15.

On July 1, 2010, Cola Corporation acquired a held to maturity security in Color Company’s 10-year 12% bonds, with face
value of P5,000,000, for P5,386,300. Interest is payable semi-annually on January 1 and July 1. The bonds mature on July
1,2015. Bonds effective rate is 10%. On December 31, 2011, Cola Corporation sold its debt instrument for P5,500,000.
What amount of gain should Cola Corporation recognize as a result of the disposal?
a. P144,385 b. P176,604 c. P210,434 d. P245,956

16. Jennie Company commenced operations at the beginning of the current year. The following costs are incurred by the entity:
Payment for land 1,000,000
Taxes in arrears on building on land 40,000
Demolition of current building on land, net of salvage of P10,000 100,000
Survey before construction of new building 60,000
Contract price for factory building 5,000,000
Architect fee 230,000
Payment to city hall for approval of building construction 120,000
Safety fenced around construction site 35,000
Safety inspection on building 30,000
Removal of safety fence after completion of factory building 20,000
New fence surrounding the factory 80,000
Driveways, parking bays and safety lighting 550,000
Cost of trees, shrubs and other landscaping 250,000
The land and factory building respectively be measured at
a. 1,150,000 and 5,495,000 c. 1,650,000 and 5,435,000
b.1,200,000 and 5,435,000 d. 1,400,000 and 5,495,000

17. On January 1, 2007, Sage Company received a grant of 10,000,000 from the foreign government to compensate for massive
losses incurred because of a recent earthquake. The grant requires no fulfilment of certain conditions. The grant was made for the
purpose of giving immediate financial support to the enterprise. It will take Sage Company 2 years to reconstruct its assets
destroyed by earthquake. How much income from the government grant should he recognized by Sage in 2007?
a. 0 b.5,000,000 c.2,500,000 d. 10,000,000

18. On July 1, 2010, Donella Company, a calendar year corporation, purchased the rights to a mine. The total purchase price was
P12,750,000, of which P750,000 was allocable to the land. Estimated reserves were 1,500,000 tons. Donella expects to extract
and sell 25,000 tons per month. Donella purchased new equipment on July 1, 2010 for P7,500,000. The equipment had a useful
life of 8 years. However, after all the resource is removed, the equipment will be of no use and will be sold for P300,000.
Donella Company should record depletion of the mining equipment for 2010 at