Professional Documents
Culture Documents
BSA 2-1
PROBLEM 1-1
The cash account of the Mapagkumbaba Inc. as of December 31, 2017 consists of the
following:
Total P1,950,000
Less: Overdraft with Piggy Bank secured by a Chattel ( 300,000)
At what amount will the account “Cash” appear on the December 31, 2017 balance
sheet?
a. P1,425,000
b. P1,495,000
c. P1,315,000
d. P1,725,000
Total P1,425,000
Total P4,248,000
PROBLEM 1-2
In the course of your audit of the Mabait Corporation, its controller is attempting to
determine the amount of cash to be reported on its December 31, 2017 balance sheet.
The following information is provided:
b. Travel advances of P360,000 for executive travel for the first quarter of the next year
(employee to reimburse through salary deduction).
c. A separate cash fund in the amount of P3,000,000 is restricted for the retirement of a
long term debt.
f. A bank overdraft of P250,000 has occurred at one of the banks the company uses to
deposit its time, the
g. The company has two certificates of deposit, each totaling P1,000,000. These
certificates of
h. Las Conde has received a check dated January 2, 2013 in the amount of P150,000.
i. Las Conde has agreed to maintain a cash balance of P200,000 at all times at PS
Bank to ensure
Based on the above and the result of your audit, how much will be reported as cash and
cash equivalent at December 31, 2017?
a. P2,075,000
b. P3,025,000
c. P2,825,000
d. P5,025,000
Total P3,025,000
PROBLEM 1-3
b) Check of P100,000 dated January 15, 2013 in payment of accounts payable was
recorded and mailed on December 31, 2017.
c) The company uses the calendar year. The cash receipts journal was held open until
January 15, 2013, during which time P400,000 was collected and recorded on
December 31, 2017.
The cash and cash equivalents to be shown on the December 31, 2017 balance sheet
is
a. P3,310,000
b. 1,910,000
c. P2,910,000
d. P4,410,000
Total P1,900,000
1. Emily Company provided the bank statement for the month of December which
included the following information:
In comparing the bank statement to its own cash records, the entity found the following:
Checks written and mailed but not yet recorded by the bank 650,000
In addition, the entity discovered that it had drawn and erroneously recorded a check for
P46,000 that should have been recorded for P64,000.
a. 2,500,000
b. 2,800,000
c. 2,520,000
d. 2,540,000
2. The bank statement of Maloko Corporation for April, 2013 showed an ending
balance of P169,263. Deposit in transit on April 30 was P18,200. Outstanding checks as
of April 30 were P59,435. During the month of April, the bank charged back NSF checks
in the amount of P3,435 of which P1,835 had been redeposited by April 30. The
company made no entry for the return and for the redeposit of the checks.
On April 23, the bank charged Maloko Corporation’s account for a P2,200 item which
should have been charged against the account of Maloka Corporation; the error was not
detected by the bank. During April, the proceeds from notes collected by the bank for
Maloko Corporation were P7,548 and bank charges for this service were P180.
What is the unadjusted book balance for “Cash” of Maloko Corporation at April 30,
2013?
a. 132,008
b. 126,295
c. 124,460
d. 124,310
3. On June 30, 2013, the bank statement of Bongangbongga Company had an ending
balance of P3,735,000. The following data were assembled on the course of reconciling
the bank balance:
What is the unadjusted cash in bank per ledger on June 30, 2013?
a. 3,515,000
b. 3,557,000
c. 3,455,000
d. 3,497,000
PROBLEM 1-1
The Creamers Corporation starts operations in Year One and makes gross sales of
P740,000 per year, incurring P240,000 cost of expense; while collecting cash of only
P200,000 per year. During each year, P15,000 in accounts are judged to be
uncollectible. The company estimates that 8 percent of its credit sales will eventually
prove to be worthless.
In addition to that, the entity wrote off P24,000 during the year. There were no collection
of accounts written off.
What is reported as the allowance for doubtful accounts on the company’s balance
sheet at the end of Year Two
a. P15,000
b. P40,000
c. P24,000
d. P30,000
PROBLEM 1-2
What is the Doubtful Accounts Expense that should appear on December 31 of the
current year?
a. 8,640
b. 8,600
c. 7,240
d. 8,200
Total P10,240
Required Allowance P10,240
Allowance for Doubtful Accounts (credit) (1,600)
d. 373,000
Solution: Answer (d)
Allowance- 2013 (7,100,00-6,250,000) P850,000
Recovery of accounts written off 207,000
Doubtful accounts expense for 2016 (SQUEEZE) 373,000
Total P1,430,000
PROBLEM 1
a. 6, 305, 000
2. What is the cost of factoring of the accounts receivable if all accounts are collected?
a. 399, 000
b. 798,000
c. 549, 855
Interest 150,855
PROBLEM 2
Sinigang Company during its third year of operations found itself at financial difficulties.
With this, the entity decided to use its accounts receivable as a means of obtaining cash
to continue operations.
On July 1, 2015, the entity sold P 2, 150, 000 of accounts receivable for cash proceeds
of P2, 000, 000. No bad debt allowance was associated with these accounts.
On December 15, 2015 the entity assigned the remainder of its accounts receivable,
P4,000,000 as of the date, as collateral on a P 2,550, 000, with 10% annual interest rate
loan from Sinangag Company. The entity received P 2,500, 000 less a 3% finance
charge. None of the assigned accounts had been collected by the end of the year.
a. 159, 000
b. 166, 500
c. 241, 500
d.550, 000
6. Lucian Company factored P 4,900, 000 of accounts receivable without guarantee for
a finance charge of 3%. The finance entity retained an amount equal to 8% of the
accounts receivable for possible adjustments. What should be recorded as gain or loss
on the transfer of accounts receivable?
a.490, 000
b.147, 000
c.392, 000
d.539, 000
Solution: Answer (c )
1. What amount of cash was received from the assignment of accounts receivable on
December 1, 2017?
a. 2, 375, 000
c. 1, 600, 000
a.475,000
b. 425, 000
c.495, 000
d.525, 000
Solution:
Principal Payment:
Remittances P950,000
Interest (2,500, 000 x 12% x 1/12) 950,000 25, 000 925, 000
Accounts Receivable- assigned(3, 000, 000- 1, 000, 000) P2, 000, 000
PROBLEM 1
a. 370,000 b. 300,000
c. 330,000 d. 400,000
PROBLEM 2
The P2,000,000 note receivable is dated December 31, 2013, bears interest at 8% and
is due on December 31, 2018. Interest is payable annually on December 31, and all
interest payments were made through December 31, 2014.
The P7,500,000 note receivable is dated May 1, 2018, bears interest at 9%. Principal
payments of P2,500,000 plus interest are due annually beginning May 1, 2014.
On July 1, 2014, Fernando Company sold a parcel of land to Barr Company for
P4,000,000 under an installment sale contract. Moreno Company made a P1,200,000
cash down payment on July 1, 2014, and signed a 4-year 10% note for the P2,800,000
balance. The equal annual payments of principal and interest on the note totalled
P880,000, payable on July 1 of each year from 2017 through 2020.
What is the total amount of notes receivable including accrued interest that should be
classified as current assets on December 31, 2014?
a. 2,940,000
b. 3,080,000
c. 3,540,000
d. 3,820,000
What is the total amount of notes receivable that should be classified as noncurrent
assets on December 31, 2014?
a. 4,500,000
b. 7,300,000
c. 6,700,000
d. 6,420,000
on 7/1/2017:
Principal P2,800,000
On August 31, 2020, Syvir Company discounted with recourse a note at the bank at
discount rate of 15%. The note was received from the customer on August 1, 2020, is
for 90 days, has a face value of P5,000,000 and carries an interest rate of 12%. The
customer paid the note to the bank on October 30, 2024, the date of maturity.
If the discounting is accounted for as a secured borrowing, what is the interest expense
to be recognized on August 31, 2020?
a. 0
b. 23,000
c. 50,000
d. 28,750
a. 5,000,000
b. 5,021,000
c. 5,021,250
d. 5,050,000
Principal P5,000,000
Principal P5,000,000
PROBLEM 1
Analysis of Billabong’s financial condition on December 31, 2015, indicates the principal
payments will be concluded, but the collection of interest is unlikely. Calvin klein did not
accrue the interest on December 31, 2015.
What is the carrying value of the loan receivable on December 31, 2020?
March 16, 2013, KULAMBO INC. loaned P3,000,000 to KABREKAMA CO.. Under the
loan agreement, Kulambo inc.is to make an annual principal payment of P600,000 for 5
years plus interest at 8%. The first principal and interest payments is due on January 1,
2013. The required payments were made by Kulambo inc. for 2016 and 2017. However,
during 2017, Kulambo inc. began to face financial difficulties, requiring KULAMBO In. to
reevaluate the collectability of the loan. December 31, 2017, KULAMBO determines that
it will be able to collect the remaining principal, but it is unlikely that the interest will be
collected.
The following present value actors are taken from the table of present values:
1 period 0.92593
2 period 0.85734
3 period 0.79383
What is the present value of the expected future cash flows as of December 31, 2017?
Assuming that Kulambo Inc. assessment of the collectibility of the loan has not change,
what amount of interest income should be recognize 2018?
However, during 2018 Eden cheese Company began to experience financial difficulties,
requiring MAYONNAISE Bank to reassess the collectibility of the loan.
a. 237,000
b. 112,500
c. 124,500
d. 0
a. 124,875
b. 123,795
c. 113,670
d. 0
a. 1,499,295
b. 1,489,170
c. 1,375,500
d. 1,500,000
PROBLEM 1
2014 2013
Merchandise Inventory 150,000 90,000
Cash 180,000 ?
Accounts Receivable 240,000 180,000
Accounts payable 405,000 200,00
Assuming all sales and purchases are on account. The amount of cost of goods sold is
P360,000 during the current year. The gross profit margin on sales is 20%.
a. 300,000
b. 210,000
c. 240,000
d. 310,000
a. 105,000
b. 35,000
c. 55,000
d. 185,000
Balance P690,000
Sales 450,000
Collections (510,000)
Purchases 300,000
Payment to suppliers (505,000)
PROBLEM 2
Xtyle Sportswear regularly buys sweaters from Asahi Company and is allowed trade
discounts of 18% and 8% from the list price. Xtyle made a purchase during the year,
and received an invoice with a list price of P780,000 , a freight charge of P22,000 and
payment terms of 2/10, n/30. What is the cost of purchase?
a. 617,600
b. 588,432
c. 583,248
d. 566,432
Balance 639,600
PROBLEM 1
There were no security transactions during 2016. The securities had the following fair
value at year-end:
a. 800,000
b. 900,000
c 1,000,000
d. 1,100,000
2 What amount of unrealized gain or loss should be recognized in inome statement for
the year ended December 31,2016?
a. 50,000 gain
b. 100,000 gain
c. 150,000 gain
d. 50,000 loss
PROBLEM 2
On September 21,2013, Paulene Company purchased 35,000 shares for P50 per share
The investment was classified as trading investment On December 31,2013, the market
price per share is P42. During 2014, the entity sold 15,000 shares for P65 per share. On
December 31,2014, the market price per share had declined to P38.
1. What amount of unrealized gain or loss should be reported in the income statement
for 2013?
a. 1,750,000 b. 1,570,000
c. 1,470,000 d. 1,330,000
3. What net amount of gain or loss should be recognized for 2014?
a. 345,000 gain b. 265,000 gain
c. 80,000 loss d. 105,000 gain
4. What is the carrying amount of the invesment for the year ended December 31,2014?
a. 760,000 b. 840,000
c. 670,000 d. 1,000,000
Solution 4 Answer b
Carrying amount- 12/31/14 (20,000 × 42) 840,000
INVESTMENT IN EQUITY SECURITIES (PROBLEMS)
PROBLEM 1
A P5 dividend per share had been declared on December 15, 2016, to be paid on
March 31, 2016 to shareholders of record on January 31, 2016. No other transaction
occurred in 2016 affecting the investment.
a. 380,000
b. 400,000
c. 412,000
d. 392,000
PROBLEM 2
On January 1, 2012, Joey Company purchased 20,000 shares of Bay Company, P100
par, at P110 per share. On March 1, 2012, Bay Company issued rights to Joey
Company, each permitting the purchase of ¼ share at par. No entry was made. The bid
Lion of the share was 140 and there was no quoted pLion for the rights. On April 1,
2012, Joey Company paid for the new shares charging the payment to the investment
account.
Since Joey Company felt that it had been assessed by Bay Company, the dividends
received from Bay Company in 2012 and 2013 (10% on December 31 of each year) are
credited to the investment account until the debit was fully offset. Bay Company
declared annual dividend of P2,500,000 for the year ended December 31, 2012 and
2013.
On January 1, 2014, Joey Company received 50% stock dividend from Bay
Company. On same date, the shares received as stock dividend were sold at P160
per share and the proceeds were credited to income.
On December 31, 2014, the shares of Bay Company were split 2 for 1. Joey
Company found that each new share was worth P5 more than the P110 paid for the
original shares. Accordingly, Joey Company debited the investment account with
the additional shares received at P110 per share and credited income. On June 30,
2015, Joey Company sold one-half of the investment at P92 per share and credited
the proceeds to the investment account.
What is the balance of the investment on December 31, 2015 as it was kept by
Joey Company?
a. 3,150,000
b. 2,650,000
c. 2,200,000
d. 4,950,000
Using the average method, what is the correct balance of the investment on
December 31, 2015?
a. 2,200,000
b. 1,800,000
c. 900,000
d. 0
Shares Cost
1/1/2012 (20,000 x 110) 20,000 2,200,000
4/1/2012 (5,000 x 100) 5,000 500,000
12/31/2012 (10% x 2,500,000) - (250,000)
12/31/2013 (10% x 2,500,000) - (250,000)
12/31/2014 (25,000 x 110) 25,000
2,750,000
6/30/2015 (25,000 x 92) (25,000) (2,300,000)
Shares Cost
PROBLEM 1
Problem 13
On January 1, 2015, Eurasia Company purchased 5-year bonds with face value of
P8,000,000 and stated interest of 10% per year payable semiannually January 1 and
July 1. The bonds were acquired to yield 8%. Present value factors are:
What is the carrying amount of the bond investment on December 31, 2015?
a. 8,538,542
b. 8,302,848
c. 8,594,752
d. 8,540,704
Difference 80,000
Multiply by PV of annuity of 1 for 10 periods at 4% 8.11
Premium 648,800
Face value 8,000,000
PROBLEM 2
a. 4,662,000
b. 4,618,200
c. 4,562,000
d. 4,680,020
PROBLEM 1
Ds Company intended to issue a bond with face value of 100,000 having a maturity of 5
years and annual coupon of 8%. At the time of issue however, the market interest rate
rose to 10% and the bond could fetch a price of 92,420 only. What is the amortization
on the first year?
a. 9,242
b. 8,000
c. 1,242
d. 2,606
Amortization 1,242
PROBLEM 2
Senegal Corporation issues 100,000, 10%, 5-year bonds on January 1, with interest
payable on January 1. In this case, the bonds sell for 107,985, which results in bond
premium of 7,985 and an effective-interest rate of 8%. What is the amortization
premium for the year?
A. 7,985
B. 2,159.5
C. 1,361
D. 2, 798.5
PROBLEM 3
On January 1, 2011, MS Company issues long-terms bonds which are due on January
1, 2016. Interest is paid semiannually on January 1 and July 1 each year. Face
amount of bonds is 500,000 with stated interest rate (coupon rate) of 10%. At the time
of issuance, market interest rate is 12%. What will be the price of bonds issued by MS
Company?
a. 463,202
b. 279,200
c. 500,000
d.184,002
= 500,000 x 0.5584
= 279,200
= 184,002
Price of bonds
= 463,202
P460,000
INVESTMENT PROPERTY
PROBLEM 1
One of the investment properties was measured at 7,950,000 and on December 31,
2014.
The property had been acquired on January 1, 2014 for a total of P 7, 600, 000, made
up of P 6,900, 000 paid to the vendor, P300, 000 paid to the local authority as a
property transfer tax and P400, 000 paid to professional advisers. The useful life of the
property is 50 years.
What is the amount of gain to be recognized in profit or loss for the year ended
December 31, 2014 in respect of the investment property?
a. 350, 000
b. 400, 000
c. 450, 000
d. 500, 000
PROBLEM 2
Azimudal Company and its subsidiaries own the following properties that are accounted
for in accordance with PAS 40:
What is the total investment property that should be reported in the consolidated
statement of financial position of the parent and its subsidiaries?
Building owned by a subsidiary of Azimudal and for which the 1, 750, 000
PROBLEM 3
Afro Company has a building with a carrying amount of P25, 000, 000 on December 31,
2019. The building is used as offices of the entity’s administrative staff.
On December 31, 2019, the entity intended to rent out the building to
independent third parties. The staff will be moved to a new building purchased
early in 2019
On December 31, 2019, the original building had a fair value of P35, 000, 000
On December 31, 2019, the entity also had land that was held in the ordinary
course of the business
The land had a carrying amount of P15, 000, 000 and fair value of P20, 000, 000
on December 31, 2019. On such date, the entity decided to hold the land for
capital appreciation.
The accounting policy is to carry all investment property at fair value.
a. 5, 000, 000
b. 10, 000, 000
c. 20, 000, 000
d 15, 000, 000
On March 31,2017, Qua Lee Company acquired 40% of the outstanding ordinary
shares of an investee for P8,000,000. The carrying amount of the net assets of the
investee equalled P15,000,000. Any excess of cost over carrying amount is attributable
to goodwill. During the year, the investee reported net loss of P4,500,000 and paid
dividends of P3,300,000. What is the carrying amount of the investment on December
31,2017?
a. 5,330,000
b. 5,660,000
c. 8,000,000
d. 6,650,000
PROBLEM 34-2
a. 2,744,000
b. 2,854,000
c. 2,584,000
d. 2,700,000
Total P2,744,000
PROBLEM 2
Nica Company acquired 30% of Chizza Company's voting share capital for P2,000,000
on January 1,2013. Nica's 30% interest in Chizza gave Nica the ability to exercise
significant influence over Chizza's operating and financial policies. During 2013, Chizza
earned P1,200,000 and paid dividend of P800,000. Chizza reported earnings of
P900,000 for the 6 months ended June 30,2017, and P1,700,000 for the year ended
December 31,2017. On July 1,2017 Nica sold half of the investment in Chizza for
P1,900,000 cash. Chizza paid dividend of P400,000 September 31,2017.
The fair value of the retained investment is P1,400,000 on July 1,2017 and P1,650,000
on December 31,2017. The retained investment is to be held as financial asset at fair
value through other comprehensive income.
1. Before income tax, what amount should be included in the 2017 income statement as
a result of the investment?
a. 360,000
b. 180,000
c. 252,000
d. 1,200,000
2. In the December 31,2013 statement of financial position, what is the carrying amount
of the investment in associate?
a. 2,000,000
b. 2,360,000
c. 2,120,000
d. 2,600,000
3. In the 2017 income statement, what amount should be reported as gain from the sale
of investment?
a. 900,000
b. 600,000
c. 705,000
d. 720,000
4. In the 2017 income statement, what amount should be reported as gain from re-
measurement of the retained investment?
a. 220,000
b. 205,000
c. 400,000
d. 100,000
PROBLEM 1
Solution2 Answer c
Cost of equipment (cash price equivalent) P2,470,000
Less: Down payment 400,000
Amount assigned to note payable 2,070,000
Face value of note 3,204,160
Discount on note payable, January 1, 2015 1,134,160
Solution 3 Answer b
Interest expense for 2015:
Carrying value of note payable, Jan. 1, 2015
(P3,204,160 - 1,134,160) P2,070,000
Interest rate x 10%
Discount amortization for 2015 P 207,000
Solution 4 Answer d
Interest expense for 2016:
Note payable, Jan. 1, 2015 P3,204,160
Less: Payment made on Dec. 31, 2015 400,520
Note payable, Dec. 31, 2015 2,803,640
Discount on note payable, Dec. 31, 2015
( P1,134,160 - P207,000) (927,160)
Carrying value of note, Dec. 31, 2015 1,876,480
Interest rate x 10%
Discount amortization (interest expense) for 2016 P 187,648
Solution 5 Answer a
Carrying value of note, Dec 31, 2015 (see no.4) P1,876,480
Discount amortization for 2015 (see no.4) 187,648
Payment made on Dec. 31, 2016 (400,520)
Carrying value of note, Dec. 31, 2016 P1,663,608
GOVERNMENT GRANT
PROBLEM 1
Clause Co. purchased a varnishing machine for P4,000,000 on January 1,2015. The
entity received a government grant of P840,000 in respect of this asset. The accounting
policy is to depreciate the asset over 4 years on a straight line method basis and to treat
the grant as deferred income.
1. What is the carrying amount of the machine on December 31, 2016?
a. 2,000,000
b. 3,000,000
c. 2,420,009
d. 3,160,000
2. What amount should be reported as deferred grant income on December 31, 2016?
a. 420,000
b. 720,000
c. 840,000
d. 120,000
Solution 1: Answer (a)
Cost 4,000,000
Accumulated Depreciation (4,000,000/4x2) (2,000,000)
Carrying Amount-Dec. 31 ,2016 2,000,000
1.) On January 1,2013 Lourde Company received a grant of P25,000,000 from the
American Government in order to defray safety and environmental cost within the area
where the entity is located. The safety and environment cost are expected to be
incurred over four years, respectively,P2,000,000 ,P4,000,000 ,P6,000,000 and
P8,000,000.What amount of grant income should be recognized in 2013?
a. 25,000,000
b. 2,000,000
c. 2,500,000
d. 6,250,000
P20,000,000 P25,000,000
2.) On January 2 ,2017, Marlborough Company received a grant of P60,000,000 to
compensate for costs to be incurred in planting trees over a period of 5 years. The entity
will incur such cost at P2,000,000 for 2017, P4,000,000 for 2013, P6,000,000 for 2016,
P8,000,000 for 2017, and P10,000,000 for 2018. What amount of grant income should
be recognized for 2013?
a. 6,000,000
b. 4,000,000
c. 12,000,000
d. 8,000,000
3.) On January 1, 2013 Madlangtuta Co. received a grant of P25,000,000 from the
British government for the construction of a laboratory and research facility with an
estimated cost of P15,000,000 and useful life of 5 years. The laboratory and research
facility was completed and ready for the intended use on January 1, 2013. What amount
of grant income should be included in the income statement for 2016?
a. 3,000,000
b. 5,000,000
c. 0
d.1,500,000
4.) Brainless Company received a government grant of P15,000,000 to install and run a
windmill in an economically backward area. The entity had estimated that such a
windmill would cost P25,000,000 to construct. The secondary condition attached to the
grant is that the entity shall hire labor in the area where the windmill is to locate. The
construction was completed on January 1,2017 .The windmill is to be depreciated using
the straight line method over a period of 10 years. What amount of grant income should
be recognized for 2017?
a. 1,500,000
b. 3,000,000
c. 2,500,000
d. 5,000,000
PROBLEM 2
Dinurado Co. purchased a varnishing machine for P4,000,000 on January 1,2015. The
entity received a government grant of P840,000 in respect of this asset. The accounting
policy is to depreciate the asset over 4 years on a straight line method basis and to treat
the grant as deferred income.
a. 2,000,00
b. 3,000,000
c. 2,420,009
d. 3,160,000
a. 420,000
b. 720,000
c. 840,000
d. 120,000
PROBLEM 1
The entity began the self-construction of a new building on January 1, 2017 and the
building was completed on December 31, 2020. Expenditures during 2017 and 2020
were:
a. 8,125,000
b. 7,500,000
c. 7,875,000
d. 7,675,000
PROBLEM 2
Bank A – 7% 9,000,000
Bank B – 7.7% 11,000,000
Bank C – 8% 25,000,000
What is the amount of borrowing cost that should be capitalized in relation of the plant?
a. 3,478,500
b. 2,898,750
c. 3,477,000
d. 2,608,875
PROBLEM 3
a. 1,140,000
b. 860,000
c. 1,620,000
d. 640,000
PROBLEM 1
a. 2,720,000
b. 3,205,000
c. 2,915,000
d. 2,950,000
a. 7,517,000
b. 7,537,000
c. 7,495,000
d. 7,525,000
a. 200,000
b. 203,000
c. 143,000
d. 0
DEPRECIATION
PROBLEM 1
SEVERINO spends P20,000 cash on a piece of equipment for use in her restaurant.
She plans to use the straight-line method to depreciate the equipment over 5 years. She
expects it to have no value at the end of the 5 years. After 4 years, SEVERINO sells
the equipment for P2,000. What is the gain/loss on sale of the equipment?
a. P4,000 loss
b. P4,000 gain
c. P2,000 loss
d. P2,000 gain
PROBLEM 2
a. 308,571.43
b. 380,571.34
c. 308,517.43
d. 308,517.43
PROBLEM 3
Sandstone Sky Company provided the following information with respect to a building:
* The building was acquired January 1, 2011 at cost of P3,000,000. It has an estimated
useful life of 12 years and salvage value of P150,000. The method of depreciation used
was double declining method.
* The building was renovated on January 1, 2017 at a cost of P800,000. The residual
value became P200,000.
* On January 1, 2013, the management decided to change the method being used to
straight line method.
a. 439,351.85
b. 304,513.89
c. 493,351.58
d. 340,513.98
Accumulated Depreciation
P1,163,888.9
Tropang FOREVER Company, purchased a tract of land for mining worth 5,000,000
with removable ore estimated at 20,000,000 tons. Before the start of its operation the
company incurred 3,000,000 exploration cost. Of these cost 2,000,000 was associated
with successful wells and the remaining with so called “dry holes”. The entity uses the
full cost method in accounting the exploration cost. The entity also incurred
development cost of 3,600,000 during the current year. The entity is required by the law
to restore the land to its original condition at estimated cost of 4,000,000. The present
value of Estimated restoration cost is 3,300,000 The land is estimated to be sold at
1,500,000 afterwards. The entity removed 400,000 tons during the year and sold
300,000 of it.
1. What total amount of depletion should be recorded for the current year?
A. 262,000
B. 268,000
C. 312,000
D.201,000
A. 196,500
B. 150,750
C. 234,000
D. 201,000
ANSWER : D
Building and bunk houses were build costing 8,000,000 , it is use as a storage of mining
equipment and houses for the miners. Its expected useful life is 10 years with no
residual value.
Operations began on January 1, 2013 and resources removed totaled 500,000 tons.
During 2017, it is discovered that available resource will total 1,500,000 tons.
At the beginning of 2017, 800,000 development cost were incurred, and only 200,000
tons are extracted.
A. 1,800,000
B. 1,600,000
C. 1,700,000
D. 1,500,000
ANSWER: C
1. James Budoy Company acquired a machine for 5,000,000 on July 1, 2017. The
machine has a 12-year useful life, a 500,000 residual value, and was depreciated using
the straight-line method. On June 30, 2016 a test for recoverability revealed that the
machine has been impaired. The fair value less cost of disposal on this date is
1,750,000 and the value in use amount to 1,500,000. What amount should be
recognized as impairment loss?
A. 2,750,000
B. 2,500,000
C. 2,875,000
D. 3,125,000
ANSWER: B
Cost P5,000,000
A. 16,812,500
B. 17,312,500
C. 14,270,833
D. 19,000,000
ANSWER: C
Cost P19,000,000
Cost P19,000,000
3. Using the same information in No.2, Nasaktan Corporation change its depreciation
method into straight line method at the beginning of 2013. It is estimated to have a
residual value of 1,000,000 it is estimated to have a total of 10-year useful life. What
amount should be recognized as depreciation in 2013?
A. 1,914,062.5
B. 2,039,062.5
C. 1,701,388.89
D. 1,531,250
ANSWER: A