1. On August 13,2020,Elgin Development, Inc. purchased a tract of land for P4,300,000.

Additional costs
of P200,000 were incurred in subdividing the land during the rest of 2012.

Under the relative sales value method, the cost allocated to each “medium” lot should be

a. 4,167

b. 6,667

c. 10,000

d. 60,000

2. On October 1, 2020, Earl Company purchased for P1,600,000 a tract of land as a factory site.

In October 31, 2020, balance sheet, Earl Company should report a balance in the land account of:

a. 1,920,000

b. 1,856,000

c. 1,840,000

d. 1,600,000

3. The Elite Company imported a new machine at a peso equivalent of P1,320,000. The company has to
pay additional cost of importing the asset such as P40,000 import duties and P60,000 non-refundable
purchase taxes

a. 1,320,000

b. 1,430,000

c. 1,440,000

d. 1,460,000

4. Eagle Corporation purchased a machine costing P2,000,000 for a manufacturing operations and paid
shipping costs of P230,000. What amount should Eagle record as the cost of the machine

c. 2,390,000
5. Epic Company acquired land and building for P5,000,000 on October 1, 2020. The land was appraised
at P2,400,00 and the building at P9,600,000.

What is the proper cost of the land for financial accounting purposes?

b. 2,325,000

6. On March 31, 2020, Enfalac Co. traded in an old machine having a carrying amount of P336,000, and
paid a cash difference of P120,000 for a new machine having a total cash price of P410,000. On March
31, 2020, what amount of loss should Enfalac recognize on this exchange?

c. 46,000

7. Equitable Co. started a construction of a new office building on January 1, 2020 and moved into the
finished building on July 1, 2021. What amount should Equitable report as capitalized interest on
December 31, 2020?

a. 204,000

8. Earth Co. began constructing a building for its own use in January 2020. During 2020, Earth incurred
interest of P100,00 on specific construction debt, and P40,00 on other borrowings. What amount of
interest cost should Earth capitalize?

b. 100,000

9. Erika Co. purchased a machine under a deferred payment contract on December 31, 2020. The purchase
price of the machine is:

c. 869,400

10. Eunice Inc. purchased an equipment on January 3, 2020. The invoice price of the machine was
P1,600,000 and the vendor offered 5% discount for payment within ten days.

Equipment should be recorded at:

c. 1,569,000

11. On October 1, Epic Corp. exchanged 16,000 shares of its P25 par value common stock for a parcel of
land to be held for a future plant site

b. 1,208,000
12. On January 2, 2020, Elbert Co. bought machinery under a contract that required a down payment of
P100,000, plus 24 payment of P50,000 each for total cash payment of P1,300,000.

d. 105,000

13. Edu Crop. Takes full year’s depreciation expenses in the year of disposition.

Use the same depreciation method as used in 2017, 2018 and 2019, how much depreciation expense
should Edu record in 2020 for this asset?

d. 120,000

14. Escrow Co. purchased a new machine on July 1, 2019.

The amount of accumulated depreciation on this machine at December 31, 2020 would be:

d. 101,250

15. The amount of depreciation expense for this machine in 2020 using sum-of-the-year’s digits method
would be:

c. 112,500

26. A company purchased land to be used as the site for the construction of plant. Timber was cut from
the building site so that the construction of the plant could begin. The proceeds from the sale of the timber
should be

c. deducted from the cost of the plant asset

27. When a company purchased land with a building on it and immediately tears down the building so
that the land can be used for the construction of a plant, the cost occurred to tear down the building
should be

c. added to the cost of the plant

28. A donated plant asset for which the fair value has been determined, and for which incidental costs
were incurred in acceptance for the asset, should be recorded at an amount equal to

a. incidental costs incurred

b. fair value and incidental costs incurred

c. book value om books of donor and incidental costs incurred

d. book value on books of donor

31. A machine with an original estimated useful life of ten years is moved to another location in the factory
it had been in service for these years. The efficiency of the machine increase for its remaining useful life.

d. YES YES

32. An expenditure subsequent to acquisition of assembly-line manufacturing equipment benefits future

periods. The expenditure should be capitalized if it is a

Betterments Rearrangements

a. Yes Yes

33. Which of the following concepts is often given as justification not to value noncurrent operating assets
at its current value?

a. the revenue principle

b. verifiability

c. relevance

d. predictive value

1,305,000

2,000,000

2,400,000

2,800,000

34. An asset was acquired on January 1, 2016 for P800,00 and is expected to have a 5-year useful economic
life. Straight line method of depreciation will be used.

What is the replacement cost of the asset at January 1, 2010?

a. 720,000

b. 800,000

c. 1,100,000

d. 1,200,000
35. Using the information given in no. 34, what is the impairment loss to be recognized in January 1, 2020?

a. 0

b. 40,000

c. 60,000

d. 80,000

36. On December 31, 2020, Errol Company has an equipment, with the following cost and accumulated
depreciation:

Errol Company should report an impairment loss for the year 2012 of:

a. 800,000

b. 600,000

c. 200,000

d. 0

37. During December 2019, Eijie Company determined that there had been a significant decrease in
market value of its equipment used in its manufacturing process. At December 31, 2020, Eijie complied
the information below:

What is the amount of impairment loss that should be reported on Eijie’s income statement for the year
ended December 31, 2020

a. 1,500,000

b. 1,300,000

c. 300,000

d. 100,000

38. On January 2, 2017 Essex Company purchased a machine for P1,600,00 and established an annual
depreciation charge of P200,000 over an eight-year life.

In its December 31, 2020 balance sheet, the machine should be reported at a carrying amount of:

a. 800,000

b. 500,000
c. 320,000

d. 0

39. Elegance Company acquired a machine for P3,200,00 on August 31, 2017. The machine has 1 5-eyar
life, a P500,00 salvage value and was depreciated using the straight-line method. Assuming a loss on
impairment is recognized on May 31, 2020, what is Elegance’s depreciation for June 2020?

a. P63,520

b. P50,000

c. P45,000

d. 31,480

40. Egret Company, a clothing manufacturer, purchased a sewing machine for P1,000,000 on July 1, 2017.
The machine had a 10-year life, a P50,000 salvage value, and was depreciated using straight-line method.
The machine’s fair value on January 1, 2020 is P300,000. What is the loss on impairment?

a. 650,000

b. 475,000

c. 462,500

d. 4150,000