INVESTMENT PROPERTY MEASUREMENT

Investment properties are measured as follows:
Select the correct response:
 Initial: Cost; Subsequent: Fair Value
 Initial: Cost or Fair Value; Subsequent: Cost or Fair Value
 Initial: Fair Value; Subsequent: Fair Value
 Initial: Cost; Subsequent: Cost or Fair Value
On June 30, 2018, ABC Co. purchased 25% of the outstanding ordinary shares of DEF Co. at a
total cost of P2,100,000. The book value of DEF’s net assets on acquisition date was P7.2
million. For the following reasons, ABC was willing to pay more than book value for the DEF
shares:
• DEF has depreciable assets with a current fair value of P180,000 more than their book value.
These assets have a remaining useful life of 10 years.
• DEF owns a tract of land with a current fair value of P900,000 more than its carrying amount.
• All other identifiable tangible and intangible assets of DEF have current fair values that are
equal to their carrying amounts.
DEF reported a net income of P1,620,000, earned evenly during the current year ended
December 31, 2018. Also in the current year, it declared and paid cash dividends of P315,000
to its ordinary shareholders. Market value of DEF’s ordinary shares at December 31, 2018, is
P9 million. ABC’s financial year-end is December 31.
What amount of investment income should ABC report in the income statement for the year
ended December 31, 2018, under the fair value method?
 P 78,750
 Answer not given
 P 71,250
 P 202,500
 P 228,750
Which of the following is outside the scope of PAS 41?
 mango trees and other plants that produce agricultural products repeatedly over a
long period of time
 rice plants and other crops that produce agricultural products only once
 chickens used in the production of meat
 dairy cattle used in the production of milk

Statement 1. R Co. receives a 3-year, noninterest-bearing note of P1,000,000. R Co determined
that the effective interest rate on the transaction is 10%. The initial carrying amount of the note
receivable is computed as P1,000,000 x PV of 1 @ 10%, n=3.
Statement 2. Wet Co. received a noninterest-bearing note of P3,000,000. The note is collectible
in three equal annual installments of P1,000,000, due at the end of each year. Wet Co.
determines that the effective interest on the transactions is 10%. The initial carrying amount of
the note receivable is computed as P1,000,000 x PV of 1 @ 10%, n=3.
 FALSE; FALSE
 TRUE; TRUE
 TRUE; FALSE
 FALSE; TRUE
Which of the following methods may be used to estimate doubtful

accounts?
I. Percentage of credit dales
II. Percentage of receivables
III. Aging of receivables
IV. Combination of these methods
 All of these
 I only
 II and III only
 I, II, and III
On October 1, 20x1, the warehouse of ABC Co. and all inventories

contained therein were damaged by flood. Off-site back up of data
base shows the following information:
Inventory, Jan. 1 10,000

Accounts payable, Jan. 1 3,000
Accounts payable, Sept. 30 2,000
Payments to suppliers 50,000
Freight-in 500
Purchase returns 500
Sales from Jan. to Sept. 80,000
Sales returns 5,000
Sales discounts 2,000
Gross profit rate based on sales 30%
Additional information:
Goods in transit as of October 1, 20x1 amounted to ₱1,000, cost of
goods out on consignment is ₱1,200, and materials damaged by
flood can be sold at a salvage value of ₱1,800. How much is the
inventory loss due to the flood?
 P 2,500
 P 4,400
 P 4,900
 P 3,000
 answer not given
Which of the following checks from customers should not be

considered as Cash?
 Personal check
 Certified check
 Manager's Check
 Post dated check
The following information was available from the inventory records

of Mon Company for January:
Units Unit Cost Total Cost
Balance at January 1 3,000 ₱9.77 ₱29,310
Purchases:
January 6 2,000 10.30 20,600
January 26 2,700 10.71 28,917
Sales:
January 7 (2,500)
January 31 (3,200)
Balance at January 31 2,000
Assuming that Mon maintains perpetual inventory records, what

should be the inventory at January 31, using the moving-average
inventory method, rounded to the nearest peso?
 P20,720
 P 20,520
 P20,474
 P 21,010
At the beginning of current year, ABC Company acquired 200,000

ordinary shares of an investee for P9,000,000. The investment is
measured at fair value through other comprehensive income. At the
time of purchase, the investee had outstanding 800,000 shares with
a carrying amount of P36,000,000. The following events took place
during the year:
• The investee reported net income of P1,800,000.
• ABC Company received from the investee a dividend of P0.75 per
ordinary share.
• The market value of the investee’s share had declined to P40 at
year end.
What is the carrying amount of the investment at year-end?
 P 9,000,000
 P 9,300,000
 P 9,450,000
 P 8,000,000
Which of the following receivables may be presented as part of

current assets?
 Loan receivables from the entity’s officers collectible

beyond 12 months
 Receivable from a subscriber of the entity’s own shares
collectible within 12 months from end of the reporting period.
 Long-term receivables of a construction firm. The firm’s
normal operating cycle extends beyond one year.
 Advances to affiliates, the settlement date is not yet agreed
upon
The imprest petty cash fund account is debited
 when the fund is created and when the fund is increased.

 when the fund is created and when the fund is decreased.
 only when the fund is created.
 when the fund is created and everytime it is replenished.
The following information applied to Fly Inc. for 2020:

Merchandise purchased for resale ₱400,000
Freight-in 16,000
Freight-out 10,000
Purchase returns 4,000
Fly's 2020 inventoriable cost was
 P406,000
 P400,000
 P412,000
 P422,000
Ame, Inc. exchanged a truck with a carrying amount of ₱12,000 and

a fair value of ₱20,000 for a truck and ₱5,000 cash. The fair value
of the truck received was ₱15,000. At what amount should Ame
record the truck received in the exchange?
 P 9,000
 P 15,000
 P 7,000
 P 12,000
20. On October 1, 20x1, the warehouse of ABC Co. and all
inventories contained therein were damaged by flood. Off-site back
up of data base shows the following information:
Inventory, Jan. 1 14,500

Accounts payable, Jan. 1 6,000
Accounts payable, Sept. 30 3,000
Payments to suppliers 50,000
Freight-in 5,000
Purchase returns and discounts 2,500
Sales from Jan. to Sept. 75,000
Sales returns 5,000
Gross profit rate based on sales 20%
Goods in transit as of October 1, 20x1 amounted to ₱2,000, cost of
goods out on consignment is ₱1,200, and materials damaged by
flood can be sold at a salvage value of ₱500.
How much is the inventory loss due to the flood?
 P 7,800
 P 7,200
 P 8,200
 P 6,800
Supporting records of ABC CORP’s trading securities portfolio show

the following debt and equity securities:
Security Cost. Fair Value

400 ordinary shares Con Co. P254,500 P243,000
P800,000 Tip Co. 7% bonds 796,500 774,000
P1,200,000 Turk Co. 7 ½ % bonds 1,207,500 1,218,900
Totals P2,258,500. P2,235,900
Interest dates on the bonds are January 1 and July 1. ABC Corp
uses the income approach to record the purchase of bonds with
accrued interest. During 2017 and 2018, ABC completed the
following transactions related to trading securities:
2017
Jan 1 Received semiannual interest on bonds. Assume that the
appropriate adjusting entry was made on December 31, 2016
April 1 Sold P600,000 of 7 ½% Turk bonds at 102 plus accrued
interest.
May 21 Received dividend of P1.25 per share on the Con ordinary
share capital. The dividend had not been recorded on the
declaration date.
Jul 1 Received semiannual interest on bonds and then sold the 7%
Tip bonds at 97 ½
Aug 25 Purchased 200 shares of New, Inc. ordinary share capital at
P580 per share plus brokerage fees of P500.
Nov 1 Purchased P500,000 of 8% Tol Co. bonds at 101 plus
accrued interest. Brokerage fees were P1,250. Interest dates are
January 1 and July 1.
Dec 31 Market price of securities were:
Con ordinary shares P550
7 ½ Turk bonds 101 ¾
8% Tol bonds 101
New ordinary shares P583.75
2018
Jan 2 Recorded the receipt of semiannual interest on bonds
Feb 1 Sold the remaining 7 ½% Turk bonds at 101 plus accrued
interest.
What amount should be reported as gain on sale of trading

securities in 2017?
 P6,000
 P2,550
 P8,550
 P3,450
The interest method of amortizing discount provides for
 Increasing amortization and decreasing interest income

 Decreasing amortization and increasing interest income
 Decreasing amortization and decreasing interest income
 Increasing amortization and increasing interest income
Of the methods to record cash discounts related to accounts

receivable, which is more theoretically correct?
 All three methods are theoretically correct.

 Net method
 Allowance method
 Gross method
The composite depreciation method
 excludes salvage value from the base of the depreciation

calculation
 is an accelerated method of depreciation
 does not recognize gain or loss on the retirement of specific
assets in the group
 is applied to a group homogenous assets
On January 1, 20x1, Entity A obtained a 12%, ₱6,000,000 loan,

specifically to finance the construction of a building. The proceeds
of the loan were temporarily invested and earned interest income of
₱180,000. The construction was completed on December 31, 20x1.
How much borrowing costs are capitalized to the cost of the
constructed building?
 P 540,000
 P 0.00
 P 480,000
 P 720,000
Statement I: An entity acquires debt instruments to be held under a

"hold to collect and sell" business model. The entity shall classify
the debt instruments either a fair value through other
comprehensive income or fair value through profit or loss.
Statement II: A financial asset held under a "hold to collect"
business model is classified under the amortized cost measurement
category.
 TRUE, FALSE
 TRUE, TRUE
 FALSE, TRUE
 FALSE, FALSE
Information on ABC Co. is shown below:

30-Jul Aug. 31
Book balance 132,200 180,000
Book debits 60,000
Book credits ?
Bank balance 100,600 169,000
Bank debits 20,600
Bank credits ?
Notes collected by bank 10,000 35,000
Debit memos 7,800 8,900
Understatement of book receipts - 2,800
Deposit in transit 45,000 43,800
Outstanding checks 11,200 3,900
How much is the adjusted receipts in August?

 88,700
 87,800
 78,800
 80,700
1. Jerry Company had the following account balances on December

31, 2020:
Petty cash fund 25,000 Cash on hand 250,000

Cash in bank-current account 2,000,000 Cash in bank – payroll
account 500,000
Cash in bank -restricted account for plant addition for disbursement
in early 2021
250,000 Cash in sinking fund set aside for bond payable, due June
30, 2021
750,000
Time deposit 1,000,000
The Petty cash fund included unreplenished December 2020 PCF

vouchers of P2,500 and employee IOUs of P2,500. The Cash on
hand included a P50,000 check payable to the entity dated January
31, 2021.
What total amount should be reported as Cash and cash

equivalents on December 31, 2020?
 3,720,000
 4,470,000
 3,470,000
 3,970,000
Quezon Co. records purchases at net amounts. On May 5 Quezon

purchased merchandise on account, ₱32,000, terms 2/10, n/30.
Quezon returned ₱2,000 of the May 5 purchase and received credit
on account. At May 31 the balance had not been paid.
The amount to be recorded as a purchase return is

 P 2,040
 P1,800
 P2,000
 P1,960
Credit balances in accounts receivable shall be classified as

 Current liabilities
 Long-term liabilities
 Deduction from accounts receivable
 Part of account payable
In which of the following instances is the capitalization of borrowing

costs under PAS 23 would most likely be suspended
 Active development is stopped to give time for the

engineers to reevaluate a design flaw.
 The construction of a building is discontinued because it is
condemned by the government and the resumption of development
is uncertain.
 The construction of a bridge is disrupted by troubled waters.
 Construction is temporarily stopped for the curing of
concrete
The amount reported as "Cash" on a company's statement of

financial position normally should exclude
 petty cash
 cash in a payroll account.
 undelivered checks written and signed by the company
 postdated checks that are payable to the company.
On January 1, 2018, ABC Co sells inventory with a list price of

P100,000 on account under credit terms of 15%, 20%, 3/10, n/30.
Under the net method, how much should be debited to Accounts

Receivable on January 1, 2018?

 P100,000
 P65,960
 P68,000
 P85,000
On January 1, 2017, ABC owns 15,000 ordinary shares

representing 15% of the shares outstanding of DEF Corporation.
The ordinary shares were acquired on November 12, 2017 at a cost
of P1,500,000 and have a fair value of P1,600,000 on December
31, 2017. On January 2, 2018, ABC sold half of its investment for
P100 per share incurring a brokerage and commission expense of
P20,000.
Assume that the above securities are classified as FVPL, what is

the unrealized gain (loss) on December 31, 2017 to be presented
un the statement of financial position?

 P0
 P100,000
 P20,000
 P(100,000)
Quezon Co. records purchases at net amounts. On May 5 Quezon

Quezon returned ₱2,000 of the May 5 purchase and received credit
The amount to be recorded as a purchase return is
 P1,960
 P 2,040
 P1,800
 P2,000
Cross Co. accepted delivery of merchandise which it purchased on

account. As of December 31, Cross had recorded the transaction,
but did not include the merchandise in its inventory. The effect of
this on its financial statements for December 31 would be
 net income was correct and current assets were

understated.
 net income, current assets, and retained earnings were
understated.
 net income was overstated and current assets were
understated.
 net income was understated and current liabilities were
overstated.
Dance Co. received merchandise on consignment. As of March 31,

Dance Co. had recorded the transaction as a purchase and
included the goods in inventory. None of the consigned goods have
been sold during the period. The effect of this on its financial
statements for March 31 would be
 net income and current liabilities were overstated.

 no effect
 net income, current assets, and current liabilities were
overstated.
 net income was correct and current assets and current
liabilities were overstated
ABC, Inc. acquired 50,000 ordinary shares of AAA for P5 per share
and 125,000 ordinary shares of BBB Corp for P10 per share on
January 2, 2016. Both AAA Inc and BBB Corp have 500,000
ordinary shares outstanding. Both securities are being held as long-
term investments. Changes in retained earnings for AAA and BBB
for 2016 and 2017 are as follows
AAA, Inc. BBB, Corp
Retained earnings, 1/1/2016 P1,000,000 (P175,000)
Cash dividends, 2016 (125,000) -
Profit for 2016 200,000 325,0000
Retained earnings, 12/31/2016 1,075,000 150,000
Cash dividends, 2017 (150,000) (50,000)
Profit for 2017 300,000 125,000
Retained earnings, 12/31/2017 1,125,000 225,000
Market value of share:
12/31/2016
12/312017
P7.00
6.50
P12.00
15.00
How much should be reported as accumulated net unrealized gain

or loss - OCI in equity as of December 31, 2017?
 P 75,000 gain
 P 25,000 loss
 P 25,000 gain
 P0
Statement 1: Trade receivables are classified as current assets only

if they are collectible within one year from the reporting date.
Statement 2: The total balance of the accounts receivable of Entity
X is P100, net of P5 credit balance in the account of Customer A.
The adjusted balance of accounts receivable is P95.
 FALSE; TRUE
 TRUE; TRUE
 TRUE; FALSE
 FALSE; FALSE
On January 13, 2018, ABC Co. sold on account goods with selling
price of P300,000 with terms of 2/10, n/30. Freight costs amounted
to P5,000. The goods were received by the buyer on January 15,
2018. ABC Co. collected the receivable on January 23, 2018.
How much net cash did ABC received from the buyer if the terms
are FOB destination, freight prepaid?

 P299,000
 P294,000
 P289,000
 P305,000
ABC received from a customer a one-year, P375,000 note bearing

annual interest of 8%. After holding the note for six months, ABC
discounted the note at Super Bank at an effective interest rate of
10%.
If the discounting is treated as a borrowing, what amount of loss

from discounting should ABC recognize?
 P20,250
 P0
 P5,250
 P9,750
Information on ABC Co. is shown below:

30-Jul Aug. 31
Book balance 132,200 180,000
Book debits 60,000
Book credits ?
Bank balance 100,600 169,000
Bank debits 20,600
Bank credits ?
Notes collected by bank 10,000 35,000
Debit memos 7,800 8,900
Understatement of book receipts - 2,800
Deposit in transit 45,000 43,800
Outstanding checks 11,200 3,900
How much is the adjusted balance of Cash in August?
 P208,900
 P 136,200
 P 134,400
 P132,600
On January 1, 20x1, Entity A had the following general borrowings.

A part of the proceeds was used to finance the construction of a
qualifying asset:
Principal
12% bank loan (1.5 years) ₱ 1,000,000
10% bank loan (3-year) 8,000,000
Expenditures made on the qualifying asset were as follows:

Jan. 1 ₱ 5,000,000
March 1 4,000,000
August 31 3,000,000
December 1 2,000,000
Construction was completed on December 31, 20x1.
How much borrowing costs are capitalized to the cost of the

constructed qualifying asset?
 P 1,045,000
 P 971,111
 P 1,026,667
 P 920,000
A company buys ten shares of securities at P1,000 each on January

15, 2017. The securities are classified as fair value through other
comprehensive income. The fair value of the securities increases to
P1,250 per share as of December 31, 2017. Assume no dividends
are paid and that the company has a 30% tax rate. What is the
amount of the holding gain arising during the period that is
recognized in other comprehensive income for the period ending
December 31, 2017?
 P0
 P1,750
 P2,500
 P7,500
Supporting records of ABC CORP’s trading securities portfolio show

the following debt and equity securities:
Security Cost. Fair Value

400 ordinary shares Con Co. P254,500 P243,000
P800,000 Tip Co. 7% bonds 796,500 774,000
P1,200,000 Turk Co. 7 ½ % bonds 1,207,500 1,218,900
Totals P2,258,500. P2,235,900
Interest dates on the bonds are January 1 and July 1. ABC Corp
uses the income approach to record the purchase of bonds with
accrued interest. During 2017 and 2018, ABC completed the
following transactions related to trading securities:
2017
Jan 1 Received semiannual interest on bonds. Assume that the
appropriate adjusting entry was made on December 31, 2016
April 1 Sold P600,000 of 7 ½% Turk bonds at 102 plus accrued
interest.
May 21 Received dividend of P1.25 per share on the Con ordinary
share capital. The dividend had not been recorded on the
declaration date.
Jul 1 Received semiannual interest on bonds and then sold the 7%
Tip bonds at 97 ½
Aug 25 Purchased 200 shares of New, Inc. ordinary share capital at
P580 per share plus brokerage fees of P500.
Nov 1 Purchased P500,000 of 8% Tol Co. bonds at 101 plus
accrued interest. Brokerage fees were P1,250. Interest dates are
January 1 and July 1.
Dec 31 Market price of securities were:
Con ordinary shares P550
7 ½ Turk bonds 101 ¾
8% Tol bonds 101
New ordinary shares P583.75
2018
Jan 2 Recorded the receipt of semiannual interest on bonds
Feb 1 Sold the remaining 7 ½% Turk bonds at 101 plus accrued
interest.
What is the loss on the sale of the remaining Turk bonds on

February 1, 2018?
 P4,500
 P10,500
 P750
 P13,500
Which of the following is a true statement concerning research and
development (R&D) costs?
 Financial statements must disclose total R&D costs charged

to expense in the period.
 All R&D costs, without exception, must be charged to
expense when incurred
 R&D costs can only be amortized over a life of 40 years or
more
 Almost any treatment is acceptable for handling R&D costs
A depreciable asset has an estimated 15 percent salvage value. At

the end of its estimated useful life, the accumulated depreciation
would equal the original cost of the asset under which of the
following depreciation methods?
 Output Method - No ; SYD Method - Yes ; DDB Method -

No
 Output Method - Yes ; SYD Method - Yes; DDB Method -
Yes
 Output Method - No ; SYD Method - No; DDB Method - No
 Output Method - Yes ; SYD Method - No; DDB Method - No
On August 31, 2017, ABC Company purchased the following fair value
through other comprehensive income equity securities:
Security Cost Fair value December 31, 2017

D P96,000 P84,000
E 152,000 158,000
F 162,000 146,000
On December 31, 2017, ABC reclassified its investment in security F from fair
value through other comprehensive income to held for trading securities. What
total amount of loss on these securities should be included in ABC's income
statement for the year ended December 31, 2017?

 P22,000
 P0
 P16,000
 P28,000
On January 13, 2018, ABC Co. sold on account goods with selling
price of P300,000 with terms of 2/10, n/30. Freight costs amounted
to P5,000. The goods were received by the buyer on January 15,
2018. ABC Co. collected the receivable on January 23, 2018.
How much net cash did ABC received from the buyer if the terms
are FOB destination, freight collect?

 P299,000
 P305,000
 P294,000
 P289,000
Which of the following represents a debit memo?
 Loan proceeds directly added by the bank to the depositor's

account
 Interest income earned by the depositor
 Interest expense on a loan that is directly deducted from the
depositor's account.
 Collections made by the bank on behalf of the depositor
ABC Co had the following account balances at December 31, 2017:

Accounts receivable P900,000
Allowance for doubtful accounts (before any provision for 2017
doubtful accounts expense) 16,000
Credit sales for 2017 1,750,000
ABC is considering the following methods of estimating doubtful

accounts expense for 2017:
• Based on credit sales at 2%
• Based on accounts receivables at 5%
What amount should ABC charge to doubtful accounts expense

under each method?

 Percentage of credit sales: P35,000; Percentage of
Accounts Receivable: P29,000
Queen Co. records purchases at net amounts. On May 5 Queen

Queen returned ₱2,000 of the May 5 purchase and received credit
By how much should the Account payable be adjusted on May 31?
 P680
 P600
 P 0.00
 P640
On February 12, Lar Company purchased a tract of land as a

factory site for ₱175,000. An existing building on the property was
razed and construction was begun on a new factory building in
March of the same year. Additional data are available as follows:
Cost of razing old building 35,000
Title insurance and legal fees to purchase land 12,500
Architect's fees 42,500
New building construction cost 875,000
The recorded cost of the completed factory building should be
 P 930,000
 P 952,500
 P910,000
 P 917,500
Statement 1: Investment properties measured under the fair value

model are not depreciated even if the investment property is
depreciable, e.g Building.
Statement 2: Tupper Co replaces the escalator in its building that is
classified as investment property. The newly installed escalator has
a cost of P1M while the carrying amount of the old escalator that
was replaced is P200K. Tupper Co shall recognize loss of P800K
from the replacement of the old escalator.
 FALSE, TRUE
 FALSE, FALSE
 TRUE, TRUE
 TRUE, FALSE
The use of a Purchase Discounts account implies that the recorded

cost of a purchased inventory item is its
 invoice price less the purchase discount allowable whether

taken or not.
 invoice price plus any purchase discount lost.
 invoice price
 invoice price less the purchase discount taken
Tent Retailers purchased merchandise with a list price of ₱90,000,
subject to trade discounts of 20% and 10%, with no cash discounts
allowable. Tent should record the cost of this merchandise as
 P 90,000
 P64,800
 P 70,200
 P 63,000
On August 15, an entity sold goods for which it received a note

bearing the market rate of interest on that date. The four-month note
was dated July 15. Note principal, together with all interest, is due
November 15. When the note was recorded on August 15, which of
the following accounts increased?
 Interest revenue
 Prepaid interest
 Interest receivable
 Unearned discount
The following information pertains to ABC Co.’s accounts

receivables at December 31, 2017:
Age Amount % Uncollectible
0-60 days 120,000 1%
61-120 days 90,000 2%
Over 120 100,000 6%
During 2017, ABC wrote off P7,000 in receivables and recovered
P4,000 that had been written off in prior years. ABC’s December 31,
2017, allowance for uncollectible accounts was P22,000. Under
aging method, what amount of allowance for uncollectible accounts
should ABC report at December 31, 2017?

 P9,000
 P19,000
 P13,000
 P10,000
On May 9, 2017, ABC Corp sold merchandise with a list price of

P150,000 to DEF on account. ABC allowed trade discounts of 30%
and 20%. Credit terms were 2/15, n/40 and the sale was made FOB
shipping point. ABC prepaid P6,000 of delivery costs for DEF as an
accommodation.
What amount should DEF remit to ABC as full payment on May 24,
2017?
 P94,200
 P82,320
 P88,200
 P88,320
The cash balance of CAPSIZE OVERTURN Co. comprises the

following:
Cash on hand 300,000

Cash in bank – savings – BPI 600,000
Cash in bank – current – BPI (240,000)
Cash in bank – deposit in escrow – Metrobank 300,000
Cash in bank – current – Metrobank ( 60,000)
Cash in bank – current – BDO ( 90,000)
Total 810,000
• Cash on hand includes undeposited collections of P60,000.
• The cash in bank – savings maintained at BPI includes a
P150,000 compensating balance which is not restricted.
What amount of cash is reported in the financial statements?
 P 900,000
 P 810,000
 P 960,000
 P 660,000
Which of the following principles best describes the conceptual

rationale for the methods of matching depreciation expense with
revenues?
 associating cause and effect

 Systematic and rational allocation
 immediate recognition
 partial recognition
On October 1, Tak, Inc. exchanged 8,000 shares of its ₱25 par

value ordinary share for a parcel of land to be used as site for a new
plant. Tak's ordinary share had a fair value of ₱80 per share on the
exchange date. Tak received ₱36,000 from the sale of scrap when
an existing building on the site was razed. The land should be
carried at

 P 200,000
 P 640,000
 P 236,000
 P 604,000
Statement 1: PAS38 does not require a specific amortization

method that entities shall use. However, if no other amortization
method best reflects the pattern of consumption of economic
benefits from the intangible asset, then the entities shall use the
straight-line method of amortization.
Statement 2: PAS 38 does not prohibit the use of an amortization
method that is based on revenue.

 TRUE, FALSE
 FALSE, TRUE
 FALSE, FALSE
 TRUE, TRUE
Presented below is information pertaining to ABC Co.:

Cost Retail
Inventory, January 1 21,750 35,000
Purchases 138,250 200,750
Freight-In 5,000 -----
Purchase discounts 1,250 ------
Purchase returns 13,000 21,500
Departmental Transfers-In (Debit) 2,500 3,750
Departmental Transfers-Out (Credit) 2,000 3,000
Markups 15,000
Markup cancellations 5,000
Markdowns 30,000
Markdown cancellations 7,500
Abnormal spoilage (theft and casualty loss) 12,500 17,500
Sales 109,500
Sales returns 6,250
Employee discounts 1,250
Normal spoilage (shrinkage and breakages) 500
How much is the ending inventory under the Average cost method?

 P 62,400
 P 60,000
 P 61,050
 P 60,750
When an entity uses the fair value model, changes in the fair values
of investment properties are
 Not recognized.
 Directly in equity
 Recognized in other comprehensive income.
 Recognized in profit or loss.
As of December 31, 20x1, the petty cash fund of TUMULT

COMMOTION Co. with a general leger balance of P15,000
comprises the following:
Coins and currencies P 2,550
Petty cash vouchers:
Gasoline for delivery equipment P3,000
Medical supplies for employees 2,040
IOU’s:
Advances to employees 2,220
A sheet of paper with names of several employees
together with contribution to bereaved employee,
attached is a currency of 2,400
Checks:
Check drawn to the order of the petty cash custodian 3,000
Personal check drawn by the petty cash custodian 2,400
The entry to record the replenishment of the petty cash fund

includes
 A debit to cash short/overage account of P2,190 and a

credit to cash on hand of P9,450.
 A debit to cash short/overage account of P2,190 and a
credit to cash in bank of P9,450
 A debit to cash short/overage account of P810 and a credit
to petty cash fund of P12,450.
 A credit to cash short/overage account of P810 and a credit
to cash of P12,450.
On January 1, 2020, Kay Corporation established a petty cash fund

of ₱400. On December 31, 2020, the petty cash fund was examined
and found to have receipts and documents for miscellaneous
expenses amounting to ₱364. In addition, there was cash
amounting to ₱44. What entry would be required to record
replenishment of the petty cash fund on December 31, 2020?

 Dr. Miscellaneous expense P356; Dr. CAsh short or over;
Cr Cash in bank P364
 Dr Petty cash fund P 364; Cr Cash short or over P 8; Cr
Cash in bank P356
 Dr Miscellaneous expense P364 ; Cr Cash short or over
P8 ; Cr Cash in bank P 356
 Dr Miscellaneous expense P364; Cr Cash short or over P 8;
Cr Petty cash P356
Which of the following is not a basic characteristic of a system of

cash control?
 Use of a voucher system

 Daily deposit of all cash received
 Internal audit at regular intervals
 Combined responsibility for handling and recording cash
nformation on Mix Co.’s equipment on June 30, 20x8 is shown

below:
Equipment (at cost) ₱ 500,000

Accumulated depreciation 150,000
₱ 350,000
The equipment consists of two machines, Machine A and Machine

B. Machine A has a cost of ₱300,000 and a carrying amount of
₱180,000. Machine B has a cost of ₱200,000 and a carrying
amount of ₱170,000. Both machines are measured using the cost
model and depreciated on a straight line basis over a ten-year
period.
On December 31, 20x8, Mix Co. decided to change from the cost
model to the revaluation model. Information on this date follows:
Fair values Remaining useful life
Machine A ₱180,000 6 years
Machine B ₱155,000 5 years
On June 30, 20x9, Machine A and Machine B have fair values of
₱163,000 and ₱136,500, respectively, and remaining useful lives of
5 years and 4 years, respectively. The tax rate is 30%.
How much is the revaluation surplus on December 31, 20x8?

 P 10,500
 (P 10,500)
 P 7,000
 (P 15,000)
Clay Company started construction of a new office building on

January 1, 20x3, and moved into the finished building on July 1,
20x4. Of the building’s ₱2,500,000 total cost, ₱2,000,000 was
incurred in 20x3 evenly throughout the year. Clay’s incremental
borrowing rate was 12% throughout 20x3, and the total amount of
interest incurred by Clay during 20x3 was ₱102,000. What amount
should Clay report as capitalized interest at December 31, 20x3?
 P 102,000
 P 150,000
 P 120,000
 P 240,000
Statement 1: In some cases, a building that is being used partly as

an owner-occupied property and partly as held for rentals, under
operating lease, is presented in the statement of financial position
as partly PPE and partly investment property.
Statement 2: Heidel Co. exchanges a piece of land for another land
with Sol Co. Heidel classifies the land as investment property. The
land given to Sol has a fair value of P20 while the land received
from Sol has a fair value of P24. Heidel Co paid P3 cash to Sol on
the exchange. Heidel Co. shall initially recognize the land received
from Sol at P23.
 TRUE, FALSE
 TRUE, TRUE
 FALSE, FALSE
 FALSE, TRUE
The present value of a debt instrument is computed by
 multiplying the future cash flows from the note by an

appropriate PV factor
 dividing the future cash flows from the note by an
appropriate PV factor
 adding the future cash flows
 adding the future cash flows from the principal to the sum of
the periodic interests receivable
BC Co. showed the following balances on December 31, 2018:

Accounts Receivable P2,000,000
Allowance for doubtful accounts (60,000)
The following transactions transpired for ABC Company during the

year 2016:
a. On May 1, received a P300,000, six-month, 12% interest bearing
note from Ed, a customer in settlement of an account.
b. On June 30, factored P400,000 of its accounts receivable to a
finance company. The finance company charged a factoring fee of
5% of the accounts factored and withheld 20% of the mount
factored.
c. On August 1, ABC discounted the Ed Note at the bank at 15%.
d. On November 1, Ed defaulted on the P300,000 note. ABC
company paid the bank the total amount due plus a P12,000 protest
fee and other bank charges.
e. On December 31, ABC Company assigned P600,000 of its
accounts receivable to a bank under a nonnotification basis. The
bank advanced 80% less a service fee of 5% of the accounts
assigned. ABC Company signed a promissory note for the loan.
f. On December 31, ABC collected from Ed in full including interest
on total amount due at 12% since default date.
g. On December 31, it is estimated that 5% of the outstanding
accounts receivable may prove uncollectible.
The net realizable value of the accounts receivable is

 P1,235,000
 P1,520,000
 P1,330,000
 P1,900,000
Statement I: Dividends received from investments in equity

securities that were irrevocable elected on initial recognition to be
subsequently measured at FVOCI are recognized in profit or loss.
Statement II: When financial assets measured at amortized cost are
reclassified to the FVPL measurement category, the initial carrying
amount of the financial assets under the new classification is the
reclassification date fair value on the financial assets.
 FALSE, TRUE
 TRUE, FALSE
 TRUE, TRUE
 FALSE, FALSE
Light Company bought a machine for ₱300,000 on January 1, 20x8.

The machine's useful life is 10 years and it is estimated to have a
zero residual value and is depreciated using the straight-line
method.
The revalued amount of the machine is as follows:

December 31 Fair values of the machine
20x8 ₱ 360,000
20x9 335,000
2x10 320,000
The enacted tax rate was 30% for each year
The revaluation surplus in the equity section of Light Company’s

December 31, 2x10 statement of financial position is
Select the correct response: (paano gagawin pag may tax rate)
 P 110,000
 P 77,000
 P 109,500
 P 123,443
Goods in transit which are shipped FOB shipping point should be
 not included in anyone's inventory

 included in the inventory of the buyer
 included in the inventory of the seller
 included in the inventory of the shipping company
5. Hera Company provided the following information:

Balance per bank statement, May 31 1,300,000 Balance per book –
May 31 1,405,000
Deposits outstanding 150,000 Bank service charge (5,000)
Checks outstanding (50,000)
Correct bank balance-May 31 1,400,000 Correct book balance-May
31 1,400,000
June data are as follows: Bank Book

Checks recorded 1,100,000 1,250,000
Deposits recorded 800,000 900,000
Service charges recorded 25,000 -
Note collected by bank, P 250,000 plus interest 275,000
NSF checks returned with June 30 statement 50,000
Balances 1,200,000 1,050,000
What is the adjusted cash balance on June 30?
 1,200,000
 1,250,000
 1,050,000
 1,400,000
Dirt Corporation schedule of depreciable assets at December 31,

20X7 was as follows:
Asset Cost Accum. Depreciation Acquisition date Residual value
A 100,000 64,000 20X6 20,000
B 55,000 36,000 20X5 10,000
C 70,000 33,600 20X5 14,000
Dirt takes a full year’s depreciation expense in the year of an asset’s

acquisition, and no depreciation expense in the year of an asset’s
disposition. The estimated useful life of each depreciable asset is 5
years.
Dirt depreciates asset A on the double-declining-balance method.

How much depreciation expense should Dirt record in 20X9 for
asset A?
 P 1,600
 P 5,600
 P 8,640
 P 2,000
When the allowance method of recognizing bad debt expense is

used, the entry to record the write-off of a specific uncollectible
accounts would decrease
 Net realizable value of accounts receivable

 Net income
 Allowance for doubtful accounts
 Working capital
PAS38 Intangible Assets applies to
 all identifiable assets only, including the disclosure

requirements for goodwill, but not the accounting for goodwill
 all intangible assets, including goodwill
 all identifiable assets only
 all identifiable assets, including goodwill
Goods out on consignment are
 recorded in a Consignment In account which is an inventory

account.
 recorded in a Consignment Out account which is an
inventory account.
 all of these
 included in the consignee's inventory.
Jam Co. has the following data related to an item of inventory:

Inventory, March 1 200 units @ ₱4.20
Purchase, March 7 700 units @ ₱4.40
Purchase, March 16 140 units @ ₱4.50
Inventory, March 31 300 units
The value assigned to cost of goods sold if Jam uses FIFO is
 P3,216
 P1,334
 P3,270
 P1,280
On December 31, 2009, West Company had the following cash

balances:
Cash in banks P1,800,000

Petty cash funds (all funds were reimbursed on 12/31/09) P 50,000
Cash in banks includes P600,000 of compensating balances

against short-term borrowing arrangements at December 31, 2009.
The compensating balances are not legally restricted as to
withdrawal by West. In the current assets section of West's
December 31, 2009, balance sheet (statement of financial position),
what total amount should be reported as cash?
 P1,200,000
 P1,250,000
 P 1,800,000
 P1,850,000
When using the periodic inventory system, which of the following

generally would not be separately accounted for in the computation
of cost of goods sold?
 Purchase returns and allowances of merchandise during

the period
 Cash (purchase) discounts taken during the period
 Cost of transportation-in for merchandise purchased during
the period
 Trade discounts applicable to purchases during the period
Which of the following is an unidentifiable asset?
 Deferred charges
 Private-to-private franchise
 Goodwill
 Unearned rent
Which of the following is not a debit memo?
 bank service charge

 NSF checks
 Automatic payment of bills by the bank on behalf of the
depositor.
 direct deposits of customers to the depositor's account
ABC Co. showed the following balances on December 31, 2018:

Accounts Receivable P2,000,000
Allowance for doubtful accounts (60,000)
The following transactions transpired for ABC Company during the

year 2016:
a. On May 1, received a P300,000, six-month, 12% interest bearing
note from Ed, a customer in settlement of an account.
b. On June 30, factored P400,000 of its accounts receivable to a
finance company. The finance company charged a factoring fee of
5% of the accounts factored and withheld 20% of the mount
factored.
c. On August 1, ABC discounted the Ed Note at the bank at 15%.
d. On November 1, Ed defaulted on the P300,000 note. ABC
company paid the bank the total amount due plus a P12,000 protest
fee and other bank charges.
e. On December 31, ABC Company assigned P600,000 of its
accounts receivable to a bank under a nonnotification basis. The
bank advanced 80% less a service fee of 5% of the accounts
assigned. ABC Company signed a promissory note for the loan.
f. On December 31, ABC collected from Ed in full including interest
on total amount due at 12% since default date.
g. On December 31, it is estimated that 5% of the outstanding
accounts receivable may prove uncollectible.
Amount of cash received on December 31 assignment of accounts

receivable.
 P450,000
 P430,000
 P480,000
 P415,000
On January 1, 20x1, Entity A received land with fair of ₱200,000

from the government conditioned on the construction of a building
on the lot. Entity A started immediately the construction and it was
completed on December 31, 20x1 for a total cost of ₱1,000,000.
The building has an estimated useful life of 10 years and zero
residual value.
How much is the income from government grant in 20x1 and 20x2,
respectively?

 20x1- P 20,000 ; 20x2 - P 20,000
 20x1- P200,000 ; 20x2 - P 0.00
 20x1- P0.00 ; 20x2 - P 20,000
 20x1- P0.00 ; 20x2 - P 200,000
Which of the following statements is the assumption on which

straight-line depreciation is based?
 physical wear and tear are more important than economic

obsolescence.
 operating efficiency of the asset decreases in later years.
 service value declines as a function of time rather than use
 service value declines as a function of obsolescences
rather than time.
Statement 1: The cost of routine design of products is considered as

R&D expense.
Statement 2: The cost of modification of a product to conform to a
specific customer’s need is considered an R&D expense.
 FALSE, FALSE
 FALSE, TRUE
 TRUE, FALSE
 TRUE, TRUE
The advantage of relating a company’s bad debt expense to its

outstanding receivable is that this approach
 Best relates bad debt expense to the period of sale.

 Gives a reasonably correct statement of receivables in the
balance sheet.
 Makes estimates of uncollectible accounts unnecessary.
 Is the only generally accepted method by valuing accounts
receivable
These are deductions made by the bank to the depositor’s bank

account but not yet recorded by the depositor.
 outstanding checks
 deposit in transit
 debit memos
 credit memos
Yesterday, you wrote a ₱2M check and gave it to a supplier as
payment for the goods you have purchased. Today, you received
your bank statement. You noticed that the ₱2M check is not
reflected in the statement. What should you do?
 Call the supplier and demand him or her to go to the bank

and present the check for payment.
 Call your friends and celebrate, telling them that you just
saved ₱2M.
 Post the incident on your Facebook page and wait for likes.
 Treat the ₱2M check as outstanding check in your bank
reconciliation for today.
An entity starts the capitalization of borrowing costs to the cost of a

qualifying asset when
 activities necessary to prepare the asset for its intended use

or sale are being undertaken.
 borrowing costs are being incurred.
 Expenditures for the asset are being incurred.
 All of these conditions are met.
The following information pertains to ABC’s long-term marketable

equity securities portfolio:
December 31, 2017 December 31, 2016
Cost P200,000 P200,000
Fair Value 240,000 180,000
Differences between cost and fair values are considered to be

temporary. The decline in market value was properly accounted for
at December 31, 2016. At December 31, 2017, what is the net
realizable holding gain or loss to be reported as:
 OCI: P60,000 gain; Accumulated OCI: P40,000 gain

 OCI: P0; Accumulated OCI: P0
 OCI: P40,000 gain; Accumulated OCI: P60,000 gain
 OCI: P20,000 loss; Accumulated OCI: P20,000 loss
Which of the following depreciation methods applies a uniform

depreciation rate each period to an asset's carrying amount?
 units-of-production
 Straight line
 Declining balance
 sum-of-the-years' digits
According to PAS 23, borrowing costs are capitalized when
 they relate directly to the acquisition, construction or

production of a qualifying asset.
 all of these are required.
 the entity chooses to capitalize them.
 they are material and are expected to be incurred over
more than one reporting period.
Perlas Co. maintains a checking account at the Union Bank. The

bank provides a bank statement along with the canceled checks on
the last day of each month. The July bank statement included the
following information:
Balance, July 1 275,000 ; Deposits 900.000
Checks processed 700,000 ; Service charge 15,000
NSF Check 60,000 : Monthly automatic loan payment deduction by
bank 50,000
Deposits outstanding totaled P 50,000 and all checks written by the

depositor were processed by the bank except for check of P75,000.
A P100,000 July deposit from a credit customer was recorded as

P10,000 debit Cash and credit Accounts receivable.
A check correctly recorded by the entity as P15,000 disbursements

was incorrectly processed by the bank as P150,000 disbursement.
What is the cash balance per ledger on July 31?
 445,000
 675,000
 495,000
 585,000
Statement I: According to PFRS 9 Financial Instruments, financial

assets are classified on the basis of the entity's business model for
managing financial assets.
Statement II: Only debt instruments can be classified under the
amortized cost or the fair value through other comprehensive
income (mandatory) measurement categories.
 FALSE, FALSE
 TRUE, FALSE
 FALSE, TRUE
 TRUE, TRUE
On June 30, 2018, ABC Co. purchased 25% of the outstanding

ordinary shares of DEF Co. at a total cost of P2,100,000. The book
value of DEF’s net assets on acquisition date was P7.2 million. For
the following reasons, ABC was willing to pay more than book value
for the DEF shares:
• DEF has depreciable assets with a current fair value of P180,000
more than their book value. These assets have a remaining useful
life of 10 years.
• DEF owns a tract of land with a current fair value of P900,000
more than its carrying amount.
• All other identifiable tangible and intangible assets of DEF have
current fair values that are equal to their carrying amounts.
DEF reported a net income of P1,620,000, earned evenly during the

current year ended December 31, 2018. Also in the current year, it
declared and paid cash dividends of P315,000 to its ordinary
shareholders. Market value of DEF’s ordinary shares at December
31, 2018, is P9 million. ABC’s financial year-end is December 31.
What is the total amount of goodwill of DEF based on the price paid
by ABC?
 P 30,000
 P 120,000
 P 300,000
 P 1,080,000
35. Which of the following is considered a biological asset?
 carcass
 piggy bank
 ham
 pig
Transit Co. had the following balances at December 31, 2009:
Cash in checking account P 35,000

Cash in money market account P 75,000
Treasury bill, purchased 11/1/2009, maturing 1/31/2010 P350,000
Treasury bill, purchased 12/1/2009, maturing 3/31/2010 P400,000
Transit policy is to treat as cash equivalents all highly liquid

investments with a maturity of three months or less when
purchased. What amount should Transit report as cash and cash
equivalents in its December 31, 2009, balance sheet (statement of
financial position)?
 P385,000
 P860,000
 P110,000
 P460,000
ABC Company sold its inventory for P300,000 to DEF on January 2,
2017 and received a one-year note bearing an interest of 12% for
the full amount. On December 31, 2017, ABC determined based on
DEF’s recent financial crisis and the amount due on January 2,
2018 will not be collected and that only P210,000 of the principal will
be collected with some delay until the end of 2019.
What is the amount of impairment loss ABC Company must

recognize on its receivable as of December 31, 2017?

 P126,000
 P0
 P168,588
 P90,000
ABC Company sold its inventory for P300,000 to DEF on January 2, 2017 and received
a one-year note bearing an interest of 12% for the full amount. On December 31, 2017,
ABC determined based on DEF’s recent financial crisis and the amount due on January
2, 2018 will not be collected and that only P210,000 of the principal will be collected with
some delay until the end of 2019.
What is the amount of impairment loss ABC Company must recognize on its receivable
as of December 31, 2017?
 P126,000
 P0
 P168,588
 P90,000
All of the following costs should be expensed in the period they are
incurred except for
 storage costs that are necessary in bringing the asset to its

intended condition.
 manufacturing overhead costs for a product manufactured
and sold in the same accounting period.
 costs which will not benefit any future period
 depreciation of idle manufacturing capacity resulting from
an unexpected plant shutdown.
When the estimate of an asset's useful life is changed,
 depreciation expense for all past periods must be

recalculated.
 there is no change in the amount of depreciation expense
recorded for future years.
 none of these is true
 only the depreciation expense in the remaining years is
changed
4. Which of the following properties falls under the definition of

investment property and therefore within the scope of PAS40
Investment property?
I. Land held for long-term capital appreciation.
II. Property occupied by an employee.
III. Property being constructed on behalf of third parties.
IV. A building owned by an entity and leased out under an operating
lease.
 I, IV
 II, IV
 II, III, IV
 I, II

INVESTMENT PROPERTY MEASUREMENT

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INVESTMENT PROPERTY MEASUREMENT

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Investment properties are measured as follows:

Select the correct response:

 Initial: Cost; Subsequent: Fair Value

 Initial: Cost or Fair Value; Subsequent: Cost or Fair Value

 Initial: Fair Value; Subsequent: Fair Value

 Initial: Cost; Subsequent: Cost or Fair Value

Select the correct response:

 Answer not given

Which of the following is outside the scope of PAS 41?

Select the correct response:

 chickens used in the production of meat

 dairy cattle used in the production of milk

Select the correct response:

Which of the following methods may be used to estimate doubtful

Select the correct response:

On October 1, 20x1, the warehouse of ABC Co. and all inventories

Inventory, Jan. 1 10,000

Select the correct response:

Which of the following checks from customers should not be

Select the correct response:

The following information was available from the inventory records

Assuming that Mon maintains perpetual inventory records, what

Select the correct response:

At the beginning of current year, ABC Company acquired 200,000

What is the carrying amount of the investment at year-end?

Select the correct response:

Which of the following receivables may be presented as part of

Select the correct response:

 Loan receivables from the entity’s officers collectible

Select the correct response:

 when the fund is created and when the fund is increased.

The following information applied to Fly Inc. for 2020:

Fly's 2020 inventoriable cost was

Select the correct response:

Ame, Inc. exchanged a truck with a carrying amount of ₱12,000 and

Select the correct response:

Inventory, Jan. 1 14,500

How much is the inventory loss due to the flood?

Select the correct response:

Supporting records of ABC CORP’s trading securities portfolio show

Security Cost. Fair Value

What amount should be reported as gain on sale of trading

Select the correct response:

The interest method of amortizing discount provides for

Select the correct response:

 Increasing amortization and decreasing interest income

Of the methods to record cash discounts related to accounts

Select the correct response:

 All three methods are theoretically correct.

The composite depreciation method

Select the correct response:

 excludes salvage value from the base of the depreciation

On January 1, 20x1, Entity A obtained a 12%, ₱6,000,000 loan,

Select the correct response:

Statement I: An entity acquires debt instruments to be held under a

Select the correct response:

Information on ABC Co. is shown below:

How much is the adjusted receipts in August?

Select the correct response:

 Answer not given

1. Jerry Company had the following account balances on December

Petty cash fund 25,000 Cash on hand 250,000

The Petty cash fund included unreplenished December 2020 PCF