Property, Plant & Equipment Characteristics

D

They are typically the largest of the operating assets. Included in this category would be heavy equipment and machinery as well as real estate and buildings used in the business.

Property, Plant & Equipment (PP&E) refers to tangible assets that are used in the production or supply of goods and services, for rental to others, or for administrative purposes. They are also known as fixed assets or long-term assets. PP&E includes items such as land, buildings, machinery, equipment, vehicles, and furniture.

Let's analyze each answer choice:

A. They are intended for use in operating activities, and are not acquired for sale in the ordinary course of business. This statement is true. Property, Plant & Equipment are used in the normal operations of a business rather than being acquired with the intention of resale. They are utilized to generate revenue or support the company's operations.

B. They are classified as noncurrent tangible assets. This statement is true. Noncurrent assets are those that are not expected to be converted into cash or used up within the next operating cycle (usually one year). Property, Plant & Equipment are long-term assets because they are expected to provide benefits to the company for multiple periods.

C. Their service potential diminishes with use. This statement is true. Property, Plant & Equipment generally have a limited useful life and experience wear and tear or obsolescence over time. As a result, their service potential gradually diminishes with use, requiring maintenance, repairs, or eventual replacement.

D. They don't typically make up a large part of a corporation's operating assets. This statement is incorrect. Property, Plant & Equipment often represent a significant portion of a corporation's operating assets. Depending on the industry and nature of the business, the value of PP&E can be substantial. Examples include manufacturing companies heavily reliant on machinery and equipment, real estate firms with extensive property holdings, or transportation companies with a fleet of vehicles.

Therefore, the correct answer is D. They don't typically make up a large part of a corporation's operating assets.