Wesleyan University – Philippines

Mabini Extension, Cabanatuan City

College of Business and Accountancy

Quiz in
Intermediate Accounting I

NAME: YEAR AND BLOCK:

On January 1, 2013, Kahoy Company planted trees on its land. The

entity purchased the land two years ago at a cost of P2,000,000.

The entity has no sufficient cash during its first two years that’s why
on January 3, 2013 it borrowed a P500,000 loan specifically for the
plants with a 10% interest rate. The loan was outstanding all of 2013
and 2014. The company’s other interest-bearing debts included a long-
term note of P2.5 million with an 8% interest rate, and a mortgage of
P1.5 million on another qualifying asset with an interest rate of 6%.
Both debts were outstanding during all of 2013 and 2014. The company’s
fiscal year-end is December 31.

Expenditures for the first two years were as follows:

January 3, 2013 P250,000

March 31, 2013 300,000
June 30, 2013 400,000
October 31, 2013 300,000
January 31, 2014 150,000
March 31, 2014 250,000
May 31, 2014 300,000

The trees were considered bearer plants and had accumulated cost of
P2,000,000 excluding the cost for the first two years and its
borrowing cost.

On January 1, 2018, the trees had matured and were expected to bear
produce for a period of 10 years.

On December 31, 2018, the trees produced fruit and the fair value less
cost of disposal on such date was P50,000. There was no harvest during
2017.

On December 31, 2019, the fruits were harvested and the fair value
less cost of disposal on such date was P75,000.

On January 1, 2020, the entity has properly tested the bearer plants to
be impaired.

The bearer plant has a remaining life of 5 years and is expected to

generate undiscounted net cash inflows of P700,000 per year. The fair
value of the machinery on January 1, 2020 is P2,600,000. The appropriate
discount rate is 8%. (Round your factor to 4 decimal places)

On June 30, 2020, the trees produced fruit and the fair value less cost
of disposal on such date was P60,000. Again, there was no harvest during
2020.
On January 1, 2021, the asset’s recoverable amount was determined to be
P2,900,000 and management believes that the impairment loss previously
recognized should be reversed.

1. Total amount of the bearer plant as of January 1, 2018.

2. Capitalization rate for the borrowing cost.
3. Interest expense for 2013.
4. Capitalizable interest for 2013.
5. Interest expense for 2014.
6. Capitalizable interest for 2014.
7. Biological asset on December 31, 2018?
8. Gain from change in fair value to be recognized for the
agricultural produce on December 31, 2019?
9. Biological asset on December 31, 2020?
10. Carrying amount of PPE on December 31, 2018?
11. Carrying amount of PPE on December 31, 2019?
12. Carrying amount of PPE on December 31, 2020?
13. Carrying amount of PPE on December 31, 2021?
14. Impairment loss on 2020?
15. Gain on reversal of impairment loss on 2021?