Question

Which of the following is not properly classified as property, plant, and equipment? a. Land used in ordinary business operations. b. A truck held for resale by an automobile dealership. c. Building used as a factory. d. Land improvements, such as parking lots and fences.

Answer 1

Answer:

b. A truck held for resale by an automobile dealership

Explanation:

Property plant and equipment are physical or tangible assets used by an organization in the ordinary course of business. They include Land and building used in ordinary business operations, plant and machinery used in production, Land improvements, such as parking lots and fences etc. Such assets are usually depreciated as they are used and in accordance with the organization's policy. However, assets held for sale are not used by the organization in the ordinary course of business rather, the company holds them till such assets are sold.  No depreciation is computed on the assets held for sale. Hence, from the options given, a truck held for resale by an automobile dealership is the only item held for sale and does not qualify for recognition as property plant and equipment. The right answer is b.