o Securities classified as financial asset measured at amortized cost ore reported at 8. asawisition.cost. ©. cauisiian-cost plus amortization of a discount. ©. acquisition cost plus amortization of c premium 6. tair-value. In accounting for investments in debt securities that are classified as held for trading securities, 9. @.discount is reported separately. b. apremium isreported separately. ©. gp discount or premium is not amortized . nongof these. According to PFRS 9 Financial instruments, investments in debt securities that ore: classified at amortized cost are generally recorded at ©. Gast including accrued interest. ©. ouotuity valve. ©. ggst including brokerage ond other fees, 6. tai: value ot initial recognition plus brokerage and other tees. Pippen Co. purchased ten-year, 10% bonds that pay interest semiannually. The bonds are sold to yield 8%. One step in calculating the issue price of the bonds is to multiply the principal by the table value for 2. 10 periods and 10% from the present value of I table. b. 10 periods and 8% from the present value of 1 table. c. 20 periods and 5% from the present value of | table. 9. 20 periods and 4% from the present value of | table. Solo Co. purchased 8200,000 af bonds for 8315,000. The securities are to be held until maturity to collect the contractual cash flows. The entyy to record the investment includes 2. gdebit fo Held-for-Trading Securities at B300,000 ©. a.credit to Premium on Investments of B15,000. ¢. Qdebit fo Investment in bonds measured at amortized cost for #315,000. d. congof these. When an investment in debt security measured at amortized cost is transtemed to- held for trading security. the canying amount assigned to the held for trading security should be ©. ifporiginal cost. D. [is fair value at the date of the transfer. c. the lower of its original cost or its fair valve at the date of the transfer. ?Gd. the higher of its original cost or its far value at the date of tne transfer. 7. When an investment in equity securities irrevocably elected on initial recognition to be subsequently measured at FVQClis transtemed to held for trading because the company anticipates selling the stock in the near future, the camying amount signed to the investment upen entering it in the trading portfolio should be 9. its original cost. ©. itefair value at the date of the transfer. c. the higher of its original cast orits fair valve at the date of the transfer, d. None of these & According to PFRS 9 Financial Instruments, investments in debt securities classified under the amortized cost measurement category should be recorded on the date: of acquisition at ©. (ewer of cost or market. b. qotket value. ©. {gif-value plus brokerage fees ond other costs incident to the purchase. 3. fagavalue, 3. Which of the following is comect about the effective interest method of amortization? @. The effective interest method applied to investments in debt securities is different from that applied to bonds eayable. b. The amoriization of a discount decreases from period to period. c. The amortization of a premium decreases from period to period. d. The effective interest method preduces a constant rate of retum on the book value (carrying amount) of the investment from period to period. 10. debt security Is purchased at a discount. The entity wants to classify the Invesiment as @ financial asset measured ot FVOC. The entry te record the amortization of the discount includes o 2. debitte investment account. ©. debit to the discount account. C. Agito Interest Revenue . nongof these. Use the following information for the next two questions: ‘On January 1, 20x1, Kevin Co. acquired 12%, P4,990.009 bonds for F 4,198,948. The principal is due on December 31, 20x3 but interest is made annually starting December 31, 20x]. The effective interest rate on the bands is 10%. 11. How much Is the interest income recognized in 20x12419,895 ©. 407,273, ©. 413,884 . 480,000 12, How much is the comying amount of the investment on December 31, 20x17 9. 4.198.948 c.4.072,727 ©. 4.138,843 . 4,000,000 13. On April 1, 20x1, Ronald Ryan Co. acquired 12%, F4,000.000.bonds dated January 1 20x1 at 98 including interest. The bonds mature on December 31, 20x3 but pays annual interest at each year-end. Haw much Is the initial carrying amount of the invesiment? 2.3.920,000 b. 3,800,000 ¢. 4,000,000 4,120,000 14. On January 1, 20x1, Mitch Co. acquired 12%, P4,000.000 bonds at 98. Commission paid to brokers amounted to P204,000. Principal is due on December 31, 20x4 put interest payments are made annually starfing December 31, 20x! The adjusted effective interest rate on the investment is closest to oel2% be ¢.10.2650% — d.indeterminabie Use the following information for the next three questions: On January 1, 2041, ABC Co. acquired 10%, 81,000,000 bends for 827,135. The bonds mature on December 31, 20x2 and pay annval interest every December 31. ABC Co. incurred transaction costs 880,000 on the acquisition. The effective interest rate adjusted for the effect of the transaction casts is 14%. The bonds are fo be held under a “hold to collect and sell" business model. Information on fair waives is as follows: December 31, 20x1 coe 9B December 31, 20x2 eevee OZ December 31, 20x3. evens 100 15. How much is the comying amount of the investment on December 31, 20x12 2.935.134 . 1,002,000 1c. 980,000 6. 965,443. 16. How mueh is the unrealized goin (loss) recognized in other comprehensive income on December 31, 20x12 0. 45,865 b. [45.866] (37.899) do17. How much is the interest income recegnized in 20x2? 2, 126,999 ©. 185,088 ©. 130,779 d. 144,988 18. On December 29, 20x1, an entity commits itself to purchase a financial asset for 10,000, which isits fair value on commitment date (trade date). Transaction costs ore immaterial. On December 31. 20x1 and on January 4, 20x2 {seitiement date) the fair values of the asiet cre 812.000 and #15,009. respectively. If the enfily uses the settiement dete accounting and that the investment is classified as held for trading, how much is the carving amount of the investment in the December 31, 20x1 statement of financial pasition? 2, 10,000 . 15,000 b. 12,000 4.0 19. On January 1, 20x). Dagul Co. acquired 10%, 4,000,000 bonds for 83,807,853. The principal it due on Jonvary 1, 20x4 but interest is due annually starting December 31, 20x1_ The yield rate on the bonds is 12%. On July. 1 20x1, BagulCo. changed its business medel. If was ascerfained that the investment in bonds at amarfized cost shauld be reclasified to bald for trading securities on reclassification dote. The oonds were quoted at 102, 103 and 104 an July 1, 20x1, December 31, 20x1 and January 1. 20x2, respectively. How much is the gain (loss) on reclassification on January 1, 20x22 1, 243,478 ©. 298,205 ©. 255,205 2.0 20. On March 31, 20x1, dysiny. Co. received 10,000 stock rights from its investment in equity securities to subscribe to new shores at 86 per shore for every 4 rights held. Prior to issuance of stock rights. the shores were selling at 880 per share. How much is the inifial corying amount of the stock rights? 2, 20,000 . $0,000 b. 40,000 d. cannot be determined 21. Property, plant, and equipment may property include ‘2. demagis on machinery not yet received ©. idle. equipment classified as held for sale asset under PFRS 5, . [and held for speculation 4. gongof these. 22. Which of these is not a major characteristic of a PPE? ‘a. Possesses physical substence ©. Acquired for use in operations c. Yields services over a number of yearsd. All of these are mojor characteristics of a plant asset, 23. Plant assets purchased on long-term credit contracts should be accounted for at ‘@. the total value of the future payments b. the future omount of the future payments. <. the present value of the future payments, 4. nopgof these. 24. Nimbus Inc. purchased certain plant assets under o deferred payment contract. The agreement was to poy B20,000 per year for ten years. The plant assets should be valued at a. 8300,000. b. 300,000 plus imputed interest. ©. Qfesegt-value of 830,000 annuity for ten years at an imputed interest rate. di. future value of 880,000 annuity for ten years at an imputed interest rate. 25.4 company purchased land to be used of the site for the constuction of a plant. Timber was cut from the building site so that construction of the plant could begin. The proceeds from the sale of the fimber should be ©. clagifigd.es other income. b. cated against the costs to clear the land and expensed as incurred. c. deducted from the cost of the plant. d. destucted, trom the cost of the land 26.Cotton Hotel Corporation recently purchased Haliday Hotel and the land on which it is located with the plan ta tear down the Holiday Hotel and build o new luxury hotel on the site. The cost of the Holiday Hotel should be ‘3. deprecioted over the period from acauibifion to the date the hotel is scheduled to be torn down. b. waitien off as an extraordinary loss in the year the hotel is torn down. <. capitalized os part of the cost of the land d. copitaized.os part of the cost of the new hotel 27The cost of land typically includes the purchase price and all of the following costs excest ‘2. gracing. filing, draining, ond clearing casts. b. sewers and drainage systems cost. ¢. private driveways and parking lots. d. ossumantion of any lens or mortgages on the property. 28.4 donated plant asset for which the foir value hos been determined, and for which incidental costs were incurred in acceptance of the asset. should be recorded at an amount equal to its ‘2. ingidantal costs incumed©. fgipvalue and incidental costs incurred ©. 892k value on books of donor and incidental costs incurred. @. Bak value On DOOks of donor. 23.The debit for a non-refundable sales tox propery levied and paid on the purchase of machinery preferably would be a charge to @. the machinery account. ©. separate deferred charge account. ©. miscelanaeus tox expense (which includes oll taxes other than these on income} 6. accumulated depreciation: machinery. 20.In order for & Cost to be Capitalized [capital expenditure), the following must be present: 4. The useful ite of an asset must be increased. . The quantity of assets must be increased . The quality of assets must be increased. d. Any one of these. 31. Memy Co. purchased a machine casting 8125.00 for its manufacturing operations and paid shipping costs of 820.000. Mery spent an additional 810,000 testing and preparing the machine for use. What amount should Mey record as the cost of the machine? a. 155,000 b. 145,000 <. 135,000 d. 125,000 92. Peterson, Inc. purchased @ machine under a deferred payment contract on December 31, 20x]. Under the terms of the contract, Peterson is required to moke eight annual payments of 140,000 each beginning December 31, 20x2. The appropriate interest rate is 8%. The purchase price of the machine is 2. 1,889,190, b. 1,120,000 ¢. 868,900. 804,520 33. Marburg Manufacturing Company purchased a machine on January 2, 20x2. The invoice price of the machine was 849,000, and the vendor offered a 2 percent discount for payment within ten days. The following additional costs were incurred in connection with the machine: [Transportation Testing costs prior fo regular operation IF the invoice is paid within the discount period, Marburg should record the acquisition cost of the machine at 2. 41.650 b.41.100 40.400 39,20034. On July 1, 20x1, Town Company purchased far@540,000 a warehouse building and the land on which if is located. The following data were available conceming the property: i 1__Curentapprased value | __sellersonginalcost_| iT ; 200,000 1 140,000 : | Worehouse building 300/000 | 380,000 [Torab, : 300,000, i 420,000. : Town should record the land at 2. 149,000 b. 180,000 ¢. 200,000 d. 214,000 38. The Oscer Corporation acquired land, buildings, and equipment from a bankrupt company at a lump-sum price of 8180,000. At the fime of acquisition, Oscar paid BI, i proisal disclosed the following values: What cost should be assigned fo the land, buildings, and equipment, respectively? 2. $4,000, 64,000, and 64,000 b. 90,000, 60,000; and 20,000 ©. 96,000, 44,000, and 32,000 d. 120,000, 80,000, and 40,000 36. On December 1, 20x1, Boyd Co. purchased a 400,090 tract of land for a factory site. Boyd rozed an old building on the property to make way for the construction of the new factory. Boyd sold the materials it salvaged from the demolition. Boyd incurred additional costs and realized salvage proceeds during December 20x! as follows: Demolition of old building 50,000 Legal fees for purchase contract and recording ownership ‘10.000. Tile guarantee insurance 12,000 Proceeds from sale of salvaged materials 8,000 In its December 31, 20x1 statement of financial position, Boyd should report a balance in the land account of 2. 464,000 b, 460,009 ¢.442,000 d. 422.00037.On February 12, Laker Company purchased a tract of land as a factory site for 175,000. An existing ouilding on the property was razed and construction was beaun ‘on a new factory building in March of the same year. Additional data are available ‘95 follows Title insurance end legal fees fo purchase land New buliding consiruction cost 875.000 The recorded cost of the completed factory building should be 2. 910,000 ©.917,500 ©.930,009 4. 952,500 38. Amble, Inc. exchanged a truck with a camying amount of 812,000 and a fair value of 20,000 for a truck and 85,009 cosh. The fair value of the truck received was #15,000, At what amount should Amble record the truck received in the exchange? 2. 7,000, 'b. 9,000 6.12000 4. 15,000 39.0n March 31, 20x1, Winn Company traded in an old machine having a carrying ‘amount of 816,800, and paid a cash differance of 88,000 for a new machine having @ total cash price of 820,500. On March 31, 20x1, what amount of loss should Winn recognize on this exchange? 2.0 b. 2,00 6. 3,700 @. 6,000 49.On October I, Takei, Inc. exchanged 8,000 shares of its #25 por value ordinary shore for a parcel of land to be held for future plant site. Takei’s ordinary share had a fair value of B80 per share on the exchange date. Tokei received 836,000 from the sale of sorap when an existing building on the site was razed. The land should be carried ot 2. 200,000 b.236,000 ¢.804,000 4. 649,000 41.Depreciation of noncurrent operating assets is an accounting process for the purpose of ©. tepodina.seciining osret volver on the bolance sheet. b. allocating asset costs over the periods benefitted by use of the assets. ©. gpRavating for costs fo reflect the change in general price levels. d. setting aside funds to replace assets when their economic usefulness expires. 42. Which of the following principles best describes the conceptual rationale for the methods of matching depreciation expense with revenues? . Partial recognition b. immediate recognition ¢. Systematic ond rational allocationd. Associating cause and effect 4.he composite depreciation method 2. ig applied to a group of homogeneous assets. b. ig an accelerated methad of depreciation ¢. dass not recognize gain or loss on the refirement of specific assets in the group. d. excludes solvage valve from the base of he depreciotion caleuletion, 44.The sumof-the-years=digits methed of depreciation is being used for a machine with a five-year estimated useful life. What would be the fraction applied to the cost fo be depreciated in the fourth yeor? a. 45 b. 25 c. 415 od. 218 48.In order fo calculate the third yeors depreciation on an asset using the sum-ot the- yeors-digits method, which of the following must be known about the asset? 1. Its acquisition cost ®. ts estimated residual value cc. Its estimated useful life d. All the above must be known, 46.Which of the following statementsis tne asrumption on which straightiine depreciation isbosed? a. The operating efficiency of the asset decreases in later years. ®. Service valve declines asa function of fime rather than use. ¢. Service value declines of a function of obsolescence rather than time. d. Physical wear and tear are more Important than economic obsolescence. 47.4. method that ignores residual value in calculating periodic depreciation excense is the 9. productive cutaut method. ©. giguR, composite method. c. sumcokthe-ve.ars-digits method. d. daubisdeciniog-balsass,method. 48.Which of the following depreciation methods applies a uniform depreciation rate ech period fo an asset's carrying amount? ‘a. Straight-ine ©. Units-of-production ¢. Declining-balance d. Sum-orine-years-cigits49. What is the proper time ortime period over which to match costs of an intangible asset with revenues if itis fikely that the benefit of the asset will last for an indeterminate but very lang period of time? @. Fifty years ©. Forty years 6. Twenty years G. Five years 50.Which of the following reasons provides the best theoretical support for accelerated depreciation? @. Assets are more efficient in early years and initially generate more revenue b. Expenses should be allocated in.o manner that “smaaths’ earings. ©. Repairs and maintenance costs will probably increase in later periods, so depreciation should deciine. @. Accelerated depreciation provides easier replacement because of the time value of money. 51.Wnen the estimate of an asset's useful life is changed, 0. depxeciotian excense for all past periods must be recalculated. ©. thet is no change in the amount of depreciation expense recorded for future years. ©. gply-the depreciation expense in the remaining years is changed d. None of the above are true. s2.The sale of a depreciable asset resulting in q loss indicates that the proceeds from the sole were ©. l8s5 than current market value. b. gyeater than cost. ©. geeatecthan carrying amount. @. [gg§ than cerying amount. 82.0n January 1 Stockton Company acquired a machine with a fouryeer useful life. Stockton estimates the residual value of the machine will be equal to ten percent of the acauisition cost. The company is debating between using either the double- declining-bolance method or the sum-of-the-years-digits method of depreciation. Comparing the depreciation expense for the first two years computed using these meiheds, the depreciation expense for ine double-declining-bolonce method (compared to the sum-oF-the-years-digits method) will match which of the patterns shown below? istyear Second year 2. Lower Lower b. Lower higher c. Higher Lowerd. Higher digber 54, Which of the following utilizes the staight-ine depreciation method? Composite Depreciation Greup Depreciation 9. Yes ves b. Yes Ne c. No Yes d. No da 58.A depreciable asset has an estimated 15 percent salvage value. At the end of its estimated useful lite, the accumulated depreciation would equal the original cost of the asset under which of the following depreciation meinads? Productive-Outout Sum-of-ihe-Years-Digifs Double-Deciining-Bal. a. Yes No Da b. No da da c. No Yes No d. Yes Yes Yes