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CMA Intermediate · Financial Accounting · Property, Plant and Equipment (AS 10)

Which of the following items satisfies the AS 10 definition of property, plant and equipment?

A tangible machine held for production and expected to be used for more than twelve months qualifies as PPE. AS 10 requires tangible items held for production, rental or administrative purposes and used over more than twelve months; short-lived, intangible or for-sale items fail.

  1. AA tangible machine held for production and expected to be used for more than twelve monthsCorrect
  2. BA tangible tool held for administrative use and expected to be used for eight months
  3. CGoods held by a trader for sale in the ordinary course
  4. DAn intangible licence held for production use over five years

Explanation

PPE are tangible items held for use in production or supply of goods or services, for rental to others, or for administrative purposes, and expected to be used during more than twelve months. Only the machine meets both tests. The eight-month tool fails the period test, goods for sale are inventory, and a licence is not tangible.

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