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1. Forester Company provided the following assets in a forest plantation and farm:

Freestanding trees 5,000,000

Land under trees 600,000
Roads in forest 300,000
Animals related to recreational activities 1,000,000
Bearer plants 1,500,000
Bearer animals 2,000,000
Agricultural produce growing on bearer plants 800,000
Agricultural produce harvested 1,200,000
Plants with dual use 1,400,000

1. What total amount should be reported as biological assets?

a. 7,800,000
b. 7,200,000
c. 8,400,000
d. 9,200,000

2. What total amount should be included in property, plant and equipment?

a. 4,600,000
b. 3,400,000
c. 1,800,000
d. 4,200,000

2. Tower Company made the following acquisitions during the year:

Purchased for 5,400,000 including appraiser fee of 50,000 a warehouse building and the land on
which it is located.
The land had an appraised value of 2,000,000 and original cost of 1,400,000. The building had an
appraised value of 3,000,000 and original cost of 2,800,000.
Purchased an office building and the land on which it is located for 7,500,000 cash and assumed
an existing 2,500,000 mortgage.
For realty tax purpose the property is assessed at 9,600,000 60% of which is allocated to the

1. What is the total cost of land?

a. 6,160,000
b. 5,840,000
c. 6,000,000
d. 5,000,000
2. What is the total cost of building?
a. 8,760,000
b. 9,240,000
c. 9,000,000
d. 7,760,000

3. During the current year Ewing Company exchanged an old packing machine which cost 1,200,000 and
was 50% depreciated for another used machine and paid cash difference of 160,000.

The fair value of the old packing machine was determined to be 700,000.

1. What is the cost of the machine acquired in the exchange?

a. 860,000
b. 700,000
c. 760,000
d. 540,000

2. What is the gain on exchange?

a. 540,000
b. 100,000
c. 60,000
d. 0

4. At the beginning of current year Sagada Company received a grant of 25,000,000 from the American
government in order to defray safety and environment cost within the area where the entity is located.

The safety and environment cost are expected to be incurred over four years respectively 2,000,000,
4,000,000, 6,000,000 and 8,000,000.

What amount of grant income should be recognized for the current year?
a. 25,000,000
b. 2,000,000
c. 2,500,000
d. 6,250,000

5. Boyd Company purchased a 4,000,000 tract of land for a factory site.

The entity razed an old building on the property to make room for the construction of new building and
sold the materials salvage from the demolition.

Demolition of old building 200,000

Legal fees for purchase contract and recording ownership 150,000
Title guarantee insurance 50,000
Proceeds from sale of salvaged materials 20,000

What is carrying amount of the land?

a. 4,200,000
b. 4,150,000
c. 4,050,000
d. 4,400,000

6. Altitude Company purchased a plot of land for 2,000,000 as a plant site.

There was a small office building on the plot with fair value of 700,000 which the entity continue to use
with some modification and renovation.

The entity decided to construct a factory building and incurred the following costs:

Materials and supplies 3,000,000

Excavation 100,000
Labor on construction 2,500,000
Cost remodelling office building 200,000
Legal cost of conveying land 10,000
Imputed interest on money used during construction 120,000
Cash discount on materials purchased 60,000
Supervision by management 70,000
Compensation insurance premium for workers 20,000
Clerical and other expenses related to construction 30,000
Paving of streets and sidewalks 40,000
Plans and specifications 140,000
Payment for claims for injuries not covered by insurance 25,000
Legal cost of injury claim 15,000
Saving on construction 200,000

1. What is the initial cost of land?

a. 1,310,000
b. 1,300,000
c. 1,350,000
d. 1,410,000

2. What is the initial cost of office building?

a. 1,050,000
b. 900,000
c. 700,000
d. 850,000

3. What is the initial cost of factory building?

a. 5,720,000
b. 5,920,000
c. 5,800,000
d. 5,600,000

7. Negros Company acquired a new machinery.

Invoice price of the machinery 1,400,000

Cash discount available but not taken on purchased 20,000
Freight paid on the new machinery 40,000
Cost of removing the old machinery 15,000
Installation cost of the new machinery 50,000
Testing cost before the machinery was put into
Regular operation including 10,000 in wage
Of the regular machinery operator 30,000
Loss on premature retirement of the old machinery 5,000
Estimated cost of manufacturing similar machinery
Including overhead 1,300,000

What amount should be capitalized as cost of the new machinery?

a. 1,500,000
b. 1,490,000
c. 1,515,000
d. 1,520,000

8. On January 1, 2018 Hamlet Company borrowed 6,000,000 at an annual interest rate of 10% to finance
specifically the cost of building an electricity generating plant Construction commenced on January 1,
2018 with a cost 6,000,000.

Not all the cash borrowed was used immediately so interest income of 80,000 was generated by
temporarily investing some of the borrowed fund prior to use. The project was completed on November
30, 2018.

What is the carrying amount of the plant on November 3, 2018?

a. 6,000,000
b. 6,470,000
c. 6,520,000
d. 6,550,000
9. At the beginning of current year Lem Company bought machinery under a contact that required a
down payment of 100,000 plus 24 months payments of 50,000 each for total cash payments of
1,300,000. The cash price of the machinery was 1,100,000.

The machinery has a useful life of 10 years and residual value of 50,000. The entity used straight line

What amount should be reported as depreciation for the current year?

a. 105,000
b. 110,000
c. 125,000
d. 130,000

10. Frey Company purchased a machine for 4,500,000 on January 1, 2018. The machinery has an
estimated useful life of four years and a residual value of 500,000. The machine is being depreciated
using the sum of the year digits method.

1. What is the accumulated depreciation on December 31, 2019?

a. 1,600,000
b. 2,800,000
c. 1,200,000
d. 3,150,000

2. What is the carrying amount on December 31, 2019?

a. 2,900,000
b. 2,700,000
c. 1,700,000
d. 1,350,000

11. Turtle Company purchased equipment on January 1, 2016 for 5,000,000. The equipment had an
estimated 5 year service life.

The depreciation policy for 5 year assets is to use the 200% double declining balance method for the 1 st
two years and then switch the straight line depreciation method.

On December 31, 2018 what amount should be reported as accumulated depreciation for the
a. 3,000,000
b. 3,800,000
c. 3,920,000
d. 4,200,000
12. On January 1, 2018 Mankayan Company purchased land with valuable natural ore deposits for
10,000,000. The residual value of the land was 2,000,000. At the time of purchased a geological survey
estimated a recoverable output of 4,000,000 tons.

Early in 201 roads were constructed on the land to aid in the extraction and transportation of the mined
ore at a cost of 1,600,000. In 2018 500,000 tons were mined and sold.

A new survey at the end of 2019 estimated 4,200,000 tons of ore available for mining in 2019 800,000
tons were mined and sold.

1. What amount should be recognized as depletion for 2018?

a. 1,250,000
b. 1,200,000
c. 1,450,000
d. 1,000,000

2. What amount should be recognized as depletion for 2019?

a. 1,344,000
b. 1,920,000
c. 1,200,000
d. 1,600,000

13. On January 1, 2013 Raven Company acquired a building at cost of 5,000,000. The building has been
depreciated on the basis of a 20 year life.

On January 1, 2018 an appraisal of the building showed replacement cost at 8,000,000 with no change in
useful life.

1. Before income tax what amount should be credited to revaluation surplus on January 1, 2018?
a. 3,000,000
b. 2,250,000
c. 4,250,000
d. 6,000,000

2. What is the depreciation for 2018?

a. 250,000
b. 150,000
c. 400,000
d. 300,000

3. What is the revaluation surplus that should be reported in the December 31, 2018 statement of
financial position?
a. 2,100,000
b. 2,250,000
c. 1,850,000
d. 2,800,000

14. Jacqueline Company had an equipment with carrying amount of 4,500,000 at year end:

Expected discounted net cash flows 4,000,000

Fair value of similar asset 4,150,000
Fair value of the asset when sold stand alone 4,280,000

What is the impairment loss for the current year?

a. 500,000
b. 350,000
c. 220,000
d. 0

15. Bronze Company operates a production line which is treated as a cash generating unit for impairment
review purposes. At year end the carrying amounts of the noncurrent assets are as follows:

Goodwill 1,100,000
Machinery 2,200,000

The value in use of the production line is estimated at 2,700,000 at this time

1. What is the revised carrying amount of goodwill after recognition of impairment?

a. 1,100,000
b. 900,000
c. 800,000
d. 500,000

2. What is the revised carrying amount of machinery after recognition of impairment?

a. 2,200,000
b. 1,800,000
c. 1,600,000
d. 1,900,000

16. Lobo Company reported an impairment loss of 2,000,000 in 2017. This loss was related to an item of
property plant and equipment which was acquired on January 1, 2016 with cost of 10,000,000 useful life
of 10 years and no residual value. The straight line method is used in recording depreciation.

On December 31, 2017 the entity reported this asset at 6,000,000 which is the fair value on such date.
On December 31, 2018 the entity determined that the fair value of the impaired asset had increased to

1. What is the carrying amount of the impaired asset on December 31, 2018?
a. 5,250,000
b. 6,000,000
c. 5,400,000
d. 8,000,000

2. What is the carrying amount of the asset on December 31, 2018 on the basis that it was not impaired?
a. 8,000,000
b. 7,000,000
c. 9,000,000
d. 6,000,000

3. What amount gain on reversal of impairment should be reported in the income statement for 2018?
a. 2,250,000
b. 1,750,000
c. 1,500,000
d. 0

17. Vanessa Company reported the following data at year end:

Franchise 1,000,000
Computer software 1,500,000
Deferred charges 100,000
Patent 2,500,000
Customer list purchased 500,000
Copyright 700,000
Deposit with advertising agency to promote
Goodwill 400,000
Bond sinking fund 1,300,000
Goodwill 4,000,000
Trademark 900,000
Research and development cost 2,000,000

What total amount should be reported as intangible assets?

a. 11,100,000
b. 11,500,000
c. 10,600,000
d. 13,100,000
18. Mayer Company purchased Tara Company for 8,000,000 cash Tara Company had total liabilities of

Mayer Company assessment o the fair value it obtained when it purchased Tara Company is as follows:

Cash 1,000,000
Inventory 500,000
In-process research and development 5,000,000
Assembled workforce 1,200,000

What is the goodwill arising from the acquisition?

a. 4,500,000
b. 3,300,000
c. 1,500,000
d. 300,000

19. Star Company leased a building to be used as product showroom. The ten year non-renewable lease
will expire on December 31 2023.

In January 2018 the entity redecorated the showroom and made leasehold improvement of 480,000.

The estimated useful life of the improvement is 8 years. The straight line method of depreciation is used.

What is the carrying amount of leasehold improvement on June 30, 2018?

a. 456,000
b. 450,000
c. 440,000
d. 432,000

20. Jess Company incurred the following research and development costs during the current year:

Equipment purchased for current and future projects

5 year useful life 100,000
Equipment purchased for current project only
5 year useful life 200,000
Research and development salaries of current project 400,000
Legal fees to obtain patent 50,000
Material and labor cost for prototype product 600,000

What amount should be recognized as research and development expense?

a. 1,220,000
b. 1,000,000
c. 1,300,000
d. 1,060,000

21. During the current year Pitt Company incurred the following costs to develop and produce a
computer software product:

Completion of detailed program design 1,300,000

Cost incurred for coding and testing to
Establish technology feasibility 1,000,000
Other coding costs after establishment
Of technological feasibility 2,400,000
Other testing cost after establishment of
Of technological feasibility 2,000,000
Cost of producing product masters for training materials 1,500,000
Duplication of computer software and training from
Product masters 2,500,000
Packing product 900,000

1. What amount should be reported as inventory?

a. 2,500,000
b. 3,400,000
c. 4,000,000
d. 4,900,000

2. What total amount of the cost incurred should be expensed immediately?

a. 8,200,000
b. 2,300,000
c. 6,700,000
d. 4,400,000

3. What amount should be capitalized as software cost?

a. 5,400,000
b. 5,700,000
c. 5,900,000
d. 6,900,000