so we might be able to narrow it down between basically those two in some ways. You might be able to say, hmm, those are kind of like opposites of each other or related in some way, either it's held for profit or it's held to be used in the business. In other words, to be help us generate revenue for like a forklift by doing its work to do that. And so if we can narrow it down between those two, that might be useful in order to use the process of elimination. Next question. A change in an accounting estimate is A shown in past financial statements, B shown in future statements and past statements, C seen in current and future years financial statements, D not allowed, E allowed when laws change that affect the estimate. Let's go through this game. A change in accounting estimate. Now, first when we think about that, we're really kind of applying that to property plants and equipment, even though it might not say that in the question here because we know we're on property plants and equipment. That's the section we're reviewing. So the change in the estimate is probably going to be a change related to we're thinking a change in depreciation estimate. So we already made a depreciation estimate, we're going to change it at some point in the future. Or there could be a change, there's some new information that we think it would be better to have a change. So A says showing in past financial statements. Now, the question here when this happens is should we go back in time and change things in the past, which would be difficult because we would have to change the prior year's net income and then roll it over to the equity or retained earnings? Or do we make the change as of this point in time and go forward as best we can? Or do we not make a change at all and possibly just disclose it? And so showing that, no, typically, we're not going to go back to past financial statements. We're typically going to make the change at the point in time we think it should be updated going forward. B says showing in future financial statements and past financial statements. So if it were between A and B, B would probably be the more correct choice, right? If we were to narrow it down between those two, we would have to change the estimate in the past because if we change like the useful life, we would have to change it in the past and the future. So if it was between A and B, then you would think B would be more correct. And that's one way you can kind of narrow things down. But we're saying that that neither of those are correct because the financial we're not going to go typically to the past. C says seeing in current and future year's financial statements. And that's typically what we're going to do. We're going to put the change here this year as of the time we made the estimate and the change and in the future. And then D says it's not allowed and it typically will have it be allowed. I would think that'd be not allowed by law or something like that. And typically generally accepted accounting principles want to allow us to present the financial statements in as accurate of the way as possible. And so that's going to allow us typically to make the change here going forward. E says allowed when laws change that affect the estimate. So that would mean that maybe the new estimate that we had was based on some legal change and therefore that's what made the depreciation change. And that might be the reason for it, but that's not the reason that we need in order to report the change. So I think the answer, best answer, C, one more time. A change in accounting estimate is C, seen in current and future year's financial statements. Next question. An accelerated depreciation method is A, required for taxes. B, the method easiest to calculate. C, a method that results in larger depreciation expense in early years. D, a method that results in higher income in early years. And E, not allowed. So let's go through this again, process of elimination. An accelerated depreciation method is A, required by taxes. And the taxes often do use an accelerated method, but it's not required by them. We could use a straight line method, so that's not necessarily true. B, oftentimes depends on the tax code, but oftentimes we're able to use a straight line method or some type of accelerated. B, the method easiest to calculate, probably not. If we thought the method easiest to calculate, we'd be thinking straight line. Probably the first method that would come to mind. So C says a method that results in larger depreciation expense in early years. And that seems reasonable because it's an accelerated method. So we're gonna depreciate more in the beginning, we're gonna accelerate fast. And then D says a method that results in higher income in early years. Now if we didn't know the answer, we might say, those two sound kind of good. I'll keep that for now. And then E says, not allowed. And we know that if we've gone through this a few times, there's a few different types of estimates that can be used. And the accelerated method typically is one of them. So let's read through this again. An accelerated depreciation method is either C or DC. A method that results in larger depreciation expense in early years or D. A method that results in higher income in early years. Now if we have an accelerated method that depreciation is gonna be higher, which is gonna bring net income lower. So C looks right because it's gonna have the depreciation expense higher. D is wrong because it's going the wrong way. That net income would be affected, but it wouldn't be higher, it would be lower. So we're left with C then answer being an accelerated depreciation method is C. A method that results in a larger depreciation expense in the early years. Next question, cost of equipment less accumulated depreciation. A, historical cost. B, book value. C, market value. D, current value or E, replacement cost. So let's go through this again. Cost of equipment less accumulated depreciation, what is that? Is it the historical cost? Equipment minus, if we don't know that term, we might leave that for now. B says the book value and that seems pretty reasonable, the costs minus the accumulated depreciation book value. Leave that. C says market value. Now be careful on the market, whenever we talk about this property plant and equipment, we typically, every time we have market value, it's usually wrong to say market value. The other time it's on the books that the market value is when we bought it because that's, we bought it on the market and so we bought it at market price. But after the point of purchase, we're depreciating the cost and allocating the cost. We're not keeping market price. So C is not it. D says current value and that seems like another word for kind of the market value possibly, but that's not right. So that if we didn't know, that might be a way we can kind of eliminate these two because they seem pretty the same and we can't have both of them be correct. E says replacement cost. So it's not typically the replacement cost here that we're looking at. And again, that seems another method for us to try to find some kind of market value and that's not what we're doing here. We're trying to allocate the cost. So we're left with cost of equipment, less accumulated depreciation, either a historical cost or B, book value. Believe the correct answer is B, book value.