CIMA Exam CIMAPRA17-BA3-1 Topic 3 Question 106 Discussion

Actual exam question for CIMA's CIMAPRA17-BA3-1 exam

Question #: 106
Topic #: 3

The Finance Director of EFG company has made the following statements regarding the recording of expenditure relating to the entity's property, plant and equipment (PPE) in the nominal ledger.

Which THREE of the following statements are true?

AThe annual depreciation charge reduces EFG's profit for the year.

BThe cost of insurance for the factory is debited to the PPE asset account.

CThe loss on the disposal of PPE reduces EFG's profit for the year

DThe cost of repainting the office is credited to the repairs expense account

EThe loss on the disposal of PPE is recorded in a liability account

FThe annual depreciation charge reduces the carrying value of PPE

Show Suggested Answer

Suggested Answer: A, C, F

by Alethea at Jan 26, 2025, 10:55 PM

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Keneth

22 days ago

I don't know, this feels like one of those trick questions where they try to catch you out. Better double-check those answers!

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Keva

23 days ago

Haha, E is just silly. Liability account for a loss on disposal? What is this, the Bermuda Triangle of accounting?

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Rodolfo

5 days ago

Haha, E is just silly. Liability account for a loss on disposal? What is this, the Bermuda Triangle of accounting?

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Marget

10 days ago

B) The cost of insurance for the factory is debited to the PPE asset account.

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Golda

11 days ago

A) The annual depreciation charge reduces EFG's profit for the year.

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Marquetta

1 months ago

I'm pretty sure B and D are false. You wouldn't debit insurance to the PPE account, and repainting would be an expense, not a credit to repairs.

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Julio

7 days ago

C) The loss on the disposal of PPE reduces EFG's profit for the year

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Hubert

10 days ago

A) The annual depreciation charge reduces EFG's profit for the year.

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Estrella

1 months ago

I disagree with statement E. Loss on disposal should not be recorded in a liability account.

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Krystina

1 months ago

I agree with that. I also think statement F is true because depreciation reduces carrying value.

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Eun

2 months ago

I think statement A is true because depreciation reduces profit.

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Jacinta

2 months ago

A, C, and F are definitely true. The annual depreciation reduces profit and carrying value, and the loss on disposal reduces profit. The others seem a bit iffy.

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Karma

1 months ago

The loss on disposal of PPE definitely reduces profit for the year.

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Carlee

1 months ago

Yes, the annual depreciation charge does reduce profit and carrying value.

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Michell

1 months ago

I agree, A, C, and F are definitely true.

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