CPA REVIEW SCHOOL OF THE PHILIPPINES | Manila FINANCIAL ACCOUNTING AND REPORTING —_ VALIX/SIY/VALIX/ESCALA/SANTOS/DELA CRUZ, SME, 1, At the beginning of current year, SME acquired 20% of the equity of A and B for P2,000,000 and. 6,000,000 respectively. Transaction costs of 10% of the purchase price ofthe shares were incurred by SME. (On January 15, entity A declared and paid dividend of P1,500,000.. Entity A recognized profit of P2,500,000 and entity B recognized a loss of P4,000,000 for tht year. ‘At year-end, SME determined the fair value of the investments in A and B at P3.000.000 and 'P4,000.000 respectively. Costs of disposal are estimated at 10% ofthe fair value of the investments. Published price quotations do not exist forthe shares of entities A and B. 1. Under the cost model, what is the total catrying amount ofthe investments in associates at ‘year-end? ‘& §,800,000 630,000 . 7,000,000 4. 6,200,000 2. What is the impairment loss under the cont model? & 2,000,000 . 3,000,000 2,400,000 a 0 3. Under the equity method, what is the total carrying amount ofthe investments in associates at ‘year-end? a 8,200,000 ‘6. 6,000,000 8,800,000 4. 8,500,000 4. What is the impairment loss under the equity method” ‘a. 2,200,000 B. 1,800,000 ‘e. 1,900,000 4 0 5. Under the fair value model, what i the total carrying aspount of the investments in associates at year-end? | ‘a. 8,000,000 b. 6,300,000 ©. 7,000,000 . 6,000,000 6703Page 2 2. Atthe beginning of current year, SME acquired a 30% interest in the ordinary shares that carry voting rights of another entity for P15,000,000. The carrying amount of the net assets acquired is 13,250,000. SME elected to use the equity method, ‘The carying amounts of the identifiable assets and liablties ofthe investee equaled fair value except for equipment whose far value exceeded the carrying amount by P2,500,000, The remaining useful life forthe equipment is five years. ‘The investee reported net income of P20,000,000 for the current year, and declared dividend of 'P7,$00,000 at year-end. The fair value of the investment in associate is P20,000,000 at year-end. 1, What isthe implied goodwill from the acquisition? 1,750,000 1,000,000, "750,000 0 2. What is the investment income for the current year? a. 2,250,000 '. 6,000,000 © 5,750,000 4. 5,850,000 3. What is the carrying amount of the investment t year-end? 18,500,000 20,000.00 & 16,750,000 18,600,000 3. On January 1, 2016, SME acquired tademark for P3,00°,00C. The SME expected to continue ‘marketing the line of products using the trademark indefintaly An analysis provides evidence that the line of trademasked products may generate net cash :aflows foran indetiaite period. Management is unable o estimate the use‘ul life ofthe trademark In 2019, a compentor unezpectedly revealed a technologiral breakthrough that is expected to result, in a product, that when launcined by the competitor. will eatingilsh dencand for SME's patented product line. Demand for SME's patented product line is expecta to remain strong until December 2021, when the competitor is expected to launch the new product On December 31, 2019, SME assessed the recoverable ammount of the trademark at P500,000. SME intended to continue manufacturing the patented products unil December 31, 2021 1, What isthe carrying amount of the trademark on January 1, 20197 a. 3,000,000 ’. 2,100,000 ©. 2,400,000 &, 2,700,000 2. What isthe amortization of trademark for 2019? a. 300,000 ». 600,000 ©. 700,000 a 0 3. What amount should be recognized as impairment loss for 20197 3,000,000, . 2,500,000 «900,000 a 0 67034. An SME provided the following information at year-end: Cash Accounts receivable Prepayments Inventories Investments in associate Property, plant and equipment ‘Accumulated depreciation and impairment Software-net of amortization and impairment Deferred tax asset ~to be reversed next year Bank overdraft Bank loan, fully payable in two years and prepayable without penalty ‘Trade payables Interest payable Current tax liability Provision for warranty Employee benefit obligation, current portion, P4,000 Finance lease liability, current portion, P20,000 Shere capital Retained earnings 1. What is the total amount of current assets? a 675,000 b. 615,000, e. 785,000 4, 725,000 2. Whats the total amount of noncurrent assets? a. 2,615,000 b. 2,670,000 ©. 2,675,000 4. 2,660,000 3. What is the total amount of current liabilities? a. 820,000 b. 870,000 ©. 796,000 4. 816,000 4, What is total amount of noncurrent liabilities? a. 68,000 54,000 . 80,000 4. 30,000 5. Whatisthe balance of retained earings? ‘2,000,000 ». 250,000 7 ©. "500,000 450,000 Page 3 25,000 $30,000 160.000 60.000 110,000 3,250,000 "700,000 10,000 5,000 180,000 50,000 430,000 2,000 270,000 14,000 10,000 ‘44.000 2,000,000 6703Page 4 ‘5. An SME provided the following information in elation to the preparation of « statement of cash flows for the current year: Net income for the year ‘Noncash finance cost, finance cost paid P250,000 "Noncash income tax expense income taxes paid P1,900,000 Depreciation of property, plant and equipment Impairment loss Amortization intangible asset Gain on sale of equipment Increase in trade and other receivables Decrease in inventories Increase in trade payables including unrealized foreign exchange loss of P10,000 charged to other expenses Increase in eurrent and long term benefit payable Proceeds from sale of equipment Purchase of equipment for cash Payment of finance lease liability Repayment of borrowings Dividends paid Issuance of share capital for cash Purchase of treasury shares for cash 1. What i the net cash provided by operating activities? a 7,150,000 b. 6,350,000 ©. 7,140,000 4. 51650,000 2. What is the net cash used in investing activities? 4,850,000 . 3,850,000 5,850,000 4. 1,000,000 3. What isthe net cash used in financing activities? a 3,200,000 b. 1/200,000 ‘& 1,700,000 4. 2,700,000 END 3,800,000 10,000 790,000 2,700,000 300,000 20,000 600.000 100,000 90,000 110,000 30,000 1,000,000 4850.00 200,000 1,000,000 1,500,000 2,000,000 "$00,000 6703