1.

(200,000,000 + 40,000,000 + 340,000,000 + 20,000,000) x 300/100,000 = 1,800,000

2. The FV less CTS is already given at 2,040,000. This means that the building will only be impaired
up to the said amount. Thus, the carrying amount after impairment will be 2,040,000, which is
the recoverable amount of the building.

3. Carrying amount 4,800,000

Value in Use 5,600,000 – 2,400,000 = 3,200,000
FVLCTS 3,600,000 + 2,400,000 = 6,000,000
*2,400,000 is added to FVLCTS since the sale will result to the elimination of the burden to
restore the site. Thus, the asset is not impaired. The recoverable amount is still higher than the
carrying value.

4. All except deferred charges, Deposit for advertising, bond sinking fund, and R and D.

5. Cost 8,000,000
FV of NAA
1,000,000
500,000
5,000,000
-3,000,000 3,500,000
GW 4,500,000
*assembled workforce is simply your employees. They cannot be considered as assets.

6. Grant related to asset 12,000,000 x ¾ = 9,000,000 / 10 = 900,000

Grant related to income 12,000,000 x ¼ = 3,000,000 / 4 = 750,000
1,650,000

7. No loss will be recognized since the entity is only required to pay the unused/unearned portion
of the grant. The entry will simply be debit to deferred income and credit to cash. Loss will only
be recognized if the entity will be required to pay back the total grant since amount relating to
previous years will also be paid.

8. Capitalizable borrowing cost based on computation is 971,111. Actual borrowing cost is only
920,000 based on the computed interest of the two loans. An entity cannot capitalize any
amount beyond the actual interest during the year. So, the borrowing cost capitalizable is only
920,000.

9. WAEX is zero. The amount was paid at the end of the year, thus, ratio is 0/12 which means that
there is nil amount to which capitalization will be based. Borrowing cost will only be capitalized
if the three conditions are met: borrowings are incurred; expenditures are incurred; and
activities are being done. Expenditures only happened at the end of 20x1, thus, the time is 0/12.
 10. AND 11. Refer to the table below:
RC C A
COST 10,000,000.00 6,000,000.00 4,000,000.00
RV (NEW) 800,000.00 800,000.00 -
DA 9,200,000.00 5,200,000.00 4,000,000.00
AD 3,450,000.00 2,062,500.00 1,387,500.00
RDA 5,750,000.00 3,137,500.00 2,612,500.00

REVALUATION SURPLUS = 2,612,500.00

SOUND VALUE = 5,750,000 + 800,000
SOUND VALUE = 6,550,000.00

ANNUAL DEP'N = COST - SV / UL

687,500.00 = 6,000,000 - 500,000 / X
X= 5,500,000 / 687,500
X= 8.00 YEARS

THUS, THE ASSET IS 3/8 YEARS DEPRECIATED

12. 400,000 + 10,000 + 12,000

13. There is no principal market. Thus, look for the most advantageous market. Going for market A
will give you net proceeds of 475. Market B will only give 450.
Fair value of the instrument = 1000 x 500
 14. Refer to the table below:

BA
Sheep 500,000
Rubber products
Trees in a timber plantation 95,000
Maize plants 40,000
Lumber
Pigs 200,000
Roasted peanuts
Cotton plants 10,000
Peanut plants 5,000
Sugarcane 25,000
Tobacco plants 45,000
Tea bushes
Dairy cattle 1,000,000
Fruit trees
Tea
Rubber trees
Yarn
Carpet
Logs
Wheat plants 60,000
Cheese
Sausages
Wool
Thread
Felled trees
Clothing
Milk
Carcass
Sugar
Harvested cotton
Harvested peanuts
Harvested cane
Picked leaves
Oil palms
Picked grapes
Picked fruit
Grape vines
Harvested latex
Cured tobacco
Wine
Processed fruit
Palm oil
Bean plants 20,000
Cured hams
TOTALS 2,000,000
 15.
Solution:
Dec. 31, 20x1 Investment property (fair value) 6,000,000
Accumulated depreciation – Bldg. (8M + 400K) 8,400,000 12,000,000
Building 2,400,000
Revaluation surplus (squeeze)

16. ₱180,000 + (₱120,000 × 20%) – (₱30,000 × 20%) = ₱198,000.

17.
Solution:
Acquisition cost (4M x 98%) 3,920,000
Direct cost 204,000
Initial carrying amount 4,124,000

“Trial and error” approach:

Future cash flows x PV factor at x% = Present value
(4M x PV of P1 @ x%, n=4) + (4M x 12% x PV of an ordinary annuity of P1 @ x%, n=4) = 4,124,000

There is premium because the carrying amount is greater than the face amount. Therefore, the effective
interest rate must be lower than the nominal rate of 12%.

First trial: (using 11%)

Future cash flows x PV factor at x% = PV or initial carrying amount
 (4M x PV of P1 @ 11%, n=4) + (4M x 12% x PV of an ordinary annuity of P1 @ 11%, n=4) =
4,124,000
 (4M x 0.658731) + (480,000 x 3.102446) = 4,124,000
 (2,634,924 + 1,489,174) = 4,124,098 approximates 4,124,000 (a difference of only P98)

If the difference of P98 is judged immaterial, then 11% is deemed the effective interest rate.

18.
Solution:
Date Collections Interest income Amortization Present value
1/1/x1 3,807,853
12/31/x1 400,000 456,942 56,942 3,864,795
12/31/x2 400,000 463,775 63,775 3,928,571
12/31/x3 400,000 471,428 71,428 3,999,999

(4M x 104%) – 3,864,795 = 295,205

 19. – The investment is FVOCI. Any unrealized gain (loss) is recognized in OCI and not P/L.

20.
Solution:
Accounts payable
3,000 Beginning balance
Payments to suppliers 50,000 49,000 Net purchases (squeeze)
Ending balance 2,000

The computed “Gross purchases” is extended to the “Inventory” T-account as follows:

Inventory
Beginning balance 10,000
Net purchases 49,000
Freight-in 500 52,500 Cost of goods sold *
7,000 End. bal. (squeeze)

*“Cost of goods sold” is computed as follows:

Gross sales 80,000
Sales returns (5,000)
Net sales 75,000
Multiply by: Cost ratio (100% - 20% GPR based on sales) 70%
Cost of goods sold 52,500

Inventory, Sept. 30 (see T-account above) 7,000

Goods in transit (1,000)
Goods out on consignment (1,200)
Salvage value (1,800)
Inventory loss due to flood 3,000

21. ₱520,000 + (3 × ₱300,000) = ₱1,420,000.

22. ₱840,000 – ₱16,800 = ₱823,200.

23.
Solution:
Initial measurement: (2.1M ÷ 6) x PV ordinary annuity of 1 @5%, n=6 = 1,776,492

Subsequent measurement:
Date Collections Interest income Amortization Present value
Jan. 1, 20x1 1,776,492
July 1, 20x1 350,000 88,825 261,175 1,515,317
Dec. 31, 20x1 350,000 75,766 274,234 1,241,083
July 1, 20x2 350,000 62,054 287,946 953,137
Dec. 31, 20x2 350,000 47,657 302,343 650,794
July 1, 20x3 350,000 32,540 317,460 333,333
Dec. 31, 20x3 350,000 16,667 333,333 0
Interest income in 20x1 = (88,825 + 75,766) = 164,591

24. (93,000 – 2,000 + 3,000) = 94,000

25. (300,000 + 600,000 – 240,000) = 660,000

26. A suspense account is an account used temporarily or permanently to carry doubtful entries and
discrepancies pending their analysis and permanent classification. Only 1 and 5 will require
further analysis since the other items are simple errors that can be easily corrected without any
need for additional investigations.

27. Refer to the table below:

A L E AI 36,000.00 1.5X
B 300,000.00 100,000.00 200,000.00 W 24,000.00 X
CHANGES 150,000.00 100,000.00 50,000.00 I 108,000.00 4.5X
E 450,000.00 200,000.00 250,000.00 EX 70,000.00
CHANGE IN EQUITY 50,000.00

28.

29. Depreciation 600,000 / 2 300,000

Bonus 1,200,000 / 2 600,000
Total 900,000

30. Sales 2,000,000

Traceable cost 900,000
Common costs 3M x 2/10 600,000
Operating Income 500,000