SAMPLE TEST FOR ACCOUNTING 102

1. Garcia Inc. bought a machine on January 1, 2012 for ₱400,000. The machine had an expected life of
20 years and was expected to have a salvage value of ₱ 40,000. On July 1, 2017, the company
reviewed the potential of the machine and determined that its undiscounted future net cash flows
totaled ₱200,000 and its discounted future net cash flows totaled ₱140,000. If no active market exists
for the machine and the company does not plan to dispose of it, what should Garcia record as an
impairment loss on July 1, 2017?
a. ₱0
b. ₱11,000
c. ₱20,000
d. ₱71,000

2. Clarissa Corporation owns machinery with a book value of ₱285,000. It is estimated that the machinery will
generate future cash flows of ₱300,000. The machinery has a fair value of ₱210,000. Clarissa should recognize a
loss on impairment of:
a. ₱ -0-.
b. ₱ 15,000.
c. ₱ 75,000.
d. ₱ 90,000

3. In what way does an asset's service life differ from its physical life?
a. An asset's service life is the time an asset will be used by a company, while its physical life is how long the
asset will last.
b. Calculation of an asset's service life includes consideration of the asset's salvage value, while calculation of its
physical life does not.
c. An asset's service life is the length of time an asset is of use to its original owner, while its physical life is how
long the asset will be used by its all owners.
d. An asset's service life is always longer than its physical life.

4. On January 1, 2009, Joy Industries purchased a machine for ₱120,000. At that time, Joy estimated that the
machine had a 20-year useful life and a ₱12,000 salvage value. On July 1, 2019, Joy reviewed the machine's
potential, determining that its undiscounted future net cash flows totaled ₱60,000 and its discounted future net
cash flows totaled ₱45,000. Joy has no plans to dispose of the machine, in part because no active market exists
for it. Assuming that Joy uses straight-line depreciation, Joy should record an impairment loss of ₱_______
related to the machine on July 1, 2019.
a. ₱3,300
b. ₱6,700
c. ₱8,300
d. ₱18,300
5. The undiscounted future net cash flows should be used in the
a. recoverability test for impairment.
b. fair value test for impairment.
c. calculation of loss on impairment.
d. calculation of gain from asset use.

6. Joy Company reported the following related to equipment at December 31, 2018.
Cost 10,000,000
Accumulated Depreciation during the Year 500,000
Fair Value Cost of disposal 5,000,000
 Fair Value in use 7,000,000

As of December 31, 2018 the equipment has a remaining useful life of 5 years.

a. Prepare the journal entry (If any) for the impairment of the asset at December 31, 2018
b. Prepare the journal entry (If any) for the Depreciation Expense for December 31, 2019
c. The asset has recoverable amount 9,000,000. Prepare the journal entry (If any) for the impairment
of the asset at December 31, 2019
7. My Company reported the following cash generating asset for December 31, 2018.
Land 2,000,000
Building 5,000,000
Inventory 1,000,000
Machinery 2.000,000
Expected Future Cash Flow 6,600,000
a. Prepare the journal entry (If any) for the impairment of the cash generating unit at December 31,
2018.
8. Love Company reported the following related to equipment at December 31, 2018.
Machinery 5,500,000
Land 5,000,000
Factory 11,000,000
Goodwill 1,000,000
Accumulated Depreciation – Machinery during the Year 500,000
Accumulated Depreciation – Factory during the Year 1,000,000
Fair Value in use 12,500,000

As of December 31, 2018 the equipment has a remaining useful life of 5 years and the building has a
remaining useful life of 9 years.

a. Prepare the journal entry (If any) for the impairment of the following CGU at December 31, 2018
b. Prepare the journal entry (If any) for the Depreciation Expense of the Machinery and Factory for
December 31, 2019
9. Assume that at January 1, 2017, CJG Company owned the following:

Preferred shares: 100,000 issued and outstanding, with a par value of ₱10, cumulative @ 10%
preference dividend per year, convertible at the rate of 1 preferred to 5 common shares.

Common shares: 5,000,000 issued and outstanding, no par value and no fixed dividend.

Calculate Basic EPS and Diluted EPS if net income was ₱10,000,000. Tax rate 30%.

10. Following data has been extracted from the financial statements of BEBS Company. You are required
to compute the earnings per share of the company for the year 2018.

Net income for the year 2016: ₱1,500,000

10% cumulative preferred stock outstanding on December 31, 2018: ₱3,000,000

$15 par value common stock outstanding on December 31, 2018: 100,000
11. Clang Reported the following data during January 1, 2018:
Net Income 5,000,000
Income Tax 25%
Bonds Payable ₱5,000,000 @10%
 Common Share 500,000

Clang Company issued an additional 100,000 Common Share on January 15, 2018.

The Company Issued a 10% share dividend on common share.

Each ₱1000 Bonds are convertible to 20 Common shares.

Compute for the BEPS and DEPS during the year.

12. Clang Garcia Inc. had an outstanding common share 100,000 @ 10% with a par value of ₱5 on
January 1, 2019 and a preference share of 200,000, cumulative @10% with a par value of ₱10. Also
Clang had a Bonds Payable of 1,000,000 @8%, each ₱1000 bonds are convertible to 10 common
share. Clang Garcia Issued an additional 50,000 Common share on July 15, 2019. Net Income for the
year was ₱ 10,000,000 and has a 20% Income tax

Compute for the Basic Earnings EPS and Diluted EPS on December 31, 2019
13. Future Company had an ordinary share capital of 500,000, ₱10 par, ₱5,000,000 and a preferred share
1,000,000, noncumulative @10%, ₱15 par. Future also had an outstanding share option of 20,000 at
₱10 with a market price of ₱20 during the beginning of the year.

Future issued an additional 100,000 ordinary share on July 6, 2019.

During the Year dividends were declared.

A 10% Share dividend was issued on December 25, 2019.

a. Compute for the additional Ordinary Share Capital from the converted Share Option
b. Compute for the Basic Earnings Per Share and Diluted Earnings Per Share
14. I Company had a common share outstanding of 200,000 on the beginning of the year. The Company
reported the following transaction during the year:
January 5. Issued 5,000 additional common share.
July 1. Issued 100,000 common share.
Nov 5. 5,000 Treasury share.
Dec 15. Issued a Share Split of 2 for 1

Compute for the Share Outstanding during the year.

15. Love Company reported the following items during the Current Operating Cycle:
Jan 1. Ordinary share outstanding 100,000
Jan 13. Issued additional Ordinary Share of 50,000
May 1. Issued share split of 2 for 1
Dec 15. Declared 100% Share Dividends
Dec 26. 200,000 Treasury bill

Compute for the Ordinary Share Outstanding on December 31, 2019.

16. Clarissa Inc. reported the following on January 1, 2019:
Common Share outstanding, ₱5 par, 8% cumulative, 500,000 share, ₱2,500,000
Preference Share, ₱10 par, 10% cumulative, 250,000 share, ₱2,500,000
12% Bonds Payable ₱3,000,000

The Preference shares are convertible into 500,000 Common shares.

Each ₱10,000 Bonds are convertible into 25 Common shares.

 A Share Option of 100,000 at ₱15 was purchased at the beginning of the year with average Market
Value of ₱20.

The Company issued a 20% Share dividend to outstanding common share on May 31.

The company reported a ₱5,000,000 Net Income. 30% Company Tax.

a. Compute for the Basic Earnings per share during the year
b. Compute for the additional Common share during the year.
c. Compute for the Diluted Earnings per Share during the year.
17. Joy reported the following items during the current year:
Net Income ₱10,100,000
Company Tax 25%
Treasury Share 10,000
Ordinary Share 120,000
Preference Share ₱1,000,000, 10% cumulative

The Company issued a 100% Share dividend on Treasury Share.

Joy Issued an additional 800,000 Ordinary share on July 1.

Each ₱1,000 Preference shares are convertible into 10

a. Compute for the Ordinary share Outstanding on December 31, 2019.

b. Compute for BEPS and DEPS on December 31, 2019
18. Garcia acquired Gabriel and agreed to give an additional 100,000 Common share to in 2018 if Gabriel’s
net income is ₱500,000 or more before 2017; Gabriel’s Net income for 2016 is ₱600,000. Garcia has a
net income of ₱800,000 on December 31, 2018 and had an outstanding common shares of 500,000.

Compute for the EPS for December 31, 2018.