BSA 2102-INTERMEDIATE ACCOUNTING 1 & 2

FINAL DEPARTMENTAL EXAM REVIEWER

TOPIC COVERAGE:
 PAS 38: Intangible Assets  PFRS 5: Noncurrent Assets Held for
 PAS 41: Agriculture Sale
THEORIES
1. Intangible assets are said to be without physical substance. Which of the following items
listed below is not an intangible asset?
a. patent c. goodwill
b. leasehold d. marketable securities

2. Research and development costs, under prevailing practice, may be accounted for as follows:

a. R and D costs related to successful projects should be capitalized; others expensed.

b. R and D costs related to unsuccessful projects should be capitalized; others expensed.
c. R and D costs should be expensed as incurred.
d. R and D costs should be allocated between successful and unsuccessful projects.

3. Deferred charges:

a. are cash received or other assets recognized for goods and services that will be supplied
in future periods.
b. are payments made for services that will be utilized by the business.
c. represent those portions of expenditures for services, made prior to the balance sheet
date but not consumed at the balance sheet and will be utilized or consumed in the future
normal operating cycles.
d. are prepayments for services or benefits that will be received over a number of periods.

4. Development activities involve the application of research findings to develop a product,

service or process. Which is not considered a development activity?

a. design, construction and testing of preproduction prototype and model

b. design of tools, jigs, molds and dies involving new technology
c. design, construction and operation of a pilot plant
d. laboratory research aimed at discovery of new knowledge

5. A consideration in determining the useful life of an intangible asset is not the:

a. legal, regulatory or contractual provision

b. initial acquisition
c. expected action of competitors
d. effect of obsolescence, demand, competition and other economic factor
6. Which of the following is correct?
a. The fair value of internally generated intangible assets should be estimated and recorded
on the books of the entity that developed the assets even in the absence of a business
acquisition.
b. The fair value of internally generated intangible assets may be estimated but should not
be recorded on the books or displayed on the financial statements of the entity.
c. Managers may value their own companies and recognize goodwill in the company
accounts even though an entity has not been acquired in a business acquisition.
d. Goodwill should be recognized in the accounts whenever the value of the firm increases
based on current market prices of the firm's share capital.

7. What is the proper time or time period over which to match the cost of an intangible asset with
revenue if it is likely that the benefit of the asset will last for an indeterminate period of time?

a. 50 years c. 20 years
b. 40 years d. 5 years

8. Macky has two patents that have allegedly been infringed by competitors. After investigation,
legal counsel informed Macky that it had a weak case on patent A and a strong one in regard
to patent B. Macky incurred additional legal fees to stop infringement on patent B. Both
patents have a remaining legal life of 8 years. How should Macky account for these legal
costs incurred relating to the two patents?

a. expense costs for patent A and capitalize cost for patent B.

b. expense costs for both patents.
c. capitalize costs for both patents.
d. capitalize costs for patent A and expense costs for patent B.

9. Which of the following is a research activity?

a. Design, Construction, and testing of pre-production or pre-use prototypes and models
b. Design, construction and operation of a pilot plant that is not of scale economically feasible
for commercial production
c. Formulation, design, evaluation and final selection of possible alternatives for new or
improved materials, devices, products, processes, systems or services
d. Design, construction and testing of a chosen alternative for new or improved materials,
devices, products, processes, systems or services

10. Goodwill should be amortized:

a. as soon as possible against retained earnings.

b. as soon as possible as an extraordinary item.
c. by systematic charges against retained earnings over the period benefited.
d. by systematic charges to expense over the period benefited.
11. How shall the fair value of biological assets physically attached to land be determined?
a. The fair value of biological assets may be deducted from the fair value of the combined
assets to arrive at fair value of the raw land and land improvements.
b. The fair value of raw land and land improvements may be deducted from the fair value of
the combined assets to arrive at the fair value of biological assets.
c. It cannot be determined.
d. The fair value of raw land and land improvements may be added to the fair value of
biological assets to arrive at the fair value of the combined assets.

12. A required disclosure for biological assets.

I. Aggregate gain or loss arising during the current period on initial recognition of biological
assets and agricultural produce and from the change in fair value less costs to sell of
biological assets.
II. Description of each group of biological assets
a. I only c. Both land Il
b. Il only d. Neither I nor Il

13. Entity A had a plantation forest that is likely to be harvested and sold in 30 years. The income
should be accounted for in the following way:
a. No income should be reported until first harvest and sale in 30 years.
b. Income should be measured annually and reported using a fair value approach that
recognizes and measures biological growth.
c. The eventual sale proceeds should be estimated and matched to the profit and loss
account over the 30-year period.
d. The plantation forest should be valued every 5 years and the increase in value should be
shown in the statement of recognized gains and losses.

14. The following provides examples of biological assets, agricultural produce and products that
are the result of processing after harvest. Which is a correct combination?

Biological asset Agricultural produce Product after harvest

a. Plants Harvested cane Sugar
b. Dairy cattle Cheese Milk
c. Sausage Carcass Pig
d. Vines Wine Grapes
15. Not costs to sell biological assets
a. Commissions to brokers and dealers
b. Levies by regulatory agencies
c. Transfer taxes and duties.
d. Transport and other costs necessary to get the assets to a market

16. Choose the incorrect statement.

a. For a biological asset, there is a presumption that a fair value can be measured reliably
b. The fair value assumption on biological assets can be rebutted only on initial recognition
c. For an agricultural produce, it is assumed that its fair value less costs to sell on initial
recognition (point of harvest) can always be measured reliably
d. Quantified description of each group of biological assets is required by PAS 41.

17. Which of the following statements is incorrect in determining the fair value of biological
assets and agricultural produce?
a. Contract prices are not necessarily relevant in determining fair value when entities enter
into contracts to sell their biological assets or agricultural produce at a future date, because
fair value reflects the current market in which a willing buyer and seller would enter into a
transaction.
b. If an active market exists for a biological asset or agricultural produce, in its present
location and condition, the quoted price in that market is the appropriate basis for
determining the fair value of that asset
c. The determination of fair value fora biological asset or agricultural produce may be
facilitated by grouping biological assets or agricultural produce according to significant
attributes.
d. The fair value of a biological asset or agricultural produce adjusted when entities enter
into contracts to sell their biological assets or agricultural produce at a future date.

18. Harvested agricultural crops or extracted mineral ores assured to be sold under a forward
contract or government guarantee are measured at

a. Higher of cost and net realizable value c. Lower of cost and net realizable value
b. Fair value less costs to sell d. Net realizable value

19. Which of the following is not dealt with by PAS 41?

a. The accounting for biological assets
b. The initial measurement of agricultural produce harvested from the entity’s biological
assets
c. The processing of agricultural produce after harvesting
d. The accounting treatment of government grants received in respect of biological assets
20. Where there is a long aging or maturation process after harvest, the accounting for such
products should be dealt with by

a. PAS 41 c. PAS 16
b. PAS 2 d. PAS 40 I 3

21. An entity shall classify a noncurrent asset or disposal group as "held for sale" when the
a. Carrying amount of the asset or disposal group will be recovered through a sale
transaction.
b. Carrying amount of the asset or disposal group will be recovered through continuing use.
c. Noncurrent asset or disposal group is to be abandoned.
d. Noncurrent asset or disposal group is idle or retired from active use.

22. In order for a noncurrent asset to be classified as held for sale, the sale must be highly
probable. “Highly probable” means that
a. The future sale is likely to occur
b. The future sale is more likely than not to occur
c. The sale is certain
d. The probability is higher than more likely than not

23. An entity acquires a subsidiary exclusively with a view to selling it. The subsidiary meets the
criteria to be classified as held for sale. At the balance sheet date, the subsidiary has not yet
been sold, and six months have passed since its acquisition. How will the subsidiary be valued
in the balance sheet at the date of the first financial statements after acquisition?
a. At fair value
b. At the lower of its cost and fair value less cost to sell
c. At carrying value
d. In accordance with applicable PFRS

24. Any gain on a subsequent increase in the fair value less cost to sell of a noncurrent asset
classified as held for sale should be treated as follows: .

a. The gain should be recognized in full

b. The gain should not be recognized
c. The gain should be recognized but not in excess of the cumulative impairment loss
d. The gain should be recognized but only in retained earnings
25. A component of an entity is classified as "held for sale" when the component is available for
immediate sale and the sale is highly probable. Which of the following statements is incorrect
when considering a sale to be highly probable?
a. Management is committed to a plan to sell the component.
b. Active program to locate a buyer is initiated.
c. The component is actively marketed for sale at an unreasonable price in relation to its
cost.
d. The sale is expected to qualify as a completed sale w1th1n one year from the date of
classification as "held for sale".

26. An entity shall recognize any subsequent increase in fair value less cost to sell of a non-
current asset or disposal group classified as held to sale as
a. deferred gain in as component of equity
b. Deferred gain as component of liability.
c. Gain entirely to be included in profit or loss. .
d. gain to be included in profit or loss but not in excess of the cumulative impairment loss
previously recognized

27. An entity has an asset that was classified as held for sale. However, the criteria for it to remain
as held for sale no longer apply. The entity should therefore.
a. Leave the noncurrent asset in the financial statements at its current carrying value
b. Remeasure the noncurrent asset at fair value
c. Measure the noncurrent asset at the lower of its carrying amount before the asset was
classified as held for sale (as adjusted for subsequent depreciation, amortization, or
revaluations) and its recoverable amount at the date of the decision not to sell
d. Recognize the noncurrent asset at its carrying amount prior to its classification as held for
sale as adjusted for subsequent depreciation, amortization, or revaluations

28. The results of operations of a component of an entity that either has been disposed of or
classified as held for sale shall be reported in discontinued operations if:
I. The operations and cash flows of the component have been or will be eliminated from the
on-going operations of the entity as a result of the disposal transaction.
Il. The entity continues to have a significant continuing involvement in the operations of the
component after the disposal' transactions
Ill. The entity outsources the manufacturing operations of a component and sells the
manufacturing facility of the component but continues to sell the product formerly
manufactured by the facility sold.
a. Only I is true c. I and II are true
b. Only Il is true d. I, Il, and Ill are all true
29. Which of the following statements about the requirements of IFRS 5 is valid? ·
I. An asset that meets the criteria for classification as held for sale after the end of the reporting
period but before the authorization of the financial statements should be measured in the
statement of financial position at the lower of carrying amount and fair value less costs to sell.
II. To be classified as an asset held for sale, the sale must be expected to be completed within
12 months from the end of the financial year.
a. I only c. Both I and II
b. II only d. Neither I nor II

30. An entity put back an asset that was previously classified as "Held for Sale" into active use;
thus, the criteria for the asset to be classified as "Held for Sale" no longer apply. For
accounting purposes, the entity shall
a. continue to classify the asset as Held for Sale, until such date that the asset is retired or
disposed of.
b. reclassify the asset into its previous classification at the lower of fair value less cost to sell
and its carrying amount when the asset was classified as Held for Sale.
c. continue to classify the asset as Held for Sale and resume the depreciation for the asset.
d. reclassify the asset into its previous classification, measuring it at the lower between its
carrying value had the asset not been classified as Held for Safe and its recoverable
amount as determined under IAS 36 Impairment of Assets and then subject the asset to
depreciation or amortization.

PROBLEMS
31. During 2020, Delta Inc. incurred research and development costs as follows:

Experimental and development costs of a new

process patented in December 2020 P250,000
Testing for evaluation of new products 300,000
Modification of the formulation of a chemical
product 150,000
Research and development costs reimbursable
under a contract with Quality Chemicals
Corporation 500,000

What amount should Delta report as research and development expense in its income
statement for the year ended December 31, 2020?
a. P 0 c. P700,000
b. P450,000 d. P950,000
32. Harmonious Company acquired a patent for a drug with a remaining legal and useful life of
six years on January 1, 2015 for P5,400,000. On January 1, 2017, a new patent is received
for an improved version of the same drug. The new patent has a legal and useful life of twenty
years.
What is the amortization expense for 2017?
a. 900,000 c. 180,000
b. 200,000 d. 300,000

33. Rave Company developed a trademark to distinguish its product from those of its competitors.
Through advertising and other means, the company is seeking to establish significant product
identification to increase future sales. The similarity between the trademark costs and other
intangible and operating costs has caused some confusion over property accounting. The
following items are being treated as part of the cost of the trademark:

Marketing research to study consumer tastes P 400,000

Design costs of trademark 1,500,000
Legal fees of registering trademark 150,000
Advertising to establish recognition of trademark 200,000
Registration fee with Patent Office 50,000

Through renewals, the trademark is expected to have an unlimited life. The cost to be
capitalized as trademark should be:
a. P1,700,000 c. P2,300,000
b. P1,900,000 d. P2,100,000

Use the following information for answering questions 34 and 35:

Cam Software Company is an established computer software company. In 2018, the firm
incurred the following costs in the process of designing, developing and producing a new
software program using the JAVA technology to access the Internet:
Designing and planning P1,000,000
Code development 1,500,000
Testing 500,000
Production of product master 2,500,000
In 2019, Cam incurred P1,000,000 in costs to produce the software program for sale in 2019.
The costs of designing and planning, code development and testing were all incurred before
the technological feasibility of the product was established. Cam began marketing the
software program in 2019 and earned revenues of P2,400,000 in 2019. Cam estimates that
total revenues over the 4-year life of the product will be P12,000,000. At the end of 2019,
Cam was offered P4,000,000 for the rights to distribute the software.
34. How much of the R and D and production costs will be expenses in 2018?

a. P5,500,000 c. P3,500,000
b. P3,000,000 d. P3,625,000

35. How much of the R and D and production costs will be expensed in 2019?

a. P1,625,000 c. P700,000
b. P1,500,000 d. P875,000

36. At the beginning of the current year, Boracay Company bought a trademark from Lamitan
Company for P3,000,000. The entity retained an independent consultant who estimated the
trademark´s life to be indefinite. The carrying amount of the trademark was P1,500,000 on the
books of Lamitan Company.
What is the carrying amount of the trademark at the year-end?
a. 3,000,000 c. 2,850,000
b. 1,500,000 d. 0

37. Northstar Company acquired a registered trademark for 600,000. The trademark has a
remaining legal life of 5 years but can be renewed every 10 years for a nominal fee, The entity
was expected to renew the trademark indefinitely.
What amount of amortization expense should be recorded for the trademark in the current
year?
a. 120,000 c. 40,000
b. 15,000 d. 0

38. The general ledger of the ABC Corp. as of December 31, 2020 included the following
accounts:

Restricted deposits in foreign countries P 2,000

Deposits with advertising agency (will be used to
promote goodwill) 3,000
Excess of cost of investment in stock over book
value of net assets of acquired subsidiary 4,000
Leasehold 5,000
Trademarks 1,000
In the preparation of ABC’s balance sheet as of December 31, 2020, the total intangible assets
that should be shown is:

a. P6,000 c. P10,000
b. P9,000 d. P13,000
39. Sailor Company's has bought the entity from previous owners through a leveraged
management buy-in (MBI). The company incurred a total transaction cost related to the MBI.
In the amount of P5,000,000 which was broken into the following specific costs: P1,000,000
related to the issue of own equity instrument, P1,500,000 related to the issue of debt
instrument and P2,500,000 for the consultants and lawyers’ fees. The management proposes
to capitalize the P5,000,000 as intangible assets. What amount should the company
recognize as at intangible asset?
a. none c. P4,000,000
b. P2,500,000 d. P5,000,000

40. Moon Company purchased Patent A for P600,000 and Patent B for P900,000. Moon also paid
indirect costs of P75,000 for Patent A and P105,000 for Patent B. Both patents were
challenged in legal actions. Moon paid P300,000 in legal fees in successful defense of Patent
A and P450,000 in legal fees in an unsuccessful defense of Patent B. What amount should
Moon capitalize for patents?
a. P675,000 c. P1,680,000
b. P975,000 d. P2,430,000

41. An entity provided the following information about assets in forest plantation:
Freestanding trees 5,000,000
Land under trees 900,000
Roads in forest 500,000
Animals related to recreational activities 2,000,000
Rubber trees and grape vines 1,500,000

What total amount should be reported as biological assets?

a. 5,000,000 c. 6,500,000
b. 8,500,000 d. 9,900,000

42. Salve Company is engaged in raising dairy livestock. The entity provided the following
information during the current year:
Carrying amount on January 1 5,000,000
Increase due to purchases 2,000,000
Gain arising from change in fair value less cost
of disposal attributable to price change 400,000
Gain arising from change in fair value less cost
of disposal attributable to physical change 600,000
Decrease due to sales 850,000
Decrease due to harvest 200,000
 What is the carrying amount of the biological asset on December 31?
a. 6,950,000 c. 8,000,000
b. 6,000,000 d. 7,150,000

Use the following information for answering questions 43 to 45:

The Central Luzon Farms harvested corn with fair value of P350,000 at the date of harvest.
Estimated cost to sell is P10,000. At year-end, the fair value declined slightly to P330,000 and
no corn has been sold at year-end. On January 15, 2019, all of the corn had been sold for
P345,000, the company incurring selling cost of P9,500.

43. At what amount shall the harvested corn be initially recorded?

a. P330,000 c. P340,000
b. P335,500 d. P350,000

44. At the year-end statement of financial position, the inventory of corn shall be presented at
a. P320,000 c. P335,500
b. P330,000 d. P340,000

45. How much profit or loss did the company realize from the sale of the corn in 2019?
a. P 5,500 c. P15,500
b. P15,000 d. P25,000

Use the following information on answering questions 46 and 47:

On December 31, 2020, Sony Company reported the following information involving its
biological assets:
Biological assets, at cost on December 31, 2018 P6,000,000
Fair value surplus on initial recognition
at fair value on December 31, 2019 7,000,000
Change in fair value to December 31, 2020 1,000,000
Decrease in fair value due to harvest during 2020 900,000

46. What amount should the biological asset be reported in the December 31, 2020 balance
sheet?
a. P6,100,000 c. P12,100,000
b. P7,100,000 d. P13,100,000

47. What amount of net gain should Sony Company report in its December 31, 2020 income
statement related to the biological asset?
a. None c. P1,000,000
b. P100,000 d. P6,100,000
Use the following information for answering questions 48 to 50:
Rainbow Company has the following information pertaining to its biological assets for the year
2020:

A herd of 100, 2-year-old animals was held at January 1, 2020. Ten animals aged 2.5 years were
purchased on July 1, 2020 for P5,400, and ten animals were born on July 1, 2020. No animals
were sold or disposed of during the period. Per unit fair values less estimated point of sale costs
were as follows:

2.0-year-old animal at January 1, 2020 P5,000

Newborn animal at July 1, 2020 3,500
2.5-year-old animal at July 1, 2020 5,400
Newborn animal at December 31, 2020 3,600

0.5-year old animal at December 31, 2020 4,000

2.0-year old animal at December 31,2020 5,250
2.5-year old animal at December 31, 2020 5,550
3.0-year old animal at December 31,2020 6,000

48. How much of the increase in the fair value of the biological assets due to price change?
a. None c. P26,500
b. P25,000 d. P27,500

49. How much of the increase in the fair value of the biological assets due to physical change?
a. P75,000 c. P110,000
b. P79,500 d. P118,500

50. What is the fair value of the biological assets as of December 1, 2020?
a. P554,000 c. P700,000
b. P581,500 d. P735,000

Use the following information for answering questions 51 and 52:

Arlene Company accounted for noncurrent assets using the cost model. On October 30, 2017,
the entity classified a noncurrent asset as held for sale. At the date, the carrying amount was
P1,500,000, the fair value was estimated at P1,100,000 and the cost of disposal at P150,000. On
November 20, 2017, the asset was sold for net proceeds of P800,000.

51. What amount should be reported as impairment loss for 2017?

a. 550,000 c. 700,000
b. 400,000 d. 0
52. What amount should be included as loss on disposal in the statement of comprehensive
income for the year ended December 31, 2017?
a. 550,000 c. 150,000
b. 700,000 d. 0

Use the following for answering questions 53 to 55:

On October 1, 2019, Builder Company has a building with a cost of P4,00,000 and accumulated
depreciation of P3,100,000. The company commits to a plan to sell the building by February 1,
2020. On October 1, 2019, the building as an estimated selling price of P800,000, and it is
estimated that selling costs associated with the disposal of the building will be P120,000. On
December 31, 2019, the estimated selling price of the building has increased to P1,200,000, with
an estimated selling costs remaining at P120,000.
53. At the time of reclassification as held for sale, what amount should the noncurrent asset held
for sale be recognized?
a. P680,000 c. P800,000
b. P780,000 d. P900,000

54. What amount of loss should Builder Company recognize at the time the building was
reclassified as held for sale?
a. None c. P120,000
b. P100,000 d. P220,000

55. As of December 31, 2019, what amount of gain on recovery should Builder Company
recognize related to the asset held for sale?
a. None c. P220,000
b. P180,000 d. P400,000

56. On January 2, 2020, Chronicle Company is committed to a plan to sell a manufacturing facility
and has initiated actions to locate a buyer. Chronicle Company does not intend to transfer the
facility to a buyer until after it ceases all operations of the facility and eliminates the backing
of uncompleted customer orders. The facility was constructed for a total cost of P6,300,000.
Its estimated useful life was for a period of 30 years and with an estimated salvage value of
P300,000. As of January 2, 2020, the carrying value of the facility is P4,300,000 and a
recoverable value of P4,500,000. As of December 31, 2020, Chronicle Company has yet to
complete the customers’ orders and facility has a recoverable amount of P4,275,000. On
December 31, 2020, Chronicle Company should classify the facility as
a. Property, Plant and Equipment valued at P4,300,000
b. Property, Plant and Equipment at P4,100,000
c. Noncurrent asset held for sale and valued at P4,500,000
d. Noncurrent asset held for disposal and valued at P4,275,000
57. On December 1, 2020 P Company acquired through foreclosure a company comprising land
and building that it intends to sell. However, P Company does not intend to transfer the
property to a buyer until after it completes renovations to increase the property´s sales value.
P Company paid a total lump sum amount of P7,000,000 to acquire the property. As of
December 30, 2020, P Company has paid a total amount of P100,000 for the partial
renovation of the property and the property is currently selling at P7,600,000. In its December
31, 2020 statement of financial position, P Company should report its held for sale property
at
a. None c. P7,100,000
b. P7,000,000 d. P7,600,000

Use the following information for answering questions 58 to 60:

Surreal Company accounted for noncurrent assets using the revaluation model. On October 1,
2019, the entity classified a land held for sale. At that date, the carrying amount of the land was
P5,000,000 and the balance in the revaluation surplus was P1,500,000. At the same date, the fair
value of the land was estimated at P5,500,000 and the cost of disposal at P100,000. On
December 31, 2019, the fair value less cost of disposal of the land did not change. The land was
sold on January 31, 2020 for P6,000,000.

58. What is the impairment loss in 2019?

a. 100,000 c. 400,000
b. 500,000 d. 0

59. What is the adjusted carrying amount of the land on December 31, 2019?
a. 5.000,000 c. 5,400,000
b. 5,500,000 d. 3.500,000

60. What amount should be reported as gain on disposal of land in 2020?

a. 1,000,000 c. 500,000
b. 2,600,000 d. 600,000
ANSWER KEY:
THEORIES
1. D. Marketable securities
2. C. R and D costs should be expensed as incurred.
3. C. represent those portions of expenditures for services, made prior to the balance sheet
date but not consumed at the balance sheet and will be utilized or consumed in the future
normal operating cycles.
4. D. laboratory research aimed at discovery of new knowledge
5. B. initial acquisition
6. B. The fair value of internally generated intangible assets may be estimated but should not
be recorded on the books or displayed on the financial statements of the entity.
7. C. 20 years
8. A. expense costs for patent A and capitalize cost for patent B.
9. C. Formulation, design, evaluation and final selection of possible alternatives for new or
improved materials, devices, products, processes, systems or services
10. D. by systematic charges to expense over the period benefited.
11. B. The fair value of raw land and land improvements may be deducted from the fair value of
the combined assets to arrive at the fair value of biological assets.
12. C. Both I and II
13. C. The eventual sale proceeds should be estimated and matched to the profit and loss
account over the 30-year period.
14. A. Plants, Harvested cane, Sugar
15. D. Transport and other costs necessary to get the assets to a market
16. D. Quantified description of each group of biological assets is required by PAS 41.
17. D. The fair value of a biological asset or agricultural produce adjusted when entities enter into
contracts to sell their biological assets or agricultural produce at a future date.
18. D. Net Realizable Value
19. C. The processing of agricultural produce after harvesting
20. B. PAS 2
21. A. Carrying amount of the asset or disposal group will be recovered through a sale transaction
22. D. The probability is higher than more likely than not
23. B. At the lower of its cost and fair value less cost to sell
24. C. The gain should be recognized but not in excess of the cumulative impairment loss
25. C. The component is actively marketed for sale at an unreasonable price in relation to its
cost.
26. D. gain to be included in profit or loss but not in excess of the cumulative impairment loss
previously recognized
27. C. Measure the noncurrent asset at the lower of its carrying amount before the asset was
classified as held for sale (as adjusted for subsequent depreciation, amortization, or
revaluations) and its recoverable amount at the date of the decision not to sell
28. A. Only I is true
29. D. Neither I nor II
30. D. reclassify the asset into its previous classification, measuring it at the lower between its
carrying value had the asset not been classified as Held for Safe and its recoverable amount
as determined under IAS 36 Impairment of Assets and then subject the asset to depreciation
or amortization.
PROBLEMS
31. C. P700,000
Experimental and development costs of a new
process patented in December 2020 P250,000
Testing for evaluation of new products 300,000
Modification of the formulation of a chemical
product 150,000
Total R and D expense P700,000
32. C. 180,000
Cost – January 1, 2015 5,400,000
Amortization for 2015 and 2016 (5,400,000/6 x 2) (1,800,000)
Carrying amount – January 1, 2017 3,600,000
Amortization for 2017 (3,600,000/20) 180,000
33. A. 1,700,000
Design costs P1,500,000
Legal fees of registering trademark 150,000
Registration fee with Patent Office 50,000
Total cost of trademark P1,700,000
34. B. 3,000,000
Designing and planning P1,000,000
Code development 1,500,000
Testing 500,000
Total R and D expense P3,000,000
35. A. 1,625,000
Straight line rate (100% / 4) 25%
Ratio of current year sales (2,400,000/12,000,000) 20%
Cost of producing the software program in 2019 P1,000,000
Amortization of software cost (2,500,000 x 25%) 625,000
Total expense in 2019 P1,625,000
36. A. 3,000,000
The legal life of trademark is 10 years and may be renewed every 10 years. Considering
the almost automatic renewal of a trademark, the trademark can be classified as an
intangible asset with indefinite life. Accordingly, the cost of trademark is not amortized but
tested for impairment at least annually.
37. D. 0
 The cost of an intangible asset with indefinite life is not amortized but tested for impairment at
least annually. The trademark is an intangible asset with indefinite life
38. C. 10,000
Excess of cost of investment in stock over book
value of net assets of acquired subsidiary P 4,000
Leasehold 5,000
Trademarks 1,000
Total P10,000
39. A. None
The cost of MBI should not be capitalized as an intangible asset, as they do not in themselves
provide access to future economic benefits. The transaction costs on the equity instrument.
Issued should be deducted from equity (PFRS3 par. 31 or PFRS 3 par. 53 revised), the cost
related to the debt issue should be deducted from the liability and recognized over the term
of the loan through an adjustment to the interest cost (PAS 39 por. 43). The consultants' and
lawyers’ fees should be added to the cost of the acquisition of the business (PFRS 3 par. 29
or PFRS3 por. 53 revised).
40. A. 675,000
Capitalized Expensed
Original cost
Purchase price P 600,000 P 900,000
Indirect costs 75,000 105,000
Total 675,000 P 1,005,000
Subsequent cost 750,000
Total costs P 675,000 P 1,775,000

As a result of the unsuccessful litigation on patent B, its purchased price, indirect cost and the
unsuccessful litigation cost should be charged outright as expense. The cost to be capitalized
should be the purchase price and indirect cost of patent A. Subsequent cost incurred such as
fees and other cost of successfully prosecuting or defending a patent should be expensed.
(PAS 38)
The standard requires that only subsequent cost on an intangible asset that would enable the
asset to generate future economic benefits in excess of the original assessed standard of
performance can be capitalized as cost of the intangible asset. Litigation cost or legal cost
incurred in prosecuting an intangible is considered as cost of maintaining the asset rather than
enhancing or increasing its future economic benefits.

41. A. 5,000,000
The land under trees and roads in forest should be included in property, plant and equipment.
Under IFRS, animals related to recreational activities as in game parks, and bearer plants,
such as rubber trees and grape vines should be accounted for as PPE.
42. A. 6,950,000
Carrying amount on January 1 5,000,000
Increase due to purchases 2,000,000
Gain arising from change in fair value less cost
of disposal attributable to price change 400,000
Gain arising from change in fair value less cost
of disposal attributable to physical change 600,000
Decrease due to sales (850,000)
Decrease due to harvest (200,000)
Carrying amount – December 31 6,950,000
43. C. P340,000
Fair value 350,000-10,000 = 340,000 P350,000
Estimated cost to sell (10,000)
Initial value P340,000
44. A. P320,000
Fair value 330,000-10,000 = 320,000 P330,000
Estimated cost to sell (10,000)
Inventory value at December 31 P320,000
45. C. P15,500
Net Selling Price (345,000-9,500) P335,500
Inventory value at December 31 320,000
Profit on sale 15,500
46. D. P13,100,000
Biological assets, at cost on December 31, 2018 P6,000,000
Fair value surplus on initial recognition
at fair value on December 31, 2019 7,000,000
Change in fair value to December 31, 2020 1,000,000
Decrease in fair value due to harvest during 2020 (900,000)
Fair value as of December 31, 2020 P13,100,000
47. B. P100,000
Change in fair value to December 31, 2020 1,000,000
Decrease in fair value due to harvest during 2020 (900,000)
Net change in fair value – reported in income statement P 100,000
48. D. P27.500
Increase in fair value less estimated point of sale due to price change:
100 (P5,250 – P5,000) P25,000
10 (P5,550 – P5,400) 1,500
10 (P3,600 – P3,500) 1,000
Total P27,500
49. D. P118,500
Increase in fair value less estimated point of sale due to physical change:
100 (P6,000 – P5,250) P75,000
10 (P6,000 – P5,550) 4,500
10 (P4,000 – P3,600) 4,000
10 x P3500 35,000
Total P118,500
50. C. P700,000
Fair value less estimated point of sale cost on
January 1, 2020 (100 x P5,000) P500,000
Purchase on July 1, 2020 (10 x P5,400) 54,000
Total P554,000
Increase in fair value less estimated point of sale
cost due to price change; 27,500
Increase in fair value less estimated point of sale
cost due to physical change: 118,500
Total fair value P700,000
51. A. P550,000
Carrying amount 1,500,000
Fair value less cost of disposal (1,100,000 – 150,000) 950,000
Impairment loss 550,000
52. C. P150,000
Sale price 800,000
Carrying amount on November 20, 2017, date of sale 950,000
Loss on disposal (150,000)
53. A. P680,000
Fair market value (P800,000 – P120,000) 680,000
Carrying value (P4,000,000 – P3,100,000) 900,000
Initial measure of held for sale (lower) 680,000
54. D. P220,000
Carrying value (P4,000,000 – P3,100,000) 900,000
Fair market value (P800,000 – P120,000) 680,000
Loss on reclassification of impairment loss P220,000

Journal Entry for reclassification;

Building –Held for sale 680,000
Loss on held for sale classification 220,000
Accumulated depreciation – Building 3,100,000
Building 4,000,000
55. C. P220,000
Fair value as of December 31, 2019 (P1,200,000 – P120,000) P1,080,000
Carrying value 900,000
Fair value date of reclassification 680,000
At the balance sheet date, the noncurrent asset held for sale is remeasured at the lower of its
carrying value and its fair market value. Therefore, the noncurrent asset should be
remeasured at P900,000 by increasing the initial cost of P680,000 by P220,000 and the
increase in the value of the asset is reported immediately as a component of the profit or loss
of the period.
56. B. Property, plant and equipment at P4,100,000
Carrying value as of January 2, 2020 4,300,000
Less: 2020 depreciation (P4,300,000 – 300,000/ 20 years) 200,000
Carrying value as of December 31, 2020 P4,100,000
The delay in the timing of the transfer of the facility imposed by the entity (seller) demonstrates
that the facility is not available for immediate sale. Therefore, Chronicle Company should not
classify the facility as held for sale but continue to classify as held for use and should be
valued the usual way for property plant and equipment.
57. A. None
The delay in the timing of transfer of the facility imposed by the entity (seller) demonstrates
that the facility is not available for immediate sale. P Company should not report the property
as held for sale but classify the property as investment property that is to be measured either
under the cost model or fair value model
58. A. 100,000
Carrying amount equal to fair value 5,500,000
Fair value less cost of disposal (5,500,000 – 100,000) 5,400,000
Impairment loss for 2019 100,000
- Actually the cost of disposal for revalued asset is recognized as the impairment loss.
59. C. 5,400,000
Adjusted carrying amount on December 31, 2019 equal to
Fair value less cost of disposal 5,400,000
60. D. 600,000
Sale Price 6,000,000
Carrying amount 5,400,000
Gain on sale of land 600,000