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The CARTel prepared the following post-closing trial balance at year-end:

Property plant and equipment 2,400,000

Intangible assets 850,000
Investment in associate 1,100,000
Deferred tax assets 40,000
Inventory 500,000
Trade receivables 600,000
Cash on hand 1,150,000
Equity investments held at FVTPL 550,000
Equity investments not held for trading 500,000
Investment in bonds 400,000
Demand deposit in bank 200,000
Receivable from employees 10,000
Receivable from associates 300,000
Bank loans 1,100,000
Employee benefits 250,000
Finance lease payables 400,000
Trade payables 550,000
Warranty obligation 20,000
Rent payable 10,000
Interest payables 20,000
Current tax liability 210,000
Bank overdraft 40,000
Share capital 4,000,000

What is the total amount of financial assets?

a. 4,810,000
b. 3,710,000
c. 3,750,000
d. 3,160,000

What is the total amount of financial liabilities?

a. 2,330,000
b. 2,120,000
c. 1,720,000
d. 1,930,000

What is the total shareholder’s equity?

a. 4,000,000
b. 8,600,000
c. 6,000,000
d. 2,600,000

Jude Medina Buenavista Grande III Company provided the following trial balance on December
31, 2015 which has been adjusted for income tax expense:

Cash 600,000
Accounts receivable, net 3,500,000
Cost in excess of billings on long-term contracts 1,600,000
Billings in excess of cost on long-term contracts 700,000
Prepaid taxes 450,000
Property, plant and equipment, net 1,510,000
Note payable - noncurrent 1,620,000
Share capital 750,000
Share premium 2,030,000
Retained earnings unappropriated 900,000
Retained earnings restricted for notes payable 160,000
Earnings from long-term contracts 6,680,000

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Costs and expenses 5,180,000

12,840,000 12,840,000
The entity used the percentage of completion method to account for long-term construction
contracts for financial statement and income tax purposes. All receivables on these contracts are
considered to be collectible within 12 months.

During 2015, estimated tax payments of P450,000 were charged to prepaid taxes. The entity has
not recorded income tax expense. There were no temporary or permanent differences. The tax
rate is 30%.

On December 31, 2015, what amount should be reported as

Total retained earnings

a. 1,950,000
b. 2,110,000
c. 2,400,000
d. 2,560,000

Total noncurrent liabilities

a. 1,620,000
b. 1,780,000
c. 2,320,000
d. 2,560,000

Total current assets

a. 5,000,000
b. 4,100,000
c. 5,700,000
d. 6,225,000

Total shareholders’ equity

a. 2,780,000
b. 3,840,000
c. 4,890,000
d. 5,340,000

Questions 36 to 37 are based on the following:

M ‘n M & Associates presented the following items in its current year statement of
comprehensive income:

Remeasurement gain from defined benefit plans using

fair value method 500,000
Gains from equity instruments measured at FVTOCI 300,000
Translation gains 200,000
Effective gains on a cash flow hedge instruments 500,000
Ineffective gains on a cash flow hedge instruments 400,000
Revaluation surplus 200,000
Impairment loss 100,000

1. What amount should be presented in the other comprehensive income?

a. 2,100,000
b. 1,700,000
c. 1,500,000
d. 1,200,000

2. What amount should be presented in the profit or loss?

a. 500,000

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b. 800,000
c. 300,000
d. 1,000,000

Questions 38 to 41 are based on the following:

Hello KT & Co., an investment entity, provided the following data for the current year:

Dividend income from investments 9,200,000

Distribution income from trusts 500,000
Interest income from deposits 700,000
Income from bank treasury bills 100,000
Unrealized gain on derivative contracts 400,000
Income from dealing in securities and derivatives held for trading 600,000
Write-down on securities and derivatives held for trading 150,000
Other income 250,000
Finance costs 300,000
Administrative staff costs 3,800,000
Sundry administrative costs 1,200,000
Income tax expense 1,700,000

What is the total income before tax?

a. 11,200,000
b. 10,750,000
c. 11,350,000
d. 11,600,000

What is the total amount of expense before tax?

a. 5,300,000
b. 5,450,000
c. 7,000,000
d. 5,000,000

What is the net income for the year?

a. 4,600,000
b. 4,200,000
c. 3,700,000
d. 4,100,000

What is the comprehensive income for the year?

a. 4,200,000
b. 4,600,000
c. 3,800,000
d. 5,900,000

Jude Abragan Company provided the following information for the current year:

Income from continuing operation 4,000,000

Income from discontinued operation 500,000
Unrealized gain on financial asset - FVTPL 800,000
Unrealized loss on equity investment - FVOCI 1,000,000
Unrealized gain on debt investment - FVOCI 1,200,000
Unrealized gain on future contracts designated as cash flow hedge 400,000
Translation loss 200,000
Remeasurement gain 600,000
Loss on credit risk of financial liability - FVTPL 300,000
Revaluation surplus during the year 2,500,000

What amount should be presented in the income statement?

a. 4,500,000

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b. 7,700,000
c. 8,500,000
d. 7,200,000

What amount should be presented in the income statement?

a. 4,500,000
b. 7,700,000
c. 8,500,000
d. 7,200,000

What amount should be presented in the comprehensive income?

a. 4,500,000
b. 7,700,000
c. 8,500,000
d. 7,200,000

Mamsy Company reported the following components of other comprehensive income for the
current year:

Unrealized loss on future contract designated as cash flow hedge 500,000

Revaluation surplus during the year 350,000
Unrealized gain on nontrading equity investment measured at FVOCI 150,000
Remeasurement gain on employee benefits 120,000
Gain on translation of financial statements of a foreign operation 150,000
Loss from charge in fair value attributable to credit risk of a
financial liability designated at FVTPL. 200,000

In preparing the statement of comprehensive income, what net amount should be reported as
components of other comprehensive income that may not be recycled to profit or loss?

a. 350,000
b. 420,000
c. 620,000
d. 470,000

Casey Company’s net income is P7,410,000 for the current year. The auditor raised questions
with regard to the following accounts:

Unrealized loss on equity investments at FVOCI (540,000)

Gain on early retirement of bonds payable 2,200,000
Adjustment to profit of prior period for error in depreciation, net of tax effect (750,000)
Loss from fire (1,400,000)
Gain from change in fair value attributable to the credit risk
of financial liability designated at FVTPL 500,000

What amount should be presented as adjusted net income?

a. 6,500,000
b. 7,200,000
c. 8,200,000
d. 8,700,000

Dumb Company’s year-end is December 31, 2015 and the 2015 financial statements were
authorized for issue on March 31, 2016. The entity had the following events:

 On February 1, 2016, the entity determined that the total cost of an equipment purchased is
P3,700,000. The equipment was purchased on November 21, 2015 but unrecorded on
December 31, 2015.
 On March 15, 2016, the entity discovered that the 2015 depreciation expense was overstated
by P470,000.

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 On March 20,2016, the entity issued P100,000 ordinary shares at par of P10 per share.
 On March 27, 2016, the entity filed a case against another entity for present infringement.
Legal counsel assessed that it is probable that the entity will win the case for an amount of
P550,000.

What amount should be replaced as adjusting events on December 31, 2015?

a. 4, 720,000
b. 5,170,000
c. 4,170,000
d. 3,700,000

On July 1, 2015, RR Company decided to discontinue its electronic division. Analysis of the
records for the year disclosed the following relative to the electronic division:

Operating loss for the year

Loss on disposal of some assets during 2015
Expected loss in 2016
Expected gain in 2016

What amount should be reported as pretax loss from discontinued operation in 2015?
a. 8,000,000
b. 8,500,000
c. 9,500,000
d. 7,500,000

ABC Company identified the following segments for the current year:

Segment Revenue Profit Assets

A 10,000,000 1,750,000 20,000,000
B 8,000,000 1,400,000 17,500,000
C 6,000,000 1,200,000 12,500,000
D 3,000,000 550,000 7,500,000
E 4,000,000 575,000 5,500,000
F 2,000,000 525,000 3,000,000

What are the reportable segments?

a. Segments A, B and C
b. Segment A, B, C, and D
c. Segments A, B, C, D and E
d. Segments A, B, C, D, E and F

DEF Company identified the following segments for the current year:

Combined profits of segments reporting profits 6,000,000

Combined loss of segments reporting loss (4,000,000)
Combined profit and loss of all segments (2,000,000)

To qualify as reportable segment, the segment profit or loss should at least be?
a. 200,000 profit
b. 500,000 profit
c. 400,000 loss
d. 600,000 profit

Warren Company provided the following data on December 31. 2015

Petty cash fund 25,000

Cash on hand 500,000

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Current account 1,250,000

Cash in sinking fund 1,500,000
Money market placement 1,000,000
Saving deposit - set aside for dividend payable on June 30,2016 250,000

The petty cash fund included unreplenished petty cash vouchers of P10,000. The cash on hand
included a customer check of P200,000 received on December 15, 2015 but dated January 15,
2016. The sinking fund restricted for the payment of bond payable that is due on July 31, 2017.
What amount of cash and cash equivalents should be reported on December 31, 2015?

a. 1,815,000
b. 2,815,000
c. 3,315,000
d. 4,315,000
Pretty Inse has supplied you with the following list of its bank accounts and cash at December
31, 2016:
Checking account (compensating balance of P15,000 with no restriction), P48,000; Savings
account, 2%, P30,000; Certificate of deposit, 6 months, 10%, due April 20, 2017, P60,000;
Money market (30-day certificate), current rate, 9.7%, P40,000; Payroll account, P20,000;
Certificate of deposit, 3 months, 10% due February 15, 2017, P75,000 and Petty cash, P1,500;
Bills 10,000.

What should be the balance to be reported as “Cash Equivalents” in the December 31, 2016
statement of financial position of Pretty Inse Corporation?
a. P145,000 c. P224,500
b. P115, 000 d. 125,000
What should be the balance to be reported as “Cash and Cash Equivalents” in the December 31,
2016 statement of financial position of Pretty Inse Corporation?
a. P145,000 c. P224,500
b. P115, 000 d. 125,000

Lady Tsunade had the following bank reconciliation on June 31, 2015:
Balance per bank statement, June 30 3,000,000
Deposit in transit 400,000
Total 3,400,000
Outstanding checks (900,000)
Balance per book, June 30 2,500,000
The bank statement for the month of July showed the following:
Deposits (including P200,000 note collected for Lady Tsunade) 9,000,000
Disbursements (including P140,000 NSF check and P10,000 debit memos) 7,000,000

All reconciling items on June 30 cleared through the bank in July. The deposit in transit
amounted to P1,000,000 and the outstanding checks totaled P600,000 on July 31.
What is the cash in bank to be reported on July 31, 2015?
a. 5,000,000
b. 5,400,000
c. 4,600,000
d. 4,900,000

What is the cash in bank balance per ledger on July 31, 2015?
a. 5,400,000
b. 5,350,000
c. 5,550,000
d. 4,500,000

What is the amount of cash receipts per ledger for July?

a. 9,000,000
b. 9,400,000
c. 9,600,000

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d. 8,400,000

What is the amount of cash disbursement per cash ledger for July?
a. 7,000,000
b. 6,550,000
c. 6,850,000
d. 6,700,000

Paolo Company reported current receivables on December 31, 2015 which consisted of the
following:

Trade accounts receivable 930,000

Allowance for uncollectible accounts 20,000
Claims against shipper for goods lost in transit in November 2015 30,000
Selling price of unsold goods sent by Paolo on consignment at 130%
of cost and not included in the ending inventory 260,000
Security deposit on lease of warehouse used for storing inventories 300,000

What is the corrected current net receivables on December 31, 2015

a. 1,500,000
b. 1,200,000
c. 1,240,000
d. 940,000

Pi Incorporated had the following information relating to its accounts receivable:

Accounts receivable, December 31, 2015 P1,950,000

Credit sales for 2016 8,100,000
Collection from customer for 2016 7,125,000
Accounts Written off, August 30, 2017 187,500
Estimated uncollectible receivables per aging of
receivables, December 31, 2016 247,500

What is the total amount of receivable from clients?

a. P2,490,000 c. P2,775,000
b. P2,677,500 d. P2,925,000

How should the asset be presented in it’s 2016 statement of financial position?
a. P2,490,000 c. P2,775,000
b. P2,677,500 d. P2,925,000

Papa Hermes Company received a seven-year zero-interest-bearing note on February 22, 2015,
in exchange for property it sold to Kuya Emman Company. There was no established exchange
price for this property and the note has no ready market. The prevailing rate of interest for this
type was 7% was on February 22, 2016 and 8% on December 31, 2015 and 2016, respectively?
a. 0% and 0% c. 7% and 7%
b. 7% and 7.7% d. 7.5% and 8%

On December 31, 2016, Nicolo Gwapito Corporaton sold for P150,000 an old machine having an
original cost of P210,000 and book value of P60,000, the term of the sale were as follows:
P30,000 down payment
P60,000 payable on December 31 each of the next two years

The agreement of sale made no mention of interest; however, 9% would be a fair rate for this
type of transaction. What should be the amount of the notes receivable, net of the un-amortized
discount and gain on sale, respectively on December 31,2016?
a. P105,546 & 75,546 c. P120,000 & P60,000
b. P135,546 & 75,546 d. P211,092 & P90,000

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Cebuano Company provides for doubtful accounts based on 30% of credit sales. The following
data are available for 2016:
Credit sales during 2016 P2,100,00
Allowance for doubtful accounts, 1/1/2016 170,000
Collections of accounts written off 80,000
(customer accounts re-established)
Customer accounts written off 300,000

What is the balance to be presented in the company’s statement of financial position?

a. 630,000 c. 500,000
b. 420,000 d. 580,000

What is the amount to be presented in the company’s statement of financial performance?

a. 630,000 c. 300,000
b. 420,000 d. 630,000

Bryan Company determined that the net realizable value of accounts receivable on December 31,
2015 based on the aging of accounts receivable was P325,000

Allowance for uncollectible accounts 30,000

Uncollectible accounts written off during the year 18,000
Uncollectible accounts recovered 2,000
Accounts receivable December 31 50,000

What is the uncollectible account expense for the current year?

a. 5,000
b. 11,000
c. 15,000
d. 21,000

On December 30, 2015, Ken Company sold a machine in exchange for a noninterest-bearing
note requiring ten annual payments of P100,000. The first payment was made on December
30,2015. The market interest rate for similar notes at date of issuance was 8%.

Present value of ordinary

Period Present Value annuity of 1 at 8%
9 0.50 6.25
10 0.46 6.71

On December 31, 2015, what amount should be reported as note receivable?

a. 450,000
b. 460,000
c. 625,000
d. 671,000

Popong and Company factored P600,000 of accounts receivable. Control was surrendered. The
factor accepted the accounts receivable subject to recourse for nonpayment. The factor assessed a
fee of 3% and retains a holdback equal to 5% of the accounts factored. In addition, the factor
charged 15% interest computed on a weighted-average time to maturity of fifty-four days. The
fair value of the recourse obligation is P9,000. What amount of cash was initially received?

a. 529,685
b. 538,685
c. 547,685
d. 556,685

Anjanette Company purchased P 2,000,000, 8%, five-year note that required five equal annual
year-end payments of P 500,900. The note was discounted to yield 9%. At the date of purchase,

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the entity recorded the note at the present value of P 1, 948,500. The entity did not elect the fair
value option. What is the total interest revenue earned over the life of this note?

a. 504,500
b. 556,000
c. 800,000
d. 900,000

On September 30, 2016 Scianti Boy discounted at the bank a customer’s P600,000, 6-month,
10% note receivable dated May 31, 2016. The bank discounted the note at 12%.

What amount of gan or loss should Scianti Boy recognize from the transfer assuming the
discounting is treated as a sale?

a. None c. P12,600
b. P2,600 d. P17,400

What amount of loss from the transfer should Scianti Boy recognize assuming the factoring
agreement is considered as borrowings?
a. None c. P12,600
b. P2,600 d. P17,400

Wiz Papa Company has the following information pertaining to its merchandise inventory as of
December 31,2016:

Inventory on hand (including merchandise received on consignment of P20,000) 200,000

Inventory purchased with a buy back agreement 100,000
Merchandise in transit FOB shipping point excluding P5,000 freight cost 155,000
Merchandise in transit Free alongside, including delivery cost alongside the
vessel of P6,000 and the cost of shipment P3,000 250,000
Merchandise in transit, CIF(excluding insurance costs and freight of P8,000) 175,000

What amount should Wiz Papa Company report as value of its inventory in its 2016 statement of
financial position?
a. P749,000 c. P770,000
b. P767,000 d. P876,000

Information pertaining to the inventory of KALAY Company as of December 31,2016 follows:

A B C
Historical Cost P 2,000,000 P2,500,000 P3,500,000
Estimated selling price 2,200,000 3,600,000 4,000,000
Estimated cost of disposal 300,000 800,000 600,000
Normal profit margin 440,000 720,000 800,000
Current replacement cost 2,500,000 3,000,000 2,700,000

KALAY records losses that result from applying the LCNRV rule, what amount should the
inventory be valued on December 31, 2016?
a. P7,800,000 c. P8,000,000
b. P7,900,000 d. P8,100,000

Joshy Company reported inventory on December 31, 2015 at P1,500,000 based on a physical
count priced at cost and before any necessary adjustment for the following:

 Merchandise costing P90,000, shipped FOB shipping from a vendor on December 30, 2015
was received and recorded on January 5, 2016.

 Goods in the shipping area were excluded from inventory although shipment was not made
until January 4, 2016. The goods, billed to the customer FOB shipping point on December

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30, 2015, had a cost of P120,000.

What amount should be reported as inventory on December 31, 2015?

a.1,500,000
b.1,590,000
c.1,620,000
d.1,710,000

Mervic Company reported accounts payable on December 31, 2015 at P900,000 before any
necessary year-end adjustments relating to the following:

 Goods were in transit from a vendor to Mervic on December 31, 2015. The invoice cost was
P50,000, and the goods were shipped FOB shipping point on December 29, 2015. The goods
were received on January 4, 2016.

 Goods shipped FOB shipping point on December 201, 2015 from a vendor Mervic were lost
in transit. The invoice cost was P25,000. On January 5, 2016, Mervic filed a P25,000 claim
against the common carrier.
 Goods shipped FOB destination on December 21, 2015 from a vendor to Mervic were
received on January 6, 2016. The invoice cost was P15,000.

What amount should be reported as accounts payable on December 31, 2015?

a. 925,000
b. 940,000
c. 950,000
d. 975,000
Marty Pogi uses the average retail inventory method of determining the value of their inventory.
The following information is made available:

Cost Market
Inventory beginning P 1,100,000 P 2,200,000
Purchases 15,800,000 26,300,000
Freight in 400,000
Purchases return 600,000 1,000,000
Purchase allowances 300,000
Department transfer in 400,000 800,000
Net Mark-ups 600,000
Net Mark-downs 900,000
Sales 24,700,000
Sales return 350,000
Sales discounts 200,000
Employee discounts 600,000
Loss from breakage 50,000

The cost ratio using the average retail inventory method is

a. 58.13% c. 62%
b. 61.07 % d. 60%

The estimated ending inventory at retail is

a. P3,000,000 c. P2,800,000
b. P3,600,000 d. P3,650,000

The estimated ending inventory cost is

a. P1,743,945 c. P1,832,143
b. P2,198,571 d. P1,800,000

The estimated cost of good sold is

a. P15,267,857 c. P15,000,000
b. P14,901,429 d. P15,056,055

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If the inventory at retail based on physical count at December 31 is P1,700,000, the estimated
inventory shortage is
a. P780,000 c. P755,709
b. P793,000 d. P-0-

Walang, Makakapigil, Sa’kin & Company, an audit firm, would like to know how much should
they record on their books a property invoiced at P500,000 after the seller offered them discounts
of 5%, 2%, 1% and 2/10, net 30.

a. P500,000 b. P451,628 c. P460,845 d. P490,000

The Jude Jeff Deo Company imported a new machine at a peso equivalent of P330,000. The
company has to pay non-refundable purchase taxes of P10,000 and P15,000 VAT. Cost of
transporting the asset was P5,000 and the cost of preparing the asset for its intended use include
P5,000 installation. How much is the initial cost of the machine?

a. P350,000 c. P360,000
b. P355,000 d. P365,000

On October 1, 2016, Bibi Nico Company purchased a machine for P250,000 that was
placed in service on November 30, 2016. Bibi Nico incurred additional costs for this
machine, as follows:

Shipping 10,000
Installation 15,000
Testing 35,000

In Nico’s December 31, 2016 balance sheet, the machine’s cost should be
reported at
a. P250000 c. P300,000
b. P295,000 d. P310,000

During 2016, Kiyen Company made the following expenditures relating to its
plant building:

New paint for the plant building 110,000

Major improvements in the electrical wiring 100,000
Partial replacement of roof tiles 80,000
Continuing and frequent repairs 200,000

How much should be capitalized in the above expenditures

a. 490,000
b. 210,000
c. 180,000
d. 100,000

During the year, Dayag Incorporated made the following expenditures relating to plant building:

Continuing and frequent request repairs 40,000

Repainted the plant building 10,000
Major improvements to the electric wiring system 32,000
Partial replacement of roof tiles 14,000

How much should be charged to repair and maintenance expense?

a. 96,000
b. 82,000
c. 64,000
d. 54,000

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On January 1, year 1, the firm purchased for P2,400,000 a machine with useful life of 10 years,
no scrap value. The machine was depreciated by the double declining balance method and the
carrying amount of the machine was P1,536,000 on December 31, year 2. The firm can justify
the change to straight line method of depreciation effective January 1, year 3.

What would be the depreciation expense for year 3?

a. 307,200 b. 240,000 c. 192,000 d. 153,600

The following account balance relating to property, plant & equipment of Jan Merbs Company
appear on the books on January 1, 2016:

Land P2,000,000
Building 15,000,000
Accumulated depreciation 3,750,000
Machinery 3,000,000
Accumulated depreciation 1,500,000

Assets have been carried at cost since their acquisition. All assets were acquired on January 1,
2006. The straight line method is used. On January 1, 2016, the entity revalued the property,
plant & equipment. On such date, competent appraisers submitted the following:
Replacement Cost
Land P5,000,000
Building 25,000,000
Machinery 5,000,000

What is the deprecation for 2016?

a. P 531,250 c. P 525,000
b. P 875,000 d. P 626,000

What is the revaluation surplus on December 31, 2016?

a. P11,500,000 c. P11,150,000
b. P20,250,000 d. None

Christian Company maintains its records under PAS/PFRS. During the current year Christian
sold a piece of equipment used in production. The equipment had been accounted for using the
revaluation method and details of the accounts and sale are presented below.

Sales price P100,000

Equipment book value 90,000
Revaluation surplus 20,000

Which of the following is correct regarding recording the sale?

a. The gain that should be recorded in profit and loss is P30,000.
b. The gain that should be recorded in other comprehensive income is P10,000.
c. The gain that should be recorded in other comprehensive income is P30,000.
d. The gan that should be recorded in profit and loss is P10,000; the P20,000 revaluation surplus
should be transferred to retained earnings.

An asset was acquired on January 1, 2011 for P1,600,000 and expected to have a 10-year useful
economic life. Straight line method of depreciation will be used. At January 1, 2015 the asset is
appraised as having a sound value of P1,440,000. On January 1, 2017 the asset was appraised at
a sound value of P240,000.

What is the replacement cost of the asset on January 1, 2015?

a. P1,440,000 c.P2,200,000
b. P1,600,000 d. P2,400,000

What is the amount of impairment loss to be recognized on January 1,2017?

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a. None c. P320,000
b. P720,000 d. P400,000

Patrick Bryan Company’s generating-unit has been assessed for impairment and it has been
determined that the unit has incurred an impairment loss of P240,000. The carrying amounts of
the assets were as follows:

Building P6,000,000
Equipment 2,000,000
Land 3,500,000
Fittings 2,500,000

The cash generating unit has not recorded any amount of goodwill.

What amount of impairment loss should be allocated to the building?

a. P50,000 c. P87,500
b. P62,500 d. P102,857

If the fair value less cost to sell of the building is P5,960,000, what amount of impairment loss
should be allocated to the equipment?
a. P34,286 c. P62,500
b. P50,000 d. P87,500

CARAMELK Co. has equipment with a carrying amount of P800,000. The expected future net
cash flows from the equipment are P815,000, and its fair value is P680,000. The equipment is
expected to be used in operations in the future. What amount (if any) should CARAMELK report
as an impairment should be reported

a. no impairment should be reported

b. P 120,000
c. P 15,000
d. P 135,000

The following costs were considered in valuing the cost of new building on January 1,2016.

Purchase price of land and old building P1,000,000

Cost of Demolition of Old building 100,000
Architect’s Fee 150,000
Cost of materials 2,500,000
Laborer’s wages 1,500,000
Engineer’s Fee 150,000
Cost of Excavation intended for the new building 100,000
Discounts availed for the materials 25,000
Scrap Sales, out of the demolition 45,000
Legal fees related to the transfer of title 25,000
Cost of parking lot 100,000
Assessment fees by the Government for the Land 50,000
Cost of building permits and other inspection fees 25,000

The cost allocated to the old building amounted to P500,000. The overhead related to the
construction is 25% of cost of materials and 75% of Direct labor. In addition, the entity incurred
normal spoilages of 10,000.

Moreover, during the course of constructing the building, 2 workers met an accident. These
workers were hospitalized and the entity paid 150,000 as part of the insurance.

How much is the cost of the land?

a. P500,000 c. P550,000
b. P525,000 d. P575,000

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How much is the cost of the new building?

a. P6,683,750 c. P6,458,750
b. P6,465,000 d. P6,583,750

Assuming the construction was finished during the year, how much was expensed during the
year?
a. P500,000 c. P650,000
b. P150,000 d. P810,000

Assuming that if the new building was purchased will be P 7,000,000; how much is the savings
from constructing the building be recognized in the P/L?
a. P316,250 c. P535,000
b. P541,250 d. P -0-

What amount should be considered as land improvements?

a. P100,000 c. P150,000
b. P-0- d. P250,000

Assuming that the building has an estimated useful life of 25 years with a salvage value of
P150,000 and was finished on December 1, 2016, applying PAS 16, how much is the
depreciation to be recognized?

a. P261,350 c. P21,779
b. P257,350 d. P21,446

In June 2016, Jimma Company acquired a machine in exchange for a non-monetary asset with a
cost of P1,200,000 and an accumulated depreciation of P600,000 and paid a cash difference of
P160,000. The market value of the non-monetary asset was determined to be P650,000.

If the exchange has commercial substance, what is the cost of the new asset acquired and the
amount of gain to be recognized, respectively?
a. P440,000 & P50,000 c. P810,000 & P50,000
b. P440,000 & P210,000 d. P810,000 & P210,000

If the exchange lacks the necessary commercial substance, what would be the cost of the new
asset acquired and the amount of gain to be recognized, respectively?
a. P760,000 & P-0- c. P810,000 & P50,000
b. P760,00 & P50,000 d. P810,000 & P210,000

To save transportation costs,Hermes acquired its needed equipment in exchange of its inventory
located in the supplier’s business place. The equipment acquired has cash price of P650,000. The
inventory of Hermes has cost of P550,000, and Hermes paid P80,000 cash for the difference in
fair value of the two assets in exchange.

In the books of Hermes, the exchange is to be accounted as resulting to

a. gain of P20,000
b. loss of P20,000
c. gain of P30,000
d. loss of P30,000

Gracelle Company borrowed P400,000 on a 10 percent note payable to finance a new warehouse
Gracelle is constructing for its own use. The only other debt on Gracelle’s books is a P600, 000,
12 percent mortgage payable on an office building. At the end of the current year, average
accumulated expenditures on the new warehouse totaled P475,000.

Gracelle should capitalize interest for the current year in the amount of (use 2 decimal palaces)
a.40, 000 b. 47, 500 c. 49, 000 d. 380,000

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Questions 47 to 50 are based on the following data:

January 1, 2015, R.G. Manabat & Co. Disclosed the following balances:

Land 4,000,000
Land improvements 1,300,000
Buildings 20,000,000
Machinery and equipment 8,000,000

During the current year, the following transactions occurred:

A tract of land was acquired for P2,000,000 cash as a building site.

A plant facility consisting of land and building was acquired in exchange for 200,000 shares of
the entity. On the acquisition date, each share had a quoted price of P45 on a stock exchange. The
plant facility was carried on the seller’s books at P1,600,000 for land and P5,400,000 for the
building at the exchange date. Current appraised value for the land and building, respectively, are
P2,000,000 and P8,000,000. The building has an expected life of forty years with a P200,000
residual value.

Items of machinery and equipment were purchased at a total cost of P4,000,000. Additional costs
incurred were freight and unloading P100,000 and installation P300,000. The equipment has a
useful life of ten years with no residual value.

Expenditure totaling P1,200,000 were made for new parking lot, streets and sidewalks at the
entity’s various plant locations. These expenditures had an estimated useful life of fifteen years.

Research and development costs were P1,100,000 for the year.

A machine costing P200,000 on January 1, 2008 was scrapped on June 30, 2015. Straight line
depreciation had been recorded on the basis of a 10-year life with no residual value. A machine
was sold for P500,000 on July 1, 2015. Original cot of the machine sold was P700,000 on
January 1, 2012, and it was depreciated on the straight line basis over an estimated useful life of
eight years and a residual value of P50,000.

What is the total cost of the land on December 31, 2015?

a. 7,800,000
b. 7,600,000
c. 8,000,000
d. 6,800,000

What is the total cost of the land improvements on December 31, 2015?
a. 1,200,000
b. 3,600,000
c. 1,300,000
d. 2,500,000

What is the total cost of the building on December 31, 2015?

a. 28,000,000
b. 25,400,000
c. 27,200,000
d. 27,000,000

What is the total cost of the machinery and equipment on December 31, 2015?
a. 12,400,000
b. 11,500,000
c. 11,000,000
d. 11,700,000

A mining property was acquired at cost of P12,000,000. It has estimated life of 5 years. After

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exploration cost of P1,000,000, it was developed at cost of P1,500,000 (intangible). At the end of
its life, the property could be sold for P3,000,000 after restoration cost of P500,000. Confirmed
deposit is at 40,000,000 units. For its 1st year of operation, 7,500,000 units were produced at
production cost of P5,250,000. P7,125,000 of production were sold during the year.

The depletion cost in the inventory is?

a. 112,500 b. 140,625 c. 262,500 d. 2,137,500

What amount of depletion should be included in cost of goods sold?

a. 112,500 b. 140,625 c. 262,500 d. 2,137,500

What is the depletion?

a. 112,500 b. 140,625 c. 262,500 d. 2,137,500

In January 2015, Aldwin Company purchased a mineral mine for P36,000,000 with removable
are estimated by geological survey at P4,000,000 tons. The property has an estimated value of
P3,600,000 after the ore has been extracted. The entity incurred P10,800,000 of development
cost preparing the property to the original condition at an estimated cost of P2,500,000. The
present value of the estimated restoration cost is P1,800,000. During 2015, 400,000 tons were
removed and 300,000 tons were sold.

For the year ended December 31, 2015, what amount of depletion should be included in cost of
goods sold?
a. 4,500,000
b. 3,375,000
c. 4570,000
d. 34275000

For the year ended December 31, 2015, what amount of depletion should be recognized?
a. 4,500,000
b. 3,375,000
c. 4570,000
d. 34275000

Bench Company provided the following data on December 31, 2015:

Unamortized bond issue cost 150,000

Organization cost 200,000
Losses incurred in the early years of the entity’s operations 500,000
Computer software (integral part of a computer controlled machine) 1,000,000
Patent 1,500,000
Amount set up by the Board of Directors as goodwill 400,000
Franchise 2,000,000

What total amount of intangible assets should be recognized on December 31, 2015?
a. 3,500,000
b. 4,500,000
c. 3,700,000
d. 3,900,000

Juanico Company provided the following information for 2015:

Current period depreciation on the building housing R and D activities 1,500,000

Cost of market research study 1,000,000
Current period depreciation on a machine used in R and D Activities 500,000
Salary of R and D director 1,200,000
Salary of VP who spends 1/4 of his time overseeing R and D activities 2,400,000

What total amount should be recognized as R and D expense for 2015?

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a. 4,800,000
b. 6,600,000
c. 5,600,000
d. 3,800,000

Elijah Company incurred the following costs during the current year;

Laboratory research aimed at discovery of new knowledge 75,000

Design of tools, jigs, molds, and dies involving new technology 22,000
Quality control during commercial production, including routine testing 35,000
Equipment acquired two years ago, having an estimated useful life of
five years with no residual value, used in various R and D projects entire year 150,000
Research and development services performed by Star Company for Elijah 23,000
Research and development service performed by Elijah Company for Kaye 2,000

What amount of research and development expense should be reported in the current year?
a. 120,000
b. 150,000
c. 187,000
d. 217,000

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