The Enhancement Program Handouts Farpdf

ARAULLO UNIVERSITY
Maharlika Highway, Brgy. Bitas, Cabanatuan City, 3100 Nueva Ecija
The Financial Accounting & Reporting

Topic 01 – Cash & Cash Equivalents Composition
1) Gee Company had the following account balances at December 31, 2022:
Savings and demand deposits 5,000,000

Currency and coins 200,000
Time deposits 500,000
Bond sinking fund cash for bonds payable due June 30, 2023 1,000,000
Cash restricted for additions to plant expected to be disburse in 2023 2,000,000
Preference share redemption fund (redemption date May 31, 2024) 2,500,000
Cash in bank included P1,000,000 compensating balance against short-term borrowing arrangement. The
compensating balance is not legally restricted as to withdrawal by Gee. What amount should be reported as total cash
on December 31, 2022?
A. 6,200,000 B. 5,200,000 C. 4,200,000 D. 6,700,000
Use the following information for the next two (2) questions:
On December 31, 2023, an entity cash account per ledger of P10,500,000 which included the following:
Cash in bank – demand deposit 2,500,000

NSF check of customer 200,000
Money market placement 3,500,000
Saving deposit 1,000,000
IOU from an employee 300,000
Pension fund 1,500,000
Customer check dated January 31, 2024 600,000
Customer check outstanding for 18 months 400,000
• Check of P150,000 in payment of accounts payable was dated and recorded on December 31, 2023 but mailed to
creditors on January 15, 2024.
• Check of P300,000 dated January 31, 2024 in payment of account payable was recorded and mailed Dec. 31, 2023.
• The cash receipts journal

journ al was held open until January
Janu ary 15, 2024, during which time an amount P400,000 was collected
and recorded on December 31, 2023.
2) What total amount should be reported as cash on December 31, 2023?

A. 3,550,000 B. 3,000,000 C. 4,050,000 D. 5,550,000
3) What total amount should be reported as cash equivalents on December 31, 2023?
A. 3,500,000 B. 4,000,000 C. 4,500,000 D. 0
Topic 02 – Petty Cash Fund (PCF)
4) On January 1, 2022, Jayree Corporation established a petty cash fund of P400. On December 31, 2022, the petty cash
fund was examined and found to have receipts and documents for miscellaneous expenses amounting to P364. In
addition, there was cash amounting to P44. What entry would be required to record the replenishment for the petty
cash fund on December 31, 2022?
A. Petty Cash...................
Cash........ ......................36
...........3644 C. Miscellaneous expense.........
expense...........364
..364
Cash Short or Over.............................8 Cash Short or Over.............................8
Cash in Bank..................................356 Cash in Bank..................................356
B. Miscellaneous expense........
expense...........364 ...364 D. Miscellaneous expense.........
expense...........364
..364
Cash Short or Over.............................8 Cash Short or Over.....................8
Petty Cash......................................356 Cash in Bank..................................364
THE REVIEWER: John Bo S. Cayetano
5) On December 1, 2021, Babe Corporation established a petty cash fund of P5,000. On December 31, 2021, the petty
cash fund was examined and found to have receipts and documents for miscellaneous expenses amounting to P2,740
and a petty cash voucher for P1,250 signed by an employee as an IOU. In addition, there was cash amounting to P860.
Assuming that no replenishment was wa s made at year end, what entry
en try would be required to record
r ecord adjustment of the petty
cash fund on December 31, 2021?
A. Miscellaneous Expen se.......... . .........2,740 C. Miscellaneous Expense......... . ..........2, 740
Petty Cash Fund.......... .......... ............860 Receivable from Employees.......... ...1,250
Receivable from Employees..............1,250 Cash Short and Over.......... .......... .....150
Cash Short or Over.......... .......... ........150 Cash in Bank.......... .......... ..........4,140
Cash in Bank.......... .......... ..........5,000
B. Miscellaneous Expense.......... ..........2, 740 D. Miscellaneous Expense.......... ..........2,740
Receivable from Employees.......... ...1,250 Receivable from Employees.......... ...1,250
Cash Short or Over.......... .......... ........150 Cash in Bank.......... .......... ..........3,990
Petty Cash Fund.......... .......... ....4,140
You were hired by Zandra Corporation
C orporation to examine their
th eir accounts for the year ended December 31, 2021 and the following
followin g
are the items disclosed in your examination of Petty Cash account. A surprise count of cash and cash items was
conducted on January 5, 2022. The company has a petty cash fund of P55,000 which is maintained on an Imprest. The
cash count sheet disclosed the following:
Bills and Coins 28,750

Petty Cash Vouchers:
Date Description Amount
December 27 Transportation expense 9,800
December 31 Postage stamps 2,700
January 2 Repair and sound system 3,200
January 4 Representation expense 1,250
6) What is the correct amount of petty cash fund on December 31, 2021?
A. 33,200 B. 28,750 C. 42,500 D. 55,000
7) What is the amount of shortage/overage?

A. 12,500 B. 21,800 C. 9,300 D. 0
The petty cash fund of Hellflower Trading at the end of December 31, 2022 is composed of the following:
Currencies and coins………………………...

coins………………………............... .........................
..........................
..........................
..........................
.........................
.........................
.................
................
............ 3,200
Unreplenished paid vouchers:
Supplies………………………................................................................................................................... 600
Transportation………………………...........
Transportation…………………… ….......................
........................
........................
........................
........................
........................
.......................
......................
............. 100
IOU from employee……………………….
employee………………………............. .......................
.......................
........................
.......................
.......................
........................
.......................
.........................
.................
... 300
Unused supplies……………………
supplies………………………............
….........................
.........................
.........................
.........................
.........................
..........................
.........................
....................
........ ....... 50
Check drawn by a sales staff dated January 2, 2023………………………....
2023………………………................. ..........................
..........................
.........................
.................
..... 500
Check dawn by a customer dated December 26, 2022………………………......
2022………………………................... ..........................
.........................
........................
............ 1,450
Check drawn by an office director dated December 30, 2022………………………......
2022………………………................... ..........................
.........................
..............
.. 1,900
Envelope containing cash contributions from employees for a thanksgiving party .......... ......................
.......................
.......................
................
.... 800
The general ledger balance of the imprest petty cash fund at December 31, 2022 is P10,000.
8) How much is the correct petty cash fund at December 31, 2022?
A. 8,500 B. 5,100 C. 3,200 D. 6,550
9) How much is the cash shortage/overage?

A. 3,400 B. 1,100 C. 3,350 D. 1,000
   
Topic 03 – Bank Reconciliation
Use the following information for the next three (3) questions:
Valix revealed the bank
ba nk statement balance on December 31 at P8,500,000.
• A deposit of P950,000 placed in the bank’s night depository on December 29 does not appear on the bank statement.
Checks outstanding on December 31 amount to P400,000, including P100,000 certified check.
• The bank statement showed that on December 25 the bank collected a note for Valix and credited the proceeds of
P935,000 to Valix’s account which included P35,000 interest. Valix discovered that a check written in December for
P200,000 in payment of an account had been recorded as P20,000.
• Included with the December 31 bank statement was an NSF check for P250,000 that Valix had received from a
customer on December 20. The bank statement showed a P15,000 service charge for December.
Questions:
10) What it the adjusted cash in bank on December 31?

A. 9,150,000 B. 9,050,000 C. 8,970,000 D. 8,200,000
11) What is the cash in bank per ledger on December 31?
A. 8,560,000 B. 8,660,000 C. 8,990,000 D. 8,270,000
12) What is the net adjustment to cash in bank on December 31?

A. 935,000 debit B. 490,000 debit C. 445,000 credit D. 900,000 debit
Topic 04 – Proof of Cash
Use the following information for the next four (4) questions:
Your client, Booker T Company, presented you with the following data:
Bank balances:
November 30 1,500,000
December 31 2,100,000
Bank receipts in December 2,300,000
Bank disbursement in December ?
November 30 December 31
Deposit in transit 58,000 47,000
Outstanding checks 97,000 46,000
NSF checks returned by bank (recorded by client in the month following the return) 15,000 25,000
Bank service charges (recorded by client in the following month) 10,000 18,000
Note collected by the bank (recorded by the client in the following month) 76,000 84,000
Erroneous bank charges (corrected by the bank in the following month) 25,000 37,000
Erroneous bank credits (corrected by the bank in the following month) 45,000 50,000
Determine the following:

13) Adjusted cash balance as of November 30.
A. 1,486,000 B. 1,441,000 C. 1,391,000 D. 1,416,000
14) Adjusted cash receipt in

i n December.
A. 2,169,000 B. 2,214,000 C. 2,264,000 D. 2,206,000
15) Adjusted cash disbursement

disbur sement in December.
A. 1,517,000 B. 1,567,000 C. 1,612,000 D. 1,657,000
16) Adjusted cash balance as of December 31.

A. 2,047,000 B. 2,088,000 C. 2,043,000 D. 2,138,000
   
Topic 05 – Trade Receivable & Allowances

The following transactions affecting the accounts receivable of Gemini Company took place during the year 2021:
Sales (cash and credit) 600,000
Cash received from cash customers 200,000
Cash received from credit customers (P237,650 was received from customers who took advantage of the
discount feature of the company’s credit terms 3/10, n/30) 400,000
Accounts receivable written off as worthless 5,000
Credit memoranda issued to credit customers for sales returns and allowances 25,000
Cash refunds given to cash customers for sales returns and allowances 15,000
Recoveries on accounts receivable written off as uncollectible in prior periods (not included in cash collections
above) 8,500
An aging of receivable indicates that P7,500 of the accounts receivable balance are doubtful. The following balances were
taken from the December 31, 2020 balance sheet: Accounts receivable – P90,000; Allowance for bad debts P1,400.
17) What is the accounts receivable ledger balance at December 31, 2021?
A. 60,000 B. 61,150 C. 52,650 D. 44,150
18) How much is the bad debts expense reported in the income statement for the year ended December 31, 2021?
A. 4,900 B. 2,600 C. 7,500 D. 11,100
19) Presented below are unaudited balances of selected accounts of Drain Company as of December 31, 2020:
Debit Credit
Cash 500,000
Accounts receivable 1,300,000
Allowance for uncollectible accounts 8,000
Sales (net) 6,750,000
Additional information:
Goods amounting to P50,000 were invoiced for the account of a customer recorded in January 2, 2021 with terms of
net 60 days, FOB Shipping point. The goods were shipped to customer on December 30, 2020. The bank returned on
December 29, 2020, a customer’s check for P5,000 marked “No sufficient funds” but no entry was made. What is the
correct balance of accounts receivable account at December 31, 2020?
A. 1,355,000 B. 1,347,000 C. 1,305,000 D. 1,350,000
20) On December 31, 2019, the balance of accounts receivable of Jalena Company was P6,000,000 and the January 1,
2019 balance of allowance for doubtful accounts was P800,000. The following data were gathered:
Credit Sales Write offs Recoveries
2016 9,000,000 400,000 30,000
2017 13,000,000 600,000 70,000
2018 15,000,000 700,000 120,000
2019 20,000,000 650,000 150,000
Doubtful accounts are provided for a percentage of credit sales. The accountant calculates the percentage annually by
using the experience of the three years prior to the current year. How much should be reported as allowance for
doubtful accounts on December 31, 2019?
A. 1,100,000 B. 800,000 C. 1,300,000 D. 1,250,000
21) JSC Company reported accounts receivable P8,000,000 on December 31, 2020 and allowance for doubtful accounts
P1,000,000 on January 1, 2020. During the year, accounts P400,000 were written off and recoveries written off totaled
P100,000.
Table factors for three periods Amount Uncollectible
Under 30 days 5,000,000 10%
31 – 180 days 1,500,000 20%
181 – 360 days 1,000,000 50%
More than one year 500,000 100%
What amount should be reported as doubtful accounts expense for the current year?
A. 1,800,000 B. 1,100,000 C. 1,000,000 D. 1,400,000
   
22) On December 31, 2022, Sohee company estimated the allowance for doubtful accounts using the year-end aging of
accounts receivable. The following data for are available:
Allowance for doubtful accounts, January 1, 2022 250,000

Provision for uncollectible accounts recorded during 2022 (2% on credit sales of P30,000,000) 600,000
Uncollectible accounts written off 150,000
Recovery of accounts previously written off 80,000
Estimated uncollectible accounts per aging, December 31, 2022 900,000
What is the year-end adjustment to doubtful accounts expense?

A. 120,000 B. 720,000 C. 900,000 D. 600,000
Packers Company sold goods to wholesalers on terms 2/15, net 30. The entity had no cash sales but 50% of the
customers took advantage of the discount. The entity used the gross method of recording sales and accounts receivable.
An analysis of the trade accounts receivable at year-end revealed the following:
Age Amount Collectible
0 – 15 days 10,000,000 100%
16 – 30 days 7,000,000 90%
31 – 60days 2,000,000 80%
Over 60 days 1,000,000 50%
20,000,000
23) What amount should be reported as allowance for sale discount at year-end?
A. 100,000 B. 200,000 C. 300,000 D. 0
24) What is the net realizable value of accounts receivable?
A. 20,000,000 B. 18,400,000 C. 18,300,000 D. 18,200,000
Topic 06 – Notes Receivables (NR)

On January 1, 2017, Suba Company sold a transportation equipment with a historical cost of P1,000,000 and accumulated
depreciation of P300,000 in exchange for cash of P100,000 and a noninterest bearing note receivable of P800,000 due on
January 1, 2020. The prevailing rate of interest for this type of note is 12%.
25) How much is the interest income in 2017?

A. 68,331 B. 76,532 C. 85,714 D. 96,000
26) How much is the carrying amount of the receivable on December 31, 2018?
A. 800,000 B. 569,424 C. 637,755 D. 714,286
On January 1, 2021 Nonstop Company sold a building for P5,000,000 to Icecream Company. Icecream Company paid
P500,000 down and signed a noninterest bearing note for the balance which is payable in three equal annual installments
every December 31 of each year. The carrying amount of the building is P4,200,000. Assume prevailing interest rate for a
note of this type is 12%. The present value of an ordinary annuity of 1 for three periods is 2.4018.
27) How much is the gain or loss on sale of building?

A. 597,300 B. 97,300 C. 800,000 D. 300,000
28) How much is the interest income for the year 2021?
A. 600,000 B. 492,324 C. 432,324 D. 540,000
29) How much is the carrying amount of notes on December 31, 2021?
A. 3,000,000 B. 3,602,700 C. 2,535,024 D. 4,035,024
30) How much is the current portion of notes on December 31, 2021?
A. 1,500,000 B. 1,067,676 C. 1,195,797 D. 1,339,227
On January 1, 2022, Hotel Company sold machinery with historical cost of P3,000,000 and accumulated depreciation of
P900,000 in exchange for a 3-year, P2,100,000 noninterest bearing note receivable due in equal semi-annual payments
every July 1 and December 31 starting on July 1, 2022. The prevailing rate of interest for this type of note is 10%.
31) How much is the interest income in 2022?

A. 88,825 B. 177,649 C. 128,964 D. 164,591
A. 1,241,083 B. 982,378 C. 1,690,051 D. 1,594,388
   
On March 1, 2020, Namami Company sold goods to Zomiso Company. Zomiso singed a non-interest bearing note
requiring payment of P60,000 annually for seven years. The first payment was made on March 1, 2020. The prevailing
interest for this type of note at the date of issuance was 10%. Information on present value factors is as follows:
Periods Present value of 1 at 10% PV of annuity of 1 at 10%

6 0.56 4.36
7 0.51 4.87
33) How much should be reported as sales revenue on March 1, 2020?

A. 420,000 B. 321,600 C. 261,600 D. 292,200
34) What is the amount of interest income for the year 2020?
A. 30,000 B. 26,160 C. 26,800 D. 21,800
On January 1, 2017, Stressed Company sold inventory costing P1,800,000 with a list price of P2,200,000 and a cash price
of P2,000,000 in exchange for a P2,400,000 noninterest bearing note due on December 31, 2019.
35) How much is the initial measurement of the receivable?

A. 1,800,000 B. 2,200,000 C. 2,000,000 D. 2,400,000
A. 2,125,390 B. 2,135,341 C. 2,098,343 D. 2,000,000
On December 31, 2020, You Bring Out The Best In Me Like No One Else Can Do Company finished consultation services
and accepted in exchange a promissory note with a face value of P200,000, due date of December 31, 2023, and a stated
rate of 5%, with interest receivable at the end of each year. The fair value of the services is not readily determinable and the
note is not readily marketable. Under the circumstances, the note is considered to have an appropriate imputed rate of
interest of 10%. The following interest factors are provided:
Table factors for three periods 5% 10%

Future value of 1 1.15763 1.33100
Present value of 1 0.86384 0.75132
Future value of ordinary annuity 3.15250 3.31000
Present value of ordinary annuity 2.72325 2.48685
37) What is the amount of consultation service revenue to be present in the company’s income statement?
A. 24,869 B. 150,264 C. 175,133 D. 200,000
38) What is the amount of interest income for the year 2021?
A. 17,513 B. 10,000 C. 20,000 D. 7,513
39) What is the carrying value of notes at of December 31, 2022?

A. 190,909 B. 182,645 C. 175,133 D. 200,000
40) On January 1, 2022, Lovestruck Company sold machinery costing P2,000,000 with accumulated depreciation of
P950,000 in exchange for a 3-year, 3%, P900,000 note receivable. Principal is due in three equal annual installments.
Interest on the outstanding principal balance are also due annually and are to be collected together with the periodic
collections on the principal. The prevailing interest rate for this type of note is 12%. How much is the carrying amount of
the receivable on December 31, 2022?
A. 530,261 B. 1,000,562 C. 673,531 D. 789,361
41) The balance sheet of CPAR Reserve Your Seat Now! Company reported the following long-term receivable as of
December 31, 2020:
Note receivable form sale of plant 4,500,000
Note receivable from officer 1,200,000
The following are transactions during 2021 and other information pertaining to the company’s long term receivables:
a. The note receivable form sale of plant bears interest at 12% per annum. The note is payable in 3 annual
installments of P1,500,000 plus interest on the unpaid balance every April 1. The initial principal and interest
payment was made on April 1, 2021
b. The note receivable from officer is dated December 31, 2020, earns interest at 10% per annum, and is due on
December 31, 2021. The 2021 interest was received on December 31, 2021
What is the accrued interest receivable as of December 31, 2021?

A. 385,500 B. 428,538 C. 270,000 D. 505,500
   
Topic 07 – Loan Receivable (LR) & Impairment of LR
Use the following information for the next two (2) question:
BDO, a financing entity granted a loan to a borrower on January 1, 2023. The interest on the loan is 10% payable annually
starting December 31, 2023. The loan matures in three years on December 31, 2025. After considering the origination fee
charged against the borrower and the direct origination cost incurred, the effective rate on the loan is 12%.
Principal amount 4,000,000

Origination fee charged against the borrower 342,000
Direct origination cost incurred 150,000
42) What is the carrying amount of the loan receivable on January 1, 2023?
A. 4,192,000 B. 3,808,000 C. 4,150,000 D. 3,658,000
43) What is the interest income for 2023?

A. 419,200 B. 380,800 C. 456,960 D. 480,000
44) On January 2, 2022, Kardo Company received an P1,600,000, 8% 2-year note from Alyana Corporation as settlement
for an outstanding past due account. The interest is payable every December 31 and the interest due in 2022 were
collected on time
In 2023, Alyana Corporation was in financial crisis, and as result of this development. Kardo Company expects that the
interest accruing for 2023 will not be collected and that only P1,200,000 of the principal amount will be collected in
equal annual installment over the next three years starting December 31, 2024. What amount of impairment loss/bad
debts should Kardo Company recognize on December 31, 2023 related to its note receivable?
A. 903,401 B. 775,401 C. 551,161 D. 679,161
Use the following information for the next two (2) question:
On December 31, 2023, BPI, a bank recorded an investment of P7,000,000 in a loan granted to a client. The loan had a
12% nominal interest rate payable annually every December 31. The principal is due in full at maturity on December 31,
2026. Unfortunately, the borrower is experiencing significant financial difficulty and will have difficult time in making full
payment. The bank projected that the entire principal will be paid at maturity and 5% interest of P350,000 will be paid
annually on December 31 of the next three years. There is no accrued interest on December 31, 2023. The present value of
1 at 12% for three periods is 0.71, and the present value of an ordinary annuity of 1 at 12% for three periods is 2.40
45) What is the loan impairment loss for 2023?

A. 1,190,000 B. 2,030,000 C. 4,9740,000 D. 0
46) What is the interest income for 2024?

A. 350,000 B. 840,000 C. 697,200 D. 596,400
47) What is the carrying amount of the loan receivable on December 31, 2024?
A. 7,000,000 B. 6,157,200 C. 5,566,400 D. 5,810,000
Topic 08 – Financing of Receivables
On December 1, 2025, Camille company assigned on a non-notification basis accounts receivable of P5,000,000 to a bank
in consideration for a loan of 80% of the account less a 5% service fee on the account assigned. The entity signed a note
for the bank loan. On December 31, 2025, the entity collected assigned accounts of P2,000,000 less discount of
P200,000. The entity remitted the collections to the bank in partial payment for the loan. The bank applied first the
collection to the interest and the balance to the principal. The agreed interest is 1% per month on the loan balance. The
entity accepted sales returns of P100,000 on the assigned accounts and wrote off assigned accounts totaling P300,000.
48) What is the balance of accounts receivable assigned on December 31, 2025?
A. 3,000,000 B. 2,600,000 C. 2,400,000 D. 2,900,000
49) What is the carrying amount of the note payable on December 31, 2025?
A. 2,240,000 B. 2,00,000 C. 4,000,000 D. 2,200,000
50) What is the equity of the assignor in assigned accounts on December 31, 2025?
A. 2,600,000 B. 2,240,000 C. 360,000 D. 0
   
Thunder Company factored P6,000,000 of accounts receivable to Dragon Finance Company at the end of current year.
Control was surrendered by Thunder. The factor assessed a fee of 3% and retained a holdback equal to 5% of the
accounts receivable. In addition, the factor charged 15% interest computed on a weighted average time to maturity of the
accounts receivable of 54 days.
51) What is the amount of cash initially received from the factoring?
A. 5,296,850 B. 5,386,850 C. 5,476,850 D. 5,556,850
52) What amount should be recognized as loss on factoring?

A. 180,000 B. 313,150 C. 133,150 D. 613,150
On July 31, 2020, Clear Company discounted at the bank a customer’s P600,000 interest-bearing note, 6-month, 10%
note receivable dated May 31, 2020. The bank discounted the note at 12%
53) How much net proceeds did Clear receive from this discounted note?
A. 564,000 B. 576,000 C. 604,800 D. 617,400
54) Assuming the discounting is without recourse, how much gain or loss should be recognized as a result of discounting?
A. 0 B. 5,200 C. 4,800 D. 25,200
55) If the discounting is treated as secured borrowings, the gain or loss should be recognized as a result of discounting is
A. 0 B. 5,200 C. 4,800 D. 25,200
Topic 09 – Inventory Composition & Inventoriable Cost
56) Presented below is a list of items that may or may not reported as inventory in Seduco Company’s December 31, 2021
balance sheet:
Goods out on consignment at another company’s store 800,000
Goods purchased in transit, Free Alongside, including delivery cost alongside the vessel of P2,000 but
excluding the cost of shipment of P1,000 80,000
Goods purchased FOB shipping point that are in transit at December 31 120,000
Goods purchased FOB destination that are in transit at December 31 200,000
Goods sold and delivered on December 20. The goods were included in the inventory because the sale
was accompanied by a purchase agreement requiring Seduco to buy back the inventory on
February 2022 500,000
Goods sold FOB shipping point that are in transit December 31 120,000
Freight charges on goods purchased, FOB shipping point 80,000
Factory labor costs incurred on goods still unsold 50,000
Interest cost incurred for inventories that are routinely manufactured 40,000
Cost incurred to advertise goods held for resale 20,000
Materials on hand not yet placed into production 350,000
Office supplies 10,000
Raw materials on which the company has started production, but which are not completely processed 280,000
Factory supplies 20,000
Goods held on consignment from another company 450,000
Costs identified with units completed but not yet sold 260,000
Goods sold FOB destination that are in transit at December 31 40,000
Temporary investment in shares and bonds that will be resold in the near future 500,000
How much of these items would typically be reported as inventory in the financial statements?
A. 2,079,000 B. 2,580,000 C. 2,579,000 D. 3,079,000
   
57) A physical count on December 31, 2024 revealed that AAA Company had inventory with a cost of P4,400,000. The
following items were excluded from this amount:
• Merchandise of P600,000 is held on consignment by AAA.
• Goods costing P400,000 was shipped by AAA “Ex-ship” to a customer on December 31, 2024. The customer
received the goods on January 3, 2025.
• Merchandise costing P500,000 was shipped by AAA “Free alongside” to a customer on December 29, 2024. The
customer received the goods on January 6, 2025.
• Goods costing P800,000 shipped by a vendor FOB destination on December 31, 2024 was received by AAA on
January 7, 2025.
• Goods costing P700,000 was shipped by a supplier “CIF” on December 30, 2024 and received by AAA on January
10, 2025.
What is the correct amount of inventory on December 31, 2024?
A. 4,900,000 B. 5,400,000 C. 5,500,000 D. 6,000,000
Topic 10 – Inventory System / Purchase Discount / Inventory Errors

58) Elrond Company began operations in 2020. During the first two years of operations, Elrond made undiscovered errors
in taking its year-end inventories that overstated 2020 ending inventory by P50,000 and overstated 2021 ending
inventory by P40,000. The combined effect of these errors on reported income is
2020 2021 2022
A. overstated P50,000 overstated P90,000 understated P40,000
B. overstated P50,000 overstated P40,000 not affected
C. understated P50,000 understated P90,000 not affected
D. overstated P50,000 understated P10,000 understated P40,000
59) On December 3, Francis Company purchased inventory listed at P8,600 from Lyn Corporation. Terms of the purchase
were 3/10, n/20. Francis Company also purchased inventory from Duck Company on December 10 for a list price of
P7,500. Terms of the purchase were 3/10, n/30. On December 16, Francis paid both suppliers for these purchases. If
Francis uses the net method of recording purchases, the journal entry to record the payment on December 16 will
include
A. A debit to Accounts payable of P15,875 C. A credit to Purchase Discounts of P258
B. A debit to Purchase Discounts Lost of P258 D. A credit to Cash of P15,617
Topic 11 – Inventory Subsequent Measurement & Impairment of Inventory

60) Squat Company uses the lower of cost or net realizable value inventory. Data regarding the items in work-in-process
inventory are presented below:
Product Under-hand Product Over-hand
Historical cost 24,000 18,800
Selling price 36,000 21,800
Estimated cost to complete 4,800 3,500
Estimated cost to sell 2,000 1,900
Replacement cost 20,800 16,800
Normal profit margin as a percentage of selling price 25% 25%
What amount should be reported as ending inventory using the LCNRV individual approach?
A. 45,600 B. 40,400 C. 42,800 D. 48,000
At year-end, Eagles Company reported ending inventory at P15,000,000 and the allowance for inventory writedown before
any adjustment at P800,000.
Product 1 Product 2 Product 3 Product 4
Historical cost 4,000,000 5,000,000 3,500,000 2,500,000
Replacement cost 4,500,000 6,000,000 5,000,000 3,000,000
Sales price 6,000,000 6,500,000 6,250,000 5,000,000
Net realizable value 2,750,000 5,500,000 4,750,000 1,750,000
Normal profit 1,250,000 750,000 1,500,000 1,500,000
61) What is the measurement of inventory in the statement of financial position?

A. 15,000,000 B. 13,000,000 C. 14,750,000 D. 18,750,000
62) What amount of loss on inventory writedown should be included in cost of goods sold?
A. 2,000,000 B. 2,800,000 C. 1,200,000 D. 1,250,000
   
63) On December 31, 2017, Alaska Company’s ending inventory was P3,000,000 at cost and the allowance for inventory
writedown before any adjustment was P550,000. The entity provided the following information on December 31, 2017:
Product Cost Replacement Cost Sales Price NRV Normal profit
A 800,000 900,000 1,200,000 550,000 250,000
B 1,000,000 1,200,000 1,300,000 1,100,000 150,000
C 700,000 1,000,000 1,250,000 950,000 300,000
D 500,000 600,000 1,000,000 350,000 300,000
What amount of gain or loss is included in cost of goods sold for 2017?
A. 150,000 gain B. 150,000 loss C. 400,000 loss D. 400,000 gain
The following information relate to an item of raw materials of Military Press Company as of August 31, 2021:
Replacement cost of raw materials – bars 635,000

Historical cost of raw materials – bars 650,000
Conversion cost of bars to become full barbell 200,000
64) How much is the value of the closing raw materials – bars if the finished goods barbell to be produced is expected to
be sold at P900,000.
A. 650,000 B. 635,000 C. 900,000 D. 850,000
65) How much is the value of the closing raw materials – bars if the finished goods barbell to be produced is expected to
be sold at P720,000.
A. 650,000 B. 635,000 C. 720,000 D. 850,000
On December 31, 2021, Pull-ups Company experienced a decline in the value of inventory from P5,000,000 cost to NRV of
P4,650,000. Pull-ups inventory on January 1, 2021 was P3,000,000 and purchases of P2,600,000 were made during the
year 2021. During the year 2022, Pull-ups made purchases of P2,500,000 and market conditions had improved. At the end
of the year 2022, the inventory had a cost of P5,400,000 while the fair value less cost to sell is P5,200,000.
66) How much is the cost of goods sold in 2021 assuming the company is using the allowance method and treat loss as
part of cost of goods sold in the income statement?
A. 600,000 B. 950,000 C. 5,600,000 D. 4,650,000
67) How much is the cost of goods sold in 2022 assuming the company is using the direct method and treat loss as part of
cost of goods sold in the income statement?
A. 2,300,000 B. 2,100,000 C. 1,950,000 D. 1,750,000
Topic 12 – Inventory Cost Flow
Seahawks used the perpetual system. The following information has been extracted from the records about one product:
Date Transaction Units Unit cost Total cost
January 1 Beginning balance 8,000 70 560,000
6 Purchase 3,000 75 225,000
February 5 Sale 10,000
March 5 Purchase 11,000 80 880,000
March 8 Purchase return 800 80 64,000
April 10 Sale 7,000
April 30 Sale return 300
68) If the FIFO cost flow method is used, what is the cost of the inventory on April 30?
A. 360,000 B. 315,000 C. 337,500 D. 400,000
69) If the weighted average cost flow method is used, what is the cost of the inventory on April 30?
A. 337,500 B. 339,840 C. 353,430 D. 348,750
   
During a move to a new location, the inventory records of 98 Degrees were misplaced. The bookkeeper has been able to
gather some data for the July purchases:
Units Unit cost Total cost

July 5 10,000 65 650,000
10 12,000 70 840,000
15 15,000 60 900,000
25 14,000 55 770,000
On July 31, 17,000 units were on hand. The sales for July amounted to P6,000,000 or 60,000 units at P100 per unit. The
entity always used a perpetual FIFO inventory costing system. Gross profit on sales for July was P2,400,000.
70) What was the cost of the inventory on July 31?

A. 3,600,000 B. 1,670,000 C. 770,000 D. 950,000
71) What was the cost of inventory on July 1?

A. 1,390,000 B. 2,400,000 C. 950,000 D. 760,000
The following information was available from the inventory records of Bago Company for January:
Units Unit cost

Balance at January 1 30,000 9.77
Purchases: January 6 20,000 10.30
January 26 27,000 10.71
Sales: January 7 25,000
January 31 40,000
72) What amount of inventory should be reported under FIFO?

A. 128,520 B. 117,240 C. 123,600 D. 122,880
73) What amount of inventory should be reported under the moving average method? (use two decimal unit cost)
A. 126,060 B. 122,880 C. 123,120 D. 124,370
Topic 13 – Inventory Estimation
74) On October 1, 2022, a fire damaged a warehouse of Marshall Law Corporation. The entire company and many
accounting records stored in the warehouse were completely destroyed. Although the inventory was not insured, a
portion could be sold for scrap. Through the use of microfilmed records, the following data were gathered:
Inventory, January 1 575,400
Accounts payable, January 1 352,560
Accounts payable, October 1 491,400
Goods out on consignment on October 1 at cost 195,000
Payments to suppliers, January 1 to October 1 1,950,000
Collections of accounts receivable, January 1 to October 1 3,015,200
Accounts receivable, January 1 522,360
Accounts, receivable, October 1 515,560
Goods in transit on October 1 purchased FOB shipping point included in total purchases 69,500
Gross profit rate on sales 30%
How much is the estimated inventory loss?

A. 363,360 B. 293,860 C. 488,860 D. 558,360
   
75) On December 31, 2023, a typhoon damaged a warehouse of BB Corporation. The entire company and many
accounting records stored in the warehouse were completely destroyed. Although the inventory was not insured, a
portion could be sold for scrap. Through the use of microfilmed records, the following data were gathered.
Inventory, January 1 500,000
Purchases 2,200,000
Cash sales 273,600
Collection of accounts receivable (including the amount of recovery) 2,520,000
Accounts receivable, January 1 210,000
Accounts written off 9,600
Recovery of accounts written off 3,600
Allowance for bad debts, January 1 10,500
Accounts receivable, December 31 (net of allowance) 342,000
Sales returns 36,000
Sales discount 14,400
Purchase returns 60,000
Purchase discounts 12,000
Freight in 21,600
Salvage due of inventory 60,000
Gross profit percentage of sales 32%
The company consistently measures doubtful accounts in percent of accounts receivable. How much is the value of
inventory loss?
A. 513,600 B. 519,600 C. 538,080 D. 574,080
At the end of current year, a fire damage the warehouse and factory of Cake Company completely destroying the goods in
process inventory. There was no damage to either the raw materials or finished goods. The physical inventory revealed the
following:
January 1 December 31
Raw materials 1,700,000 2,000,000
Goods in process 4,300,000 0
Finished goods 6,000,000 4,500,000
Factory supplies 500,000 400,000
The gross margin profit historically approximated 30% of sales. The sales for the year amounted to P20,000,000. Raw
material purchases totaled P4,000,000. Direct labor cost amounted to P5,000,000 and manufacturing overhead was
applied at 60% of direct labor.
76) What is the cost of raw materials used used?

A. 5,700,000 B. 3,700,000 C. 3,800,000 D. 3,600,000
77) What is the total manufacturing cost?

A. 13,000,000 B. 11,800,000 C. 11,700,000 D. 11,600,000
78) What is the cost of goods sold?

A. 12,000,000 B. 16,000,000 C. 13,000,000 D. 14,000,000
79) What is the cost of the goods in process inventory destroyed in the fire?
A. 3,500,000 B. 3,800,000 C. 2,500,000 D. 1,500,000
80) The following information was taken from MACABEBE Company’s accounting records for the year ended December
31, 2023:
Increase in goods in process inventory 400,000
Increase in raw materials inventory 150,000
Selling expenses 300,000
Decrease in finished goods inventory 450,000
General and administrative expenses 180,000
Raw materials purchased 4,100,000
Direct labor payroll 2,000,000
Factory overhead 3,000,000
Freight out 450,000
Freight in 200,000
MACABEBE’s cost of goods sold was
A. 9,450,000 B. 9,200,000 C. 9,100,000 D. 9,000,000
   
Bettina Retail Store revealed the following data for the month of January 2017:
Sales 12,000,000 Net markdown 500,000
Sales allowance 100,000 Freight on purchases 100,000
Sales returns 500,000 Purchases at cost 8,950,000
Employee discounts 200,000 Purchases at retail 15,150,000
Normal losses at retail 800,000 Purchase returns at cost 450,000
Net markup 400,000 Purchase returns at retail 600,000
Abnormal losses at cost 200,000 Beginning inventory cost 600,000
Abnormal losses at retail 250,000 Beginning inventory at retail 800,000
81) What is the estimated ending inventory using the average retail inventory method?
A. 1,500,000 B. 1,450,000 C. 1,550,000 D. 1,660,000
82) What is the estimated cost of goods sold using the average retail inventory method?
A. 7,550,000 B. 7,450,000 C. 5,400,000 D. 7,500,000
Mari used the conservative retail inventory method. At year-end, the following information relating to the inventory was
gathered:
Cost Retail
Beginning inventory 200,000 450,000
Purchases 3,000,000 4,350,000
Purchase discounts 50,000
Freight in 165,000
Markups 300,000
Markdowns 400,000
Sales 4,400,000
Sales return 100,000
Sales discount 50,000
Sales allowance 30,000
83) What is the estimated cost of the ending inventory?

A. 400,000 B. 280,000 C. 260,000 D. 315,000
84) What is the estimated cost of goods sold?

A. 3,055,000 B. 2,795,000 C. 4,300,000 D. 3,315,000
The operations of a department of Push-ups Company that uses FIFO retail inventory method are presented below:
Beginning inventory – sales price 2,500,000 Markdown cancellation 180,000

Beginning inventory – cost 1,400,000 Mark-up cancellation 90,000
Purchases – cost 3,600,000 Sales 4,000,000
Purchases – sales price 4,800,000 Employee discount 100,000
Freight in 200,000 Sales returns 50,000
Departmental transfer – credit cost 150,000 Abnormal loss from breakage – sales price 70,000
Departmental transfer – credit sales price 320,000 Abnormal loss from breakage – cost 50,000
85) How much is the estimated cost of ending inventory?

A. 2,107,185 B. 2,080,340 C. 2,950,000 D. 2,360,000
86) How much is the estimated cost of goods sold?

A. 2,892,815 B. 2,919,660 C. 2,640,000 D. 2,050,000
   
Topic 14 – Investment in Shares Measured at Fair value
87) Agustin Company has the following transactions relating to its investments during 2017.
January 5: Acquired 10,000 shares of Abalos Company for P1,000,000 paying additional P20,000 for
brokerage fee and another P5,000 for commission.
February 14: Received dividends from Abalos declared January 2, 2017 to stockholders of record January 10,
2017, P20,000.
What is the initial measurement of the investment, assuming the investment is classified as Financial assets at Fair Value
through Profit or Loss (FVPL) and Financial assets at fair value through other comprehensive income (FVOCI)?
FV-PL FV-OCI FV-PL FV-OCI
A. 980,000 1,000,000 C. 1,005,000 1,005,000
B. 980,000 1,005,000 D. 1,025,000 1,025,000
Jaybu Company acquired the following portfolio of equity instruments held for trading during 2022 and reported the
following balances at December 31, 2022. No sales occurred during 2017.
Security Cost Market Value, December 31, 2022
AAA Company Shares 300,000 350,000
BBB Company Shares 450,000 410,000
CCC Company Shares 540,000 640,000
DDD Company Shares 610,000 650,000
88) What is the carrying amount of the securities on December 31, 2022?
A. 1,900,000 B. 2,050,000 C. 3,950,000 D. 0
89) How much is the unrealized gain that should be taken to profit or loss statement?
A. 150,000 B. 190,000 C. 40,000 D. 0
Jaybo Company purchased the following portfolio of equity instrument designated as fair value through other
comprehensive income during 2022 and reported the following balances below. No sales occurred during 2021 and 2022.
Security Cost Market value, 12/31/21 Market value, 12/31/22

Goku Ordinary Shares 800,000 820,000 910,000
Vegetta Ordinary Shares 1,400,000 1,500,000 1,000,000
90) How much should Jaybo Company report as unrealized gain or loss related to the securities in its 2021 other
comprehensive income?
A. 120,000 B. 410,000 C. 290,000 D. 0
91) How much should Jaybo Company report as unrealized gain or loss related to the securities in its 2022 statement of
comprehensive income?
A. 120,000 B. 410,000 C. 290,000 D. 0
92) How much should Jaybo Company report as unrealized gain or loss related to the securities in its 2022 statement of
financial position?
A. 120,000 B. 410,000 C. 290,000 D. 0
   
Future Company purchased the following portfolio of equity instruments during 2021 and reported the following balances
below. No sales occurred during 2021 and 2022.
Security Cost Transaction cost Market value 12/31/21 Market value 12/31/22
Goku Shares 1,000,000 100,000 950,000 1,100,000
Vegetta Shares 950,000 50,000 800,000 940,000
Trunks Shares 1,500,000 80,000 1,650,000 1,570,000
Piccolo Shares 900,000 20,000 860,000 920,000
93) How much is the total amount taken to 2021 profit or loss statement assuming the investment is designated as fair
value through profit or loss?
A. 90,000 B. 340,000 C. 160,000 D. 0
94) How much is the total amount taken to 2021 profit or loss statement assuming the investment is designated as fair
value through other comprehensive income?
A. 90,000 B. 340,000 C. 160,000 D. 0
95) How much is the unrealized gain or loss that should be presented in 2022 statement of comprehensive income?
A. 180,000 gain B. 180,000 loss C. 270,000 gain D. 270,000 loss
96) On January 1, 2020, Erika Company purchased equity investments held for trading .
Purchase Price Transaction Cost Market-12/31/2020

Security A 1,000,000 100,000 1,200,000
Security B 2,000,000 200,000 1,500,000
Security C 3,000,000 300,000 3,100,000
On July 1, 2021, the entity sold Security A for P1,900,000. What amount should be reported as gain on sale for trading
securities in the 2021 Income Statement?
A. 900,000 B. 700,000 C. 600,000 D. 800,000
97) C4 Company owns 8% of Isolate Inc., P100 par, 150,000 outstanding ordinary shares which was acquired on
November 20, 2022 for P1,320,000. C4 classified this as fair value through profit or loss
On December 1, 2022, Isolate declared a P2 per share cash dividend to shareholders of record January 10, 2023,
payable on January 31, 2023. On December 28, 2022, C4 sold all the shares to Xtend Company at P115 per share.
How much gain or loss on sale shall be recognized C4 on December 28, 2022?
A. 36,000 gain B. 60,000 loss C. 36,000 loss D. 60,000 gain
98) On January 1, 2020, Sheena Company purchased nontrading equity investments which are irrevocably designated at
FVOCI:
Purchase Price Transaction Cost Market-12/31/2020

Security A 1,000,000 100,000 1,500,000
Security B 2,000,000 200,000 2,400,000
Security C 4,000,000 400,000 4,700,000
On July 1, 2021, the entity sold Security C for P5,200,000. What amount should be credited to retained earnings as a
result of the sale of the investment in 2021?
A. 800,000 B. 500,000 C. 300,000 D. 0
On January 1, 2019, Familia purchased 1,600 ordinary shares of another entity for P2,000,000. During 2019, the investee
paid a cash dividend of P130 per share. At December 31, 2019, the investee’s shares were selling for P1,400 per share.
Familia irrevocably designated to classify equity investment at FVOCI. On October 1, 2020, Familia sold half of its shares at
P1,800 per share. At December 31, 2020, the shares were selling at P1,900 per share.
99) What amount is recognized in retained in retained earnings as a result of the disposal in 2020?
A. 440,000 B. 320,000 C. 216,000 D. 0
100) What amount of unrealized gain is recognized in the statement of comprehensive income for the year end December
31, 2020?
A. 240,000 B. 520,000 C. 400,000 D. 120,000
   
101) Lil Wayne Corporation received dividends from ordinary shares (15% interest) and preference share (25% interest)
investment during the current year:
• A cash dividend of P100,000 from ordinary shares investment.

• A cash dividend of P50,000 from preference share investment.
• A stock dividend of 2,000 shares from ordinary shares investment when the market price was P12 per share.
• A property dividend costing P500,000 which had a market value of P600,000.
• A liquidating dividend of P5,000 from ordinary investment.
How much is the total dividend income that should be reported for the current year?
A. 750,000 B. 700,000 C. 150,000 D. 755,000
Topic 15 – Investment in Associates
On June 30, 2020, Cape Company purchased 25% of the outstanding ordinary shares of Bit Co. at a total cost of
P2,100,000. The book value of Bit Co.’s net assets on acquisition date was P7,200,000. For the following reasons, Cape
was willing to pay more than book value for Bit Co. stock:
• Bit Co. has depreciable assets with a current fair value of P180,000 more than their book value. These assets have
a remaining useful life of 10 years.
• Bit co. owns a tract of land with a current fair value of P900,000 more than its carrying amount.
• All other identifiable tangible and intangible assets of Bit Co. have current fair values that are equal to their carrying
amounts.
Bit reported net income of P1,620,000, earned evenly during the current year ended December 31, 2020. Also in the
current year, it declared and paid cash dividends of P315,000 to its ordinary shareholders. Market value of Bit Co.’s
ordinary shares at December 31, 2020 is P9 million. Cape Company’s financial year-end is December 31.
102) What is the amount of goodwill paid by Cape Company?

A. 300,000 B. 1,080,000 C. 120,000 D. 30,000
103) What amount of investment revenue should Cape report on its income statement for the year ended December 31,
2020 under the equity method?
A. 202,500 B. 200,250 C. 78,750 D. 123,750
104) Under the equity method, the carrying value of Cape Company’s investment in ordinary shares of Bit Co. on
December 31, 2020 should be:
A. 2,221,500 B. 2,100,000 C. 2,070,000 D. 2,250,000
Giants Company acquired 40% interest in an associate, 49ers Company, for P5,000,000 on January 1, 2017. At the
acquisition date, there were no differences between fair value and carrying amount of identifiable assets and liabilities. 49ers
Company reported net income of P3,000,000 for 2017 and P4,000,000 for 2018. 49ers Company paid dividend of
P500,000 in 2017 and P1,500,000 in 2018.
On July 1, 2017, 49ers Company sold an equipment for P1,500,000 to Giants Company. The carrying amount of the
equipment is P1,000,000 at the time of sale. The remaining life of the equipment is 5 years and Giants Company used the
straight line depreciated. On December 1, 2018, 49ers Company sold an inventory to Giants Company for P2,800,000. The
inventory had a cost of P2,000,000 and was still on hand on December 31, 2018.
105) What is the investor’s share in the profit of the associate for 2017?
A. 1,020,000 B. 1,200,000 C. 1,040,000 D. 1,000,000
106) What is the investor’s share in the profit of the associate for 2018?
A. 1,600,000 B. 1,320,000 C. 1,640,000 D. 1,280,000
107) What is the carrying amount of the investment in associate on December 31, 2017?
A. 6,020,000 B. 6,000,000 C. 5,840,000 D. 5,820,000
108) What is the carrying amount of the investment in associate on December 31, 2018?
A. 6,740,000 B. 6,720,000 C. 6,540,000 D. 6,560,000
   
Bow Wow owns 25% of the ordinary shares of Doug Corporation. Doug has 8% preference shares with total par value of
P10,000,000. Doug declared P700,000 dividends on its preference shares. Doug reported a profit of P3,000,000 during
2017.
Questions:
109) How much is the share in net profit assuming the preference shares is cumulative?
A. 575,000 B. 750,000 C. 550,000 D. 625,000
110) How much is the share in net income assuming the preference shares is non-cumulative?
A. 575,000 B. 750,000 C. 550,000 D. 625,000
On January 1, 2023 Cement Company acquired 40 of the ordinary shares of another entity for P6,000,000. The purchase
was made at prices proportionate to the value assigned to the investee’s net assets which equaled carrying amounts. For
the years ended December 31, 2023 and 2024, the investee reported the following:
2023 2024
Dividend paid 2,000,000 6,000,000
Net income 5,000,000 8,000,000
On October 1, 2024, Cement sold 75% of its ordinary shares for P7,500,000. The fair value of the remaining investment on
such date is P3,000,000 and such investment was designated irrevocably at FVOCI. The fair value of the remaining
investment is P3,700,000 on December 31, 2024. The dividends were declared and paid by the investee on November 1,
2023 and December 31, 2024.
Questions:
111) What is the carrying amount of the investment on October 1, 2024 before disposal?
A. 9,600,000 B. 10,400,000 C. 7,200,000 D. 8,000,000
112) What is the gain or loss on disposal on October 1, 2024?

A. 1,500,000 gain B. 2,100,000 gain C. 300,000 loss D. 300,000 gain
113) What total amount of income is recognized in profit or loss for 2024?
A. 4,600,000 B. 3,300,000 C. 3,900,000 D. 1,500,000
During 2022, Dua Company bought the shares of another Lipa Company accounted for under cost method.
June 1, 2022 20,000 shares @ P100 2,000,000
December 1, 2022 30,000 shares @ P120 3,600,000
5,600,000
Transactions for 2023
January 10 Received cash dividend at P10 per share.
January 20 Received 20% share dividend.
December 10 Sold 30,000 shares at P125 per share.
Questions:
114) What is the gain on sale of investment using the FIFO approach?
A. 1,150,000 B. 950,000 C. 150,000 D. 550,000
115) What is the gain on sale of investment using the average approach?
A. 950,000 B. 750,000 C. 800,000 D. 900,000
   
Topic 16 – Investment in Debt Securities (Bonds)
116) On January 1, 2017, Python Company purchased eight-year bonds with a face value of P2,000,000 and a stated
interest rate of 12%, payable semi-annually on June 30 and December 31. The bonds were purchased to yield 14%.
Present value (PV) factors are:
12% 14% 6% 7%
PV of 1 for 8 periods 0.4039 0.3506 0.6274 0.5820
PV of 1 for 16 periods 0.1631 0.1229 0.3936 0.3387
PV of annuity of 1 for 8 periods 4.9676 4.6389 6.2098 5.9713
PV of annuity of 1 for 16 periods 6.9740 6.2651 10.1059 9.4466
What is the purchase price for the bonds?

A. 1,163,080 B. 1,810,992 C. 1,814,536 D. 2,000,000
Dr. Dre Corporation acquired on January 1, 2022 a 5-year, 10%, P5,000,000 face value bonds, for P4,639,400 dated
January 1, 2022. The bonds which pay interest every December 31 had a 12% prevailing interest rate on the date of
acquisition. Dr. Dre’s business model is to collect contractual cash flows and the cash flows are solely payment of principal
and interest. Prevailing interest rate on December 31, 2017 is at 9%.
Questions:
117) How much is the correct income for the year 2023?
A. 500,000 B. 556,728 C. 563,535 D. 422,652
118) How much is the unrealized gain/loss to be reported in the company’s 2022 statement of comprehensive income?
A. 303,872 B. 522,450 C. 56,728 D. 0
119) What is the adjusted balance of the Investment as of December 31, 2022?
A. 5,450,000 B. 4,696,128 C. 4,759,663 D. 5,161,850
120) How much is the carrying amount of Investment on December 31, 2025?
A. 4,910,714 B. 5,000,000 C. 4,759,817 D. 4,830,995
121) On January 1, 2021, Norwegian Forest Company purchased bonds with face value of P5,000,000 to be measured at
amortized cost. The entity paid P4,600,000 plus transaction costs of P142,000. The bonds mature on December 31,
2023 and pay 6% interest annually on December 31 of each year with 8% effective interest. The bonds are quoted at
105 on December 31, 2021. The bonds are sold at 110 on December 31, 2022. What amount of gain on sale on these
bonds should be reported in 2022 income statement?
A. 500,000 B. 250,000 C. 592,931 D. 758,000
On January 1, 2022, Shad Moss Corporation purchased 2,000 of the P1,000 face value, 9%, 10-year bond of Doug Inc.
The bonds mature on January 1, 2032, and pay interest annually beginning December 31, 2022. Shad Moss Corporation
purchased the bonds to yield 11% and classified this as Investment at Fair value through profit or loss.
PV factor of 11% after 10 years 0.3522

PV factor of 9% after 10 years 0.4224
PV factor of annuity of 11% after 10 years 5.8890
PV factor of annuity of 9% after 10 years 6.4180
Market values of the bonds are as follows:

December 31, 2022 95
December 31, 2023 98
122) How much is the interest income for the year 2023?
A. 220,000 B. 180,000 C. 158,798 D. 194,086
123) What is the carrying amount of the investment on December 31, 2023?
A. 1,900,000 B. 1,676,199 C. 1,794,142 D. 1,960,000
124) How much is the unrealized gain/loss that should be reported in 2022 profit or loss statement?
A. 35,580 B. 121,494 C. 135,580 D. 221,494
   
125) On December 1, 2022, Mundo Company purchased P5,000,000, 15% face value bonds at 98. The bonds mature on
November 30, 2032 and pay interest semi-annually every May 31 and November 30. Transaction cost incurred in
relation to the acquisition is 3% of the bonds face value. Mundo classified this investment as trading securities.
On November 30, 2025 after receiving the periodic interest, Mundo sold the investment at 101. The bonds were quoted
in the market at 98, 99, 102, 100 and 97 on December 31, 2022, 2023, 2024, 2025 and 2026, respectively.
What is the gain or loss on sale of the investment?

A. 50,000 gain B. 50,000 loss C. 150,000 gain D. 150,000 loss
Use the following information for the next five (5) questions:
Kristine Zairah holds debt securities within a business model whose objective is achieved both by collecting contractual
cash flows and selling the debt securities. The contractual cash flows are solely payments of principal and interest on
specified dates.
The term of the P1,000,000, 7% bonds is 5 years, purchased on December 31, 2019, for P1,086,565. The bonds were
purchased to yield 5% interest. The following schedule presents the fair value of the bonds at year-end.
December 31, 2020 1,065,000
December 31, 2021 1,075,000
December 31, 2022 1,056,500
December 31, 2023 1,030,000
December 31, 2024 1,000,000
Questions:
126) What amount should be reported as investment in bonds in the statement of financial position of Kristine Zairah on
December 31, 2021?
A. 1,086,565 B. 1,054,438 C. 1,075,000 D. 1,065,000
127) What amount of unrealized gain/loss should be shown as component of other comprehensive income in the 2021
statement of comprehensive income?
A. 26,455 B. 20,562 C. 10,000 D. 16,455
A. 14,393 B. 18,500 C. 19,340 D. 1,222
A. 8,358 B. 26,500 C. 9,792 D. 10,982
130) What amount of unrealized gain/loss should be shown in the 2023 statement of changes in equity?
A. 26,455 B. 16,883 C. 10,982 D. 25,233
On January 1, 2023, Creative Company purchased MLR Company’s 10%, 10-year P3,000,000 face value bonds which
pays interest every December 31. Creative Company’s total investment cost which includes commissions and taxes of
P84,555 would give Creative Company a yield rate of 12%. The securities were classified as financial asset at fair value
through other comprehensive income.
The fair value of the debt instruments at December 31, 2023, 2024 and 2025 were P2,697,425, P2,740,466 and
P2,794,954 respectively.
On December 31, 2026, Creative Company sold the debt instruments for P2,890,000.
131) The net unrealized gain/loss reported in the equity section of Creative Company’s December 31, 2023 statement of
financial position is
A. 28,750 loss B. 4,517 loss C. 17,120 gain D. 36,438 gain
132) The unrealized gain included under other comprehensive income in Creative Company’s 2025 statement of
comprehensive income is
A. 24,090 B. 30,255 C. 30,398 D. 54,488
133) The gain on the sale of the debt securities in 2026 is
A. 136,684 B. 106,286 C. 281,475 D. 296,025
   
Topic 17 – PPE Acquisition
134) On January 1, 2022, Romania Company purchased a specialized factory equipment for cash at a purchase price of
P700,000. The company incurred P20,000 freight cost and handling costs of P10,000. The company expects that it will
incur dismantling cost amounting to P80,000 at the end of the equipment’s 5-year useful life. The prevailing market
interest rate during the transaction date was 6%.
The present value factor of P1 at 6% for 5 periods is at 0.747

The present value factor of P1 ordinary annuity for 5 periods is at 4.212
How much is the initial cost of the equipment?

A. 730,000 B. 810,000 C. 1,066,960 D. 789,760
135) Marla Company acquired new equipment on account on March 1, 2009 with a 5% discount if paid with in 15 days.
The following information is available:
List price 3,500,000

Trade discount 20%
Removal of old equipment 100,000
Cost of installation 50,000
Cost of redecoration of office in connection with the purchase 250,000
Insurance taken during delivery 20,000
Transportation costs 30,000
If the invoice was paid on March 31, 2009, what should be the cost of equipment?
A. 2,760,000 B. 3,425,000 C. 2,900,000 D. 3,010,000
136) Taylor Swift (TS) Company purchased machinery on December 31, 2020, paying P80,000 down and agreeing to pay
the balance in four equal installments of P60,000 payable each December 31. Implicit in the purchase price is an
assumed interest of 12%. The following data are abstracted from the present value tables:
Present value of 1 at 12% for 4 periods 0.63552

Present value of an ordinary annuity of 1 at 12% for 4 periods 3.03735
What is the cost of the machinery purchased on December 31, 2020?

A. 233,083 B. 320,000 C. 262,241 D. 290,842
137) Doug Airlines sold used jet aircraft to Adele Company for P800,000, accepting a five-year 6% note for the entire
amount. Adele’s incremental borrowing rate was 14%. The annual payment of principal and interest on the note was to
be P189,930. The aircraft could have been sold at an estimated cash price of P651,460. The present value of an
ordinary annuity of P1 at 8% for five periods is 3.99. The air craft should be capitalized on Adele’s books at
A. 949,650 B. 800,000 C. 757,820 D. 651,460
138) Tilt Company acquired land from Display Company which will be used as a plant site in exchange for 20,000 newly
issued shares of Tilt’s ordinary shares. At the date of acquisition, Tilt’s ordinary shares had a par value of P20 per share
and a fair value of P30 per share. The fair value of the land was P500,000 when Cooper acquired this 2 years ago. How
much is the initial cost of the newly acquired land?
A. 400,000 B. 500,000 C. 600,000 D. 200,000
139) In January 2022, Utah Corporation entered into a contract to acquire a new machine for its factory. The machine,
which had a cash price of P2,000,000, was paid for as follows:
Down payment 300,000

5,000 ordinary shares of Utah with an agreed-upon value of P370 per share 1,850,000
2,150,000
Prior to the machine’s use, installation costs of P70,000 were incurred. The machine has an estimated useful life of 10
years and an estimated salvage value of P100,000. The straight line method of depreciation is used. The depreciation
to be recognized in 2022 is
A. 212,000 B. 190,000 C. 182,000 D. 197,000
   
Below is the information relative to an exchange of asset by Mimz Bernanz Company. The exchange has commercial
substance in Case 1 and without commercial substance in Case 2:
Old Equipment
Book value Fair value Cash paid
Case 1 75,000 85,000 15,000
Cash 2 50,000 75,000 7,000
140) Which of the following would be correct for Mimz Bernanz to record in Case 1?
Record Equipment at Record a gain or loss of Record Equipment at Record a gain or loss of
A. 90,000 Nil C. 75,000 5,000 loss
B. 100,000 10,000 gain D. 90,000 10,000 gain
141) Which of the following would be correct for Mimz Bernanz to record in Case 2?
Record Equipment at Record a gain or loss of Record Equipment at Record a gain or loss of
A. 57,000 Nil C. 82,000 25,000 gain
B. 75,000 25,000 gain D. 50,000 Nil
On July 1, 2017, Banded Water Company traded in an old machine with a carrying amount of P10,000 for a similar new
machine having a cash price of P32,000, and paid a cash difference of P19,000.
142) How much should the property be initially recognized?

A. 32,000 B. 29,000 C. 22,000 D. 19,000
143) How much is the gain or loss from the trade in transactions?
A. None B. 3,000 C. 7,000 D. 10,000
144) On July 1, 2017, Apprentice Company accepted an office equipment from a stockholder which originally cost the
stockholder P5,000,000. On the same date, the equipment had a fair market value amounting to P3,300,000. The
company paid P200,000 for payment of registration and legal fees related to the transaction.
A. 5,000,000 B. 3,300,000 C. 3,500,000 D. 0
145) On April 1, 2022, Pacific Corporation purchased for P2,700,000 a tract of land, a warehouse and an office building.
The following data were collected regarding the property.
Appraised values Vendors’ book value
Land 875,000 700,000
Warehouse 375,000 400,000
Office building 1,000,000 975,000
What are the appropriate amounts that Pacific should record for the land, warehouse and office building, respectively?
Land Warehouse Office building Land Warehouse Office building
A. 700,000 400,000 900,000 C. 945,000 540,000 1,215,000
B. 875,000 375,000 1,000,000 D. 1,050,000 450,000 1,200,000
On June 1, Thick Company acquired a real property by issuing 35,360 shares of its P100 par value ordinary shares. The
shares were selling on the same date at P125. A mortgage of P4,000,000 was assumed by Thick on the purchase.
Moreover, the company paid P180,000 of real property taxes in the prior years. Twenty percent of the purchase price
should be allocated to the land and the balance to the building.
In order to make the building suitable for the use of Thick, remolding costs had to be incurred in the amount of P900,000.
This however necessitated the demolition of a portion of the building, which resulted in recovery of salvage material sold for
P30,000.
Parking lot cost the company a total of P320,000 while repairs in the main hall were incurred at P45,000 prior to its use.
146) The correct cost of the land should be

A. 1,664,000 B. 1,720,000 C. 2,040,000 D. 2,400,000
147) The correct cost of the building should be

A. 6,330,000 B. 7,795,000 C. 7,750,000 D. 7,570,000
   
On January 1, 2023, Amelia Company decided to expand operations and had purchased land an old building for
construction of new manufacturing plant. The following costs were incurred in purchasing the property and constructing the
new building:
Purchase price (the old building has no fair value) 2,500,000

Payment of property taxes on the land for 2022 and 2023 (equally for each year) 100,000
Title search and insurance 50,000
Special assessment for city improvements on water and sewer 150,000
Building permit 30,000
Cost to destroy existing building on the land 60,000
Contract cost of new building 7,000,000
Architect fee 200,000
Sidewalk and parking lot 100,000
Fire insurance on building – 1 year 40,000
148) What is the cost of the land?

A. 2,860,000 B. 2,810,000 C. 2,800,000 D. 2,750,000
149) What is the cost of the building?

A. 7,440,000 B. 7,290,000 C. 7,390,000 D. 7,330,000
Topic 18 – Borrowing Cost
On January 1, 2023, Florida Company purchased a tract of land with an old building which was razed shortly after
acquisition. The costs incurred in connection with the acquisition were:
Total purchase price (the old building has a fair value of P300,000) ................... ................... .......... 3,000,000
Agent commission................... ................... ................... ................... ................... ................... ... 100,000
Legal fees for the purchase contract................... ................... ................... ................... ................ 50,000
Guarantee insurance................... ................... ................... ................... ................... ................... 10,000
Cost of razing the old building................... ................... ................... ................... ......................... 150,000
Salvage value of the old building materials................... ................... ................... ........................... 25,000
Cost of relocating squatters on the land................... ................... ................... ................... ........... 5,000
Florida had the following borrowings during 2023. The borrowings were made for general purposes but the proceeds were
used in part to finance the construction of a new building:
Principal Interest
12% bank loan................... ................... ................... ......................... 10,000,000 1,200,000
15% long term loan................... ................... ................... ................... 20,000,000 3,000,000
The construction began on January 1, 2023 and was completed on December 31, 2023. Expenditures on the building were
made as follows:
January 1................... ................... ................... ........... ........ ................... ................... ................. 5,000,000
June 30................... ................... ................... ................... ................... ................... ................... 8,000,000
December 31................... ................... ................... ................... ................... ................... ........... 2,000,000
Questions:
150) What amount of interest is capitalized for 2023?

A. 4,200,0000 B. 1,200,000 C. 2,940,000 D. 1,260,000
151) What is the total cost of the building on December 31, 2023?
A. 16,385,000 B. 10,385,000 C. 16,260,000 D. 10,260,000
152) What amount is recognized as interest expense for 2023?

A. 2,940,000 B. 3,240,000 C. 4,200,000 D. 4,500,000
153) What is the cost of the land?

A. 2,865,000 B. 3,165,000 C. 2,860,000 D. 2,990,000
   
Dawn Company had a 10% P3,000,000 specific construction loan and 12% P25,000,000 general loan outstanding during
2020 and 2021.
The entity began the self-construction of a building on January 1, 2020 and was completed on December 31, 2021. The
following expenditures were made during 2020 and 2021:
January 1, 2020 .................. .................. .................. .................. .................. ...............................4,000,000

April 1, 2020 .................. .................. .................. .................. .................. ...............................5,000,000
December 1, 2020 .................. .................. .................. .................. .................. ...............................3,000,000
March 1, 2021 .................. .................. .................. .................. .................. ...............................6,000,000
154) What amount of interest is capitalized as cost of the building in 2020?

A. 3,300,000 B. 1,380,000 C. 900,000 D. 880,000
155) What is the cost of the building to date December 31, 2020?
A. 12,900,000 B. 15,300,000 C. 13,380,000 D. 12,880,000
156) What is the cost of the building on December 31, 2021?
A. 18,000,000 B. 20,988,000 C. 19,980,000 D. 20,100,000
157) What amount of interest expense should be reported for 2021?

A. 3,000,000 B. 3,300,000 C. 1,212,000 D. 912,000
158) What is the cost of the building, assuming the building was completed on June 30, 2021?
A. 18,000,000 B. 19,884,000 C. 20,868,000 D. 19,377,000
Topic 19 – Government Grant (GG) (Asset & Income Related)
On January 1, 2021, So Many Company received cash of P16,000,000 from a local government to be used in constructing
a building. The construction was completed on December 31, 2021 for a total cost of P40,000,000. The building will be
depreciated over 20 years.
159) If So Many Company uses the gross presentation of government grants, how much is the carrying amount of the
deferred income from the government grant on December 31, 2022?
A. 15,200,000 B. 12,800,000 C. 12,000,000 D. 0
160) If So Many uses the net presentation of government grants, how much is the carrying amount of the deferred income
from the government grant on December 31, 2022?
A. 15,200,000 B. 12,800,000 C. 12,000,000 D. 0
161) If So Many Company uses the gross presentation of government grants, how much is the carrying amount of the
constructed building on December 31, 2022?
A. 40,000,000 B. 24,000,000 C. 38,000,000 D. 22,800,000
162) If So Many Company uses the net presentation of government grants, how much is the carrying amount of the
constructed building on December 31, 2022?
A. 40,000,000 B. 24,000,000 C. 38,000,000 D. 22,800,000
163) On January 1, 2022, Humble Yourself Company received a government grant of P60,000,000 to compensate for
costs to be incurred in planting trees over a period of 5 years. The entity will incur such costs at P2,000,000 for 2022,
P4,000,000 for 2023, P6,000,000 for 2024, P8,000,000 for 2025, and P10,000,000 for 2026. What amount of income
from the government grant is recognized for 2022?
A. 12,000,000 B. 8,000,000 C. 6,000,000 D. 4,000,000
164) On January 1, 2021, Hakdog Company received cash of P4,000,000 from the government to be used in
constructing a building. The construction was completed on December 31, 2021 for a total cost of P10,000,000. The
building is depreciated over 20 years. On January 1, 2024, the government demanded repayment of the P4,000,000
grant given as grant in 2021. What is the amount of loss on repayment of government grant to be reported in 2024?
A. Nil B. 600,000 C. 400,000 D. 3,400,000
   
165) On January 2, 2021, Brand Company received a grant of P60,000,000 to compensate it for costs it incurred in
planting trees over a period of five years. Brand Company will incur such cost in this manner:
Year Cost
2021 2,000,000
2022 4,000,000
2023 6,000,000
2024 8,000,000
2025 10,000,000
Actual costs incurred in planting the threes showed P2,000,000 and P4,000,000 in years 2021 and 2022, respectively.
However, in 2023 and up to year 2024, the company has stopped planting trees. Due to the non-fulfillment of its
obligation, the government is demanding an immediate repayment of the grant in the amount of P50,000,000 which is
considered reasonable. What amount should be recognized as an expense related to the repayment of grant?
A. 12,000,000 B. 2,000,000 C. 44,000,000 D. 50,000,000
166) On January 1, 2021, Feista Company acquired a depreciable asset for P3,300,000 and it this same date, it received
a government grant of P300,000 which was deducted from the cost of the asset acquired. The asset has 10-year
useful life and residual value of P250,000. Feista failed to comply with the conditions of the grant and on January 1,
2023, the grant became repayable. What is the depreciation in 2023?
A. 300,000 B. 305,000 C. 365,000 D. 390,000
167) Famine Company purchased equipment for P15,000,000 on January 1, 2019. The entity received a government
grant of P5,000,000 in respect of this asset and treated the grant as a deduction from the cost of the asset. The
equipment has a useful life of 5 years and the double declining balance method of depreciation is used. On January 1,
2021, the entity violated some conditions and returned the grant. What is the depreciation for 2021?
A. 2,160,000 B. 6,000,000 C. 5,360,000 D. 1,440,000
168) On January 1, 2023, Paided Company purchased a machine for P5,400,000. Paided received a government grant of
P400,000 toward this capital cost. The machine is to be depreciated using SYD over 5 years. The estimated residual
value is P200,000. The accounting policy is to treat the government grant as a reduction is the cost of the asset. On
January 1, 2025, Paided repaid the grant due to noncompliance of conditions. What is the depreciation of the machine
for 2025?
A. 1,040,000 B. 1,280,000 C. 1,320,000 D. 1,080,000
Topic 20 – Government Grant (GG) (Interest Related)
On January 2, 2023, Faster Company receives a government loan of P2,000,000 paying a coupon interest of 2% per year.
The loan is repayable on Dec. 31, 2026. Faster Company’s borrowing cost is 10% per annum. The below-market interest is
provided by the government to enable Faster Company to bear cost of 2% per annum on the nominal value of the loan.
169) What amount of deferred income should Faster report in the statement of financial position as of December 31,
2023?
A. 145,455 B. 277,686 C. 377,231 D. 397,896
170) The amount of realized grant should the company report in its Dec. 31, 2023 statement of comprehensive income is
A. 109,282 B. 120,210 C. 132,231 D. 397,896
Topic 21 – Depreciation
171) On January 1, 2018, Bengal Company purchased machinery for P4,000,000. On the date of installation, it was
estimated that the machinery has a 10-year useful life and P400,000 residual value. At the beginning of 2022, Bengal
revised its useful life to 8 years from acquisition date and increased the residual value by P60,000. What is the
depreciation of the machinery in 2022?
A. 625,000 B. 450,000 C. 525,000 D. 312,500
   
172) Roxanne Co. purchased equipment for P500,000. The equipment had an estimated 10-year service life. Roxanne’s
policy for 10-year assets is to use the 150% declining balance depreciation method for the first five years of the asset’s
life and then switch to the straight-line depreciation method. What amount should Roxanne report as accumulated
depreciation for equipment at the end of the sixth year?
A. 300,000 B. 322,518 C. 278,147 D. 311,425
Funseth Company had the following machines on January 1, 2023:
Machine Cost Residual value Useful life

A 150,000 30,000 6
B 100,000 10,000 5
C 170,000 20,000 6
During 2024, Funseth sold Machine A for P80,000 and purchased Machine D for P200,000. Funseth used the composite
method for depreciating the machines.
173) What is the depreciation for 2023?

A. 74,000 B. 73,333 C. 63,000 D. 54,000
174) What is the depreciation for 2024?

A. 70,500 B. 63,000 C. 40,500 D. 66,000
175) What is included in the journal entry to record the disposal of Machine A?
A. Debit accumulated depreciation P70,000 C. Debit loss on disposal P70,000
B. Credit machine P80,000 D. Credit machine P120,000
176) On January 1, 2020, Wirehair Company signed an eight-year lease for office space. Wirehair has the option to renew
the lease for an additional six-year period on or before January 1, 2028. During January 2022, Wirehair incurred the
following costs:
General improvement to the lease premises with useful life of 10 years 5,400,000
Office furniture and equipment with useful life of 8 years 2,400,000
Moveable assembly line equipment with useful life of 5 years 1,800,000
At December 31, 2022, Wirehair’s intention as to the exercise of the renewal option is uncertain. A full year depreciation
of leasehold improvement is taken for year 2022. In Wirehair’s December 31, 2022 statement of financial position,
accumulated depreciation of leasehold improvement should be:
A. 1,200,000 B. 540,000 C. 1,300,000 D. 900,000
Hot Issue, Inc. uses hand tools in its manufacturing activities. On January 1, 2024, there are 800 of such tools on hand at a
cost of P40 each. Acquisition and retirement in the years 2024 and 2025 are:
Year Acquisition and cost Retirement and proceeds Estimated value of tools at year-end
2024 400 @ P60 300 @ P10 P40,000
2025 900 @ P80 700 @ P14 P35,000
177) What is the depreciation in 2024 and 2025, using the retirement method?
2024 2025 2024 2025
A. 12,000 32,000 C. 9,000 18,200
B. 9,000 22,200 D. 12,000 22,200
178) What is the depreciation in 2024 and 2025, using the replacement method?
2024 2025 2024 2025
A. 18,000 56,000 C. 15,000 56,000
B. 18,000 46,200 D. 15,000 46,200
179) What is the depreciation in 2024 and 2025, using the inventory method?
2024 2025 2024 2025
A. 13,000 50,000 C. 13,000 67,200
B. 16,000 67,200 D. 16,000 50,000
   
Topic 22 – Impairment (PAS 36)
180) Jin Company purchased a machine on January 2, 2019, for P500,000. The machine has an estimated useful life of
eight years and a salvage value of P50,000. Depreciation was computed by the 200% declining-balance method.
During December 2022, Jin determined that there had been a significant decrease in market value of its machine. At
December 31, 2022, Jin complied the following information regarding the machine
Expected undiscounted net future cash inflows from the continued use and eventual disposal 160,000
Expected discounted net future cash inflows from the continued use and eventual disposal 120,000
Fair value less costs of disposal 130,000
What is the impairment loss that should be recognized in 2022 profit or loss?
A. 80,938 B. 38,203 C. 28,203 D. Nil
181) At the current year-end, Claxon Co has

undertaken impairment tests on two machines. The following information is relevant:
Machine 1 Machine 2
Cost 450,000 250,000
Useful life 10 years 15 years
Age 4 years 3 years
Fair value 300,000 230,000
Cost of disposal 15,000 35,000
Value in use 260,000 198,000
At what carrying amount should machinery be recognized in the accounts of Claxon Co?
A. 498,000 B. 470,000 C. 468,000 D. 455,000
182) On January 1, 2022, Black Widow acquired the following intangible assets:
• A trademark for P2,000,000. The trademark has 8 years remaining in its legal life. It is anticipated that the
trademark will be renewed in the future, indefinitely, without a problem.
• A patent for P4,000,000. Because of market conditions, it is expected that the patent will have economic life for just
5 years, although the remaining legal life is 10 years.
On December 31, 2022, the intangible assets are assessed for impairment. Because of the decline in the economy, the
trademark is expected to generate cash flows of just P120,000 per year. The useful life of the trademark still extends
beyond the foreseeable horizon. The cash flows expected to be generated by the patent are P500,000 annually for
each of the next 4 years. The appropriate discount rate for all intangible assets is 8%. The present value of ordinary
annuity of 1 at 8% for four periods is 3.31. What total amount to be recognized as impairment loss in 2022?
A. 2,045,000 B. 1,545,000 C. 2,845,000 D. 1,980,000
Use the following for the next three (3) questions:

On January 1, 2021, Yes Sir Company purchased equipment with cost of P10,000,000, useful life of 10 years and no
residual value. The entity used straight line depreciation. On December 31, 2021 and December 31, 2022, the entity
determined that impairment indicators are present. There is no change in useful life or residual value.
December 31, 2021 December 31, 2022
Fair value less cost of disposal 8,100,000 8,300,000
Value in use 8,550,000 8,200,000
183) What is the impairment loss for 2021?

A. 900,000 B. 450,000 C. 600,000 D. 0
184) What is the gain on reversal of impairment for 2022?

A. 400,000 B. 700,000 C. 600,000 D. 0
   
On January 1, 2023, Dreamt Company purchased patent with cost of P11,000,000, useful life of 11 years and no residual
value. On December 31, 2023 and December 31, 2024, Dreamt determined that impairment indicators are present.
December 31, 2023 December 31, 2024

Fair value less cost of disposal 8,100,000 8,300,000
Value in use 8,650,000 8,100,000

A. 1,900,000 B. 1,350,000 C. 2,350,000 D. 0
186) What is the gain on reversal of impairment for 2024?

A. 1,215,000 B. 515,000 C. 315,000 D. 0
Topic 23 – Revaluation Surplus
On January 1, 2023, Dower Company purchased equipment costing P2,400,000 with a 6-year useful life and no residual
value. Dower entity used the straight line method of depreciation. On December 31, 2023, the fair value of the equipment
was P2,200,000. Dower used the revaluation model and Dower revalued the equipment on December 31, 2023. The entity
restated its accumulated depreciation proportionately.
187) What is included in the journal entry to record the revaluation on December 31, 2023?
A. Debit equipment P200,000 C. Credit accumulated depreciation P40,000
B. Debit revaluation loss P200,000 D. Credit revaluation surplus P240,000
188) What is the pretax revaluation surplus on December 31, 2024?
A. 240,000 B. 200,000 C. 400,000 D. 160,000
Kingsnake Company acquired a machine on January 1, 2019, at a cost of P120,000. It was expected to have a useful
economic life of 10 years. Kingsnake uses the calendar year basis. On December 31, 2021, the machine was appraised as
having a gross replacement cost of P150,000. Kingsnake applies the revaluation model in valuing this class of property,
plant and equipment after its initial recognition.
189) How much should be credited to revaluation surplus on December 31, 2021?
A. 30,000 B. 105,000 C. 21,000 D. 9,000
190) What is the balance of the revaluation surplus account on December 31, 2022 assuming that piecemeal realization of
revaluation surplus is in order?
A. 30,000 B. 21,000 C. 18,000 D. 15,000
191) During the current year, Sunrise Company sold a piece of equipment used in production. The equipment had been
accounted for using the revaluation model and details of the account on the date of sale are as follows:
Sale price ................ ................ ................ ................ ................. 5,000,000

Carrying amount of equipment ................ ................ ................ ................ ................. 4,500,000
Revaluation surplus balance ................ ................ ................ ................ ................. 1,000,000
Which statement is correct about recording the sale?

A. The gain that should be recorded in profit or loss is P1,500,000.
B. The gain that should be recorded in other comprehensive income is P500,000.
C. The gain that should be recorded in other comprehensive income is P1,500,000.
D. The gain that should be recorded in profit and loss is P500,000 and the P1,000,000 revaluation surplus should be
transferred to retained earnings.
   
Topic 24 – Combination of Impairment & Revaluation
Cornish Company finished construction of building on January 1, 2018 at a total cost of P25,000,000. The building was
depreciated over the estimated useful life of 20 years using the straight-line method with no residual value. The building was
subsequently revalued on December 31, 2021 and the revaluation report showed that the asset had a replacement cost of
P32,000,000 and was determined to to have no change in the useful life. On January 1, 2023, the building was tested for
impairment and the fair value was P18,000,000 on same date, with no change on the remaining useful life.
192) What amount of revaluation surplus should be recognized on December 31, 2021?
A. 5,600,000 B. 7,000,000 C. 1,400,000 D. 5,250,000

A. 6,000,000 B. 400,000 C. 750,000 D. 0
Bernadette, Inc. purchased an equipment on January 1, 2019 for P13,000,000. This equipment had 10-year useful life. In
2020, due to obsolescence, Bernadette recognized an impairment loss of P2,600,000. On December 31, 2021, Bernadette
determined that the fair value of the equipment had increased to P9,750,000.
194) What amount of gain on reversal of impairment shall Bernadette recognize in 2021?
A. 2,925,000 B. 2,275,000 C. 650,000 D. 325,000
195) Assuming Bernadette was using revaluation model in accounting for its property, plant and equipment, how much
was the revaluation surplus resulting from the revaluation in 2021?
A. 2,250,000 B. 2,275,000 C. 650,000 D. 325,000
Topic 25 – Cash Generating Unit (CGU)
At year-end, McSpicy believed that the asset of a cash generating unit are impaired. The assets and liabilities of the cash
generating unit at carrying amount are:
Cash 4,000,000
Accounts receivable 6,000,000
Allowance for doubtful accounts 1,000,000
Inventory 7,000,000
Property, plant and equipment 22,000,000
Accumulated depreciation 4,000,000
Goodwill 3,000,000
Accounts payable 2,000,000
Accounts 1,000,000
The entity determined that the value in use of the cash generating unit is P30,000,000. The accounts receivable are
considered collectible, except those considered doubtful.
196) What is the impairment loss on goodwill?

A. 3,000,000 B. 1,500,000 C. 750,000 D. 0
197) What is the impairment loss on inventory?

A. 1,120,000 B. 1,960,000 C. 1,500,000 D. 0
198) What is the impairment loss on property, plant and equipment?

A. 4,000,000 B. 2,880,000 C. 2,400,000 D. 4,200,000
   
Bloodborne Company has determined that one of its cash generating units (CGU) is impaired. The assets of the cash
generating unit at carrying amount are:
Machinery 1,500,000
Building 3,000,000
Equipment 1,875,000
Furniture and fixture 1,125,000
Goodwill 800,000
The recoverable value of the cash generating units is P7,000,000. The fair value less cost of disposal of the equipment is
P1,825,000.
199) How much impairment loss that should be allocated to equipment?

A. 50,000 B. 125,000 C. 75,000 D. 0
200) How much is the carrying amount of the building after allocation of the impairment loss?
A. 2,760,000 B. 2,800,000 C. 2,770,000 D. 2,069,000
Topic 26 – Investment Property

201) Cynthia Villar Company has the following property items at December 31, 2023:
Land which at the date of acquisition is not intended for any specific use in the future 1,000,000
Land held for future plant site 2,000,000
Building being leased out under operating lease 8,000,000
Building being leased out under finance lease 2,500,000
Equipment being leased under operating lease 1,500,000
Land and building acquired under finance leases being used by the entity as its general and
administrative headquarter 9,200,000
Condominium building that is being constructed intended for sale in the ordinary course of business 5,000,000
Building being leased out under operating lease, an insignificant portion is used for administrative
purposes 6,000,000
Hotel building owned which significant services are provided to the guests 7,000,000
How much should be classified as investment properties on December 31, 2023?

A. 16,500,000 B. 15,000,000 C. 9,000,000 D. 22,000,000
202) Minty Corporation’s properties included the following items:
• Land held as potential plant site, P5,000,000.

• A vacant building to be leased out under an operating lease, P20,000,000.
• Property held for sale in the ordinary course of its business, P30,000,000.
• Property acquired exclusively with a view to subsequent disposal in the near future, P4,000,000.
• Property occupied by employees paying market rent, P3,000,000.
• Property occupied by employees paying below market rent, P1,000,000.
• Property held for administrative purposes, P10,000,000.
• A hotel owned and managed, P50,000,000.
• A building being leased out to a subsidiary, P8,000,000.
• Property that is being constructed for use as an investment property, P2,000,000.
• A building, which cannot be sold or leased out separately, used in the production of goods and around 2% of the
area being leased out to canteen operators, P7,000,000.
How much should be reported as investment properties in Minty Corporation’s separate financial statements?
A. 43,000,000 B. 40,000,000 C. 38,000,000 D. 35,000,000
203) Santana Company acquired a building on January 1, 2022 for P900,000. At that date the building had a useful life of
30 years. At December 31, 2022 the fair value of the building was P960,000. The building was classified as an
investment property and accounted for under the cost method. According to PAS 40 – Investment Property , what
amount should be carried in the statement of financial position (SFP) and recognized in profit or loss (P/L)?
Carrying amount in SFP Recognized in P/L Carrying amount in SFP Recognized in P/L
A. 870,000 Zero C. 900,000 Zero
B. 870,000 Expense of P30,000 D. 960,000 Gain of P60,000
   
204) 50 Cent Company acquired a building on January 1, 2022 for P18,000,000. At that date, the building had a useful life
of 40 years. The fair value of the building was P20,000,000 at December 31, 2022. The building was appropriately
classified as investment property and accounted for using the fair value model. What amount shall be presented in the
statement of financial position at December 31, 2022 and recognized in profit or loss for they year ended respectively?
Carrying amount in SFP Recognized in P/L Carrying amount in SFP Recognized in P/L
A. 20,000,000 Zero C. 20,000,000 2,000,000
B. 18,000,000 Zero D. 17,550,000 450,000
205) Panic Co. owns three properties which are classified as investment properties. Details of the properties are as
follows:
Initial Cost Fair value December 31, 2021 Fair value December 31, 2022
Property A 2,700,000 3,200,000 3,500,000
Property B 3,450,000 3,000,000 2,800,000
Property C 3,300,000 3,900,000 3,400,000
Each property was acquired in 2020 with a useful life of 50 years. The entity’s accounting policy is to use the fair value
model for investment properties. What is the gain or loss to be recognized for the year ended December 31, 2022?
A. 250,000 loss B. 300,000 gain C. 400,000 loss D. 700,000 loss
206) 3 Doors Down Company purchased an investment property on January 1, 2022 at a cost of P2,200,000. The
property had a useful life of 40 years and on December 31, 2022 had a fair value of P3,000,000. On December 31,
2022 the property was sold for net proceeds of P2,900,000. The entity used the cost model to account for investment
properties. What is the gain or loss to be recognized for the year ended December 31, 2022 regarding the disposal of
the property.
A. 100,000 loss B. 810,000 gain C. 700,000 gain D. 865,000 gain
On January 1, 2023, Blitz Company acquired an investment property at a total cost of P5,000,000. At December 31, 2023,
the carrying amount of the property in the company’s books is P6,000,000. On December 31, 2024, Blitz Company
decided to se the property and immediately reclassified as plant asset (owner occupied property).
207) What would be the initial cost of the plant asset if it has a fair value of P6,500,000 at conversion date?
A. 5,000,000 B. 5,500,000 C. 6,000,000 D. 6,500,000
208) What amount of revaluation surplus Blitz Company would recognize at the time of conversion?
A. None B. 500,000 C. 1,000,000 D. 1,500,000
Cute Corporation owns the following properties at 1 January 2016:
Property A
An office building used by Cute for administrative purposes with a depreciated historical cost of P2 million. At 1 January
2016 it had a remaining life of 20 years. After a re-organization on 1 July 2016, the property was leased to a third party and
reclassified as an investment property applying Cute’s policy of the fair value model. An independent valuer assessed the
property to have a fair value of P2.3 million at 1 July 2016, which had risen to P2.34 million at 31 December 2016.
Property B
Another office building sub-leased to a subsidiary of Cute. At 1 January 2016, it had a fair value of P1.5 million which had
risen to P1.65 million at 31 December 2016. At 1 January 2016 it had a remaining life of 15 years.
Determine the amounts that should be recognized by the entity in its separate financial statements in respect of these
properties for the year ended December 31, 2016 for the following:
209) Net amount in profit or loss

A. 540,000 B. 490,000 C. 190,000 D. 140,000
210) Net amount in other comprehensive income

A. 500,000 B. 350,000 C. 300,000 D. -0-
   
211) Diffun, Inc. owns a building purchased on January 1, 2012 for P50 million. The building was used as the company’s
head office. The building has an estimated useful life of 25 years. In 2016, the company transferred its head office and
decided to lease out the old building.
Tenants began occupying the old building by the end of 2016. On December 31, 2016, the company reclassified the
building as investment property to be carried under the cost model. The fair value on the date of reclassification was
P42 million.
How much should be recognized in the 2016 profit or loss as a result of the transfer from owner-occupied to
investment property?
A. 8,000,000 B. 2,000,000 C. 500,000 D. -0-
Topic 27 – Non-Current Asset (NCA) Held for Sale
212) On December 31, 2021, Barcela Company classified its building with a historical cost of P4,000,000 and
accumulated depreciation of P2,400,000 as held for sale. All of the criteria under PFRS 5 are complied with. On that
date, the land has a fair value of P1,400,000 and cost to sell of P80,000. The entry on December 31, 2021 includes
A. A debit to building for P1,320,000.
B. A credit to accumulated depreciation for P2,400,000.
C. A debit to impairment loss for P280,000.
D. No reclassification entry will be made on December 31, 2021.
213) On January 1, 2025, Nether Company classifies a hotel property a non-current asset held for sale. Immediately
before the classification as held for sale, the cost of the property is P100,000 and accumulated depreciation of
P40,000. The hotel is depreciated on the straight line method with a useful life of 10 years. The estimate of the fair value
less cost to sell on this date is P62,000. What amount of impairment loss should Nether Company recognize at the
date the asset was classified as held for sale?
A. 38,000 B. 12,000 C. 2,000 D. 0
Batalla Company accounts for non-current assets using the cost model. On April 25, 2016 Batalla classified a non-current
asset as held for sale in accordance with PFRS5. At that date the asset’s carrying amount was P32,000, its fair value was
estimated at P22,000 and the costs to sell at P3,200. On May 15, 2016 the asset was sold for net proceeds of P17,400.
In Batalla’s statement of comprehensive income for the year ended June 30, 2016:
214) What amount should be included as an impairment loss?

A. 13,600 B. 10,000 C. 13,200 D. 0
215) What amount should be included as loss on disposal?

A. 14,600 B. 13,200 C. 4,600 D. 1,400
216) On April 1, 2016, Sudaria Company has a piece of machinery with a cost of P1,000,000 and accumulated
depreciation of P750,000. On April 1, Sudaria decoded to sell the machine within 1 year. As of April 1, 2016, the
machine had an estimated selling price of P100,000 and a remaining useful life of 2 years. It is estimated that selling
costs associated with the disposal of the machine will be P10,000. On December 31, 2016, the estimated selling price
of the machine had increased to P150,000, with estimated selling costs increasing to P16,000. The gain on reversal of
impairment loss on December 31, 2016 is
A. 160,000 B. 50,000 C. 44,000 D. 0
   
On January 1, 2022, LCC Company classifies a hotel property a non-current asset held for sale. Immediately before the
classification as held for sale, the carrying amount of the property is P400,000,000 (cost of P500,000,000 and accumulated
depreciation of P100,000,000). The hotel is depreciated on the straight line method with a useful life of 50 years. The
estimate of the fair value less cost to sell on this date is P350,000,000. On January 1, 2023 no buyer could be identified.
On this date, management concludes that the criteria for classification could not be met. The estimate of the fair value less
cost to sell is revised to P340,000,000 while the value in use at the time is estimated at P380,000,000.
217) What amount of impairment loss should LCC Company recognize at the date the asset was classified as held for
sale?
A. 50,000,000 B. 100,000,000 C. 150,000,000 D. 0
218) The amount taken to profit or loss on the date the asset was reclassified back to property, plant and equipment is
A. 30,000,000 B. 50,000,000 C. 100,000,000 D. 0
219) The depreciation expense for 2023 after the asset was reclassified back to property, plant and equipment is
A. 10,000,000 B. 8,974,359 C. 8,717,949 D. 9,743,590
Topic 28 – Depletion
On January 1, 2020, Hilary Company purchased a mineral mine for P26,400,000 with removable ore estimated at
1,200,000 tons. After it has extracted all the ore, the entity will be required by law to restore the land to the original
condition at an estimated cost of P2,200,000. The present value of the estimated restoration cost is P1,800,000. The
property can be sold afterwards for P3,000,000. During 2020, the entity incurred P2,000,000 exploration cost and
P1,600,000 development cost preparing the mine for productions. The entity removed 80,000 tons of ore and sold 60,000
tons of ore in the current year.
220) What is the depletion for the current year?

A. 1,920,000 B. 1,440,000 C. 1,940,000 D. 1,455,000
221) What amount of depletion should be included in cost of sales for the current year?
A. 1,920,000 B. 1,440,000 C. 1,500,000 D. 1,590,000
Iris Company acquired property at the beginning of current year which contains mineral deposit. The acquisition cost of the
property was P20,000,000. Geological estimates indicated that 5,000,000 tons of mineral may be extracted. It is further
estimated that the property can be sold for P5,000,000 following mineral extraction. For P2,000,000, Iris is legally required
to restore the land to a condition appropriate for resale. After acquisition, the following costs were incurred:
Exploration cost.................. .................. .................. .................. .................. .................. ................ 3,000,000

Development cost related to drilling of wells.................. .................. .................. .................. ............ 6,000,000
Development cost related to production equipment.................. .................. .................. ................... 4,000,000
The production equipment has a useful life of 5 years and the mineral property can be fully depleted in about 8 years. The
equipment has no alternative use. During the current year, the company extracted 600,000 tons of the mineral and sold
450,000 tons.
222) What amount of depletion should be recognized for 2019?

A. 3,120,000 B. 2,340,000 C. 3,600,000 D. 2,700,000
223) What amount of depreciation is recognized for 2019?
A. 360,000 B. 500,000 C. 800,000 D. 480,000
224) On July 1, 2020, Nerissa Company purchased the rights to a mine for P13,000,000, of which P1,200,000 was
allocable to the land. Estimated reserves were 1,500,000 tons. The entity expects to extract and sell 25,000 tons per
month. The entity purchased mining equipment on July 1, 2020 for P9,500,000. The mining 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 P500,000.
What is the depreciation for 2020?

A. 1,800,000 B. 1,125,000 C. 900,000 D. 562,500
   
On January 2, 2019, Legend Company purchased land for P450,000, from which it is estimated that 400,000 tons of ore
could be extracted. It estimates that it will cost P80,000 to restore the land, after which it could be sold for P30,000.
During 2019, the company mined 80,000 tons and sold 50,000 tons. During 2020, the company mined 100,000 tons and
sold 120,000 tons. At the beginning of 2021, the company spent an additional P100,000, which increased the reserves by
60,000 tons. In 2021, the company mined 140,000 tons and sold 130,000 tons. The company uses a FIFO cost flow
assumption.
Questions: Based on the above and result of your audit, answer the following: (round depletion rate to two decimal places)
225) The depletion for 2020 is
A. 125,000 B. 134,000 C. 107,200 D. 80,000
226) The depletion for 2021 is

A. 175,000 B. 114,800 C. 145,600 D. 187,600
227) The depletion included in cost of sales for the year ended December 31, 2021 is
A. 173,300 B. 137,300 C. 168,350 D. 110,900
228) The carrying amount of the natural resources as of December 31, 2021 is
A. 290,200 B. 259,400 C. 317,400 D. 217,400
229) Maureen Company provided the following balances on December 31, 2020:
Wasting asset, at cost 40,000,000

Accumulated depletion 15,000,000
Capital Liquidated 5,000,000
Retained earnings 10,000,000
Depletion based on 100,000 units extracted at P30 per unit 3,000,000
Inventory of resource deposit (20,000 units) 2,000,000
What is the maximum dividend that can be declared on December 31, 2020?
A. 19,600,000 B. 19,400,000 C. 25,000,000 D. 20,000,000
Topic 29 – Intangible Assets
230) The following costs are generally incurred by Bound Eye Corporation:
Goodwill purchased in a business combination 500,000

Cost of developing website for the promotion and advertisement of the entity’s products 150,000
Cost incurred in the corporation’s formation and organization 230,000
Operating losses incurred in the start-up of the business 130,000
Initial franchise fee paid 175,000
Continuing franchise fee 50,000
Internally generated goodwill 800,000
Cost of purchasing a patent form an investor 137,000
Cost of leasehold improvement 70,000
Legal costs incurred in successfully defending a patent 55,500
Internally generated customer list 40,000
Cost of purchasing a trademark 250,000
Computer software for a computer controlled machine that cannot be operate without that specific software 325,500
How much from the above items can be recognized as intangible assets including goodwill?
A. 1,132,000 B. 1,387,500 C. 1,172,000 D. 1,062,000
   
231) Aminin Company reported the following assets at year-end:
Franchise 1,000,000
Computer software 1,500,000
Patent 2,500,000
Customer list 500,000
Copyright 700,000
Deposit with advertising agency to promote goodwill 400,000
Excess cost over fair value of identifiable net assets of acquired associate 1,400,000
Excess of cost over fair value of identifiable net assets of acquired subsidiary 4,000,000
Trademark 900,000
Research and development cost 2,000,000
What total amount should be reported as intangible assets?

A. 11,100,000 B. 11,500,000 C. 12,500,000 D. 13,100,000
232) Zeze Co. provided you the following information pertaining to its Research and Development activities for the year
2022:
Searching for applications of new research findings 57,000
Trouble-shooting in connection with breakdowns during commercial production 87,000
Adaptation of an existing capability to a particular requirement of customer’s need as part of continuing
commercial activity 39,000
Engineering follow-through in an early phase of commercial production 45,000
Laboratory research aimed to discovery of new knowledge 204,000
Design of tools, jigs, and molds involving new technology 72,000
Quality control during commercial production, including routine testing of products 174,000
Testing in search for product or process alternative 300,000
Design and construction of preproduction prototype and model 384,000
Routine and on-going efforts to refine, enrich, or otherwise, improve upon the qualities of an existing product 750,000
What is the total amount to be classified and expensed as research and development for 2022?
A. 1,095,000 B. 1,017,000 C. 456,000 D. 561,000
Behemoth Company incurred P100,000 of research and development costs to develop a product for which a patent was
granted on January 1, 2020. Legal fees and other costs associated with registration of the patent totaled P300,000. The
patent is being amortized over its legal life. On July 1, 2022, Behemoth Company won and paid legal fees of P80,000 for
the successful defense of the patent against an infringement lawsuit by Doug Company.
233) How much is the amortization expense for the year 2020?
A. 5,000 B. 20,000 C. 15,000 D. 30,000
234) How much is the carrying amount of the patent on December 31, 2022?
A. 255,000 B. 262,500 C. 248,800 D. 335,000
235) How much is the total expenses for the year 2022?
A. 15,000 B. 80,000 C. 95,000 D. 87,500
236) How much is the total expenses for the year 2022 assuming Behemoth Company did not win the lawsuit?
A. 80,000 B. 87,500 C. 262,500 D. 350,000
On January 1, 2022, Blight Stones obtained a franchise from Doug Corporation to sell for 20 years Doug’s product. The
initial franchise fee as agreed upon shall be P6,000,000, and shall be payable in cash, P1,000,000, when the contract is
signed and the balance in four equal installments thereafter, as evidenced by a non-interest bearing note. The agreement
provides that the franchisor shall provide the necessary initial services required under a franchise contract. The agreement
also provides that 5% of the revenue from the franchise must be paid to the franchisor. Revenue from the franchise for
2022 was P5,000,000.
The present value factor of P1 at 12% for 4 periods 0.6355
The present value factor of P1 ordinary annuity at 12% for 4 periods 3.0373
237) How much is the initial cost of the franchise?

A. 6,000,000 B. 4,177,500 C. 4,796,625 D. 3,796,625
238) How much is the total expenses for the year 2022?
A. 458,875 B. 945,426 C. 239,831 D. 489,831
   
239) On January 1, 2017, Blood Chalice Company acquired both License and a Trademark in exchange for 1,000 shares
of Blood Chalice, P100 par ordinary shares. The shares are selling for P125 per share on January 1, 2017. The
trademark is worth thrice as much as the license. The license may be used for five years while the trademark has a
remaining useful life of 6 years. Blood Chalice intends to renew the trademark continuously because the said trademark
is expected to contribute to net cash flows indefinitely. How much is the amortization expense for the year 2017?
A. 21,875 B. 6,250 C. 23,958 D. 0
240) On January 1, 2017, Josabelle Company purchased a patent for P7,140,000. The patents is being amortized over
the remaining legal life of 15 years. During January 2020, the entity determined that the economic benefits of patent
would not last longer than seven years from the date of acquisition. What is the carrying amount of the patent on
December 31, 2020?
A. 4,282,000 B. 4,896,000 C. 5,050,000 D. 5,236,000
241) Jennylyn Company purchased another entity for P8,000,000 cash. The assets and liabilities of the acquire are as
follows:
Carrying Amount Fair Value

Cash 1,000,000 1,000,000
Inventory 400,000 500,000
In-process R and D 6,000,000 5,000,000
Assembled Workforce 1,100,000 1,200,000
Liabilities 2,500,000 3,000,000
What is the goodwill arising from acquisition?

A. 4,500,000 B. 3,300,000 C. 3,100,000 D. 2,000,000
Life Company is planning to sell the business to new interests. The cumulative net earnings for the past five years amounted
to P16,500,000 including expropriation loss of P1,500,000. The normal rate of return is 20%. The fair value of net assets of
the entity at current year-end was P10,000,000.
What is the amount of goodwill if:

242) Excess earnings are purchased for 5 years?
A. 8,000,000 B. 4,000,000 C. 5,000,000 D. 4,500,000
243) Excess earnings are capitalized at 25%?

A. 7,200,000 B. 6,400,000 C. 8,000,000 D. 3,600,000
244) Annual average earnings are purchased for 3 years?

A. 10,800,000 B. 18,000,000 C. 4,800,000 D. 5,400,000
245) Annual average earnings are capitalized at 25%?

A. 1,600,000 B. 3,600,000 C. 4,400,000 D. 2,000,000
246) Excess earnings are discounted at 12% for 5 years? (the PV of an ordinary annuity of 1 for 5 years at 12% is 3.60)
A. 12,960,000 B. 10,800,000 C. 5,760,000 D. 7,200,000
During the current year, VVIP Company incurred the following costs to develop and produce a routine low-risk computer
software product:
Completion of detailed program design or working model 1,300,000

Cost incurred for coding and testing to establish feasibility 1,000,000
Other coding cost after establishment of technological feasibility 2,400,000
Other testing cost after establishment of technological feasibility 2,000,000
Cost of producing product masters for training materials 1,500,000
Duplication of computer software and training materials from product master 2,500,000
Packaging product 900,000
247) What amount should be capitalized initially as software cost?

A. 5,400,000 B. 3,700,000 C. 5,900,000 D. 6,900,000
248) What amount should be reported in inventory at year-end?
A. 2,500,000 B. 3,400,000 C. 4,000,000 D. 4,900,000
249) What total amount of the cost incurred should be expensed immediately?
A. 8,200,000 B. 2,300,000 C. 6,700,000 D. 4,400,000
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250) The following costs are generally incurred by Bong Go Company:
Goodwill purchased in a business combination 600,000

Cost incurred in the corporation’s formation and organization 230,000
Operating losses incurred in the start-up of the business 130,000
Initial franchise fees paid 170,000
Continuing franchise fees 50,000
Internally generated goodwill 800,000
Cost of purchasing a patent from an investor 135,000
Legal cost in securing a patent 80,000
Legal costs incurred in successfully defending a patent 55,000
Cost of improvements on a leased facility 280,000
Distribution and packaging cost for internally developed computer software 90,000
Cost of testing and coding after technical feasibility related to internally developed computer software 140,000
Cost of purchasing a trademark with indefinite life 250,000
Computer software for a computer-controlled machine that cannot operate without that specific software 325,000
Training, market knowledge, fundraising capability 210,000
Cost of developing brands and mastheads 175,000
Cost to develop customer lists 50,000
Laboratory research aimed at discovery of new knowledge 200,000
Cost of developing a website to market a certain product 160,000
Design, construction, and testing of preproduction prototypes and models 70,000
How much from the above items can be recognized as intangible assets including goodwill?
A. 1,425,000 B. 1,600,000 C. 1,375,000 D. 1,235,000
The End
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ARAULLO UNIVERSITY

Maharlika Highway, Brgy. Bitas, Cabanatuan City, 3100 Nueva Ecija

The Financial Accounting & Reporting

Savings and demand deposits 5,000,000

Cash in bank – demand deposit 2,500,000

• The cash receipts journal

2) What total amount should be reported as cash on December 31, 2023?

Topic 02 – Petty Cash Fund (PCF)

Bills and Coins 28,750

7) What is the amount of shortage/overage?

Currencies and coins………………………...

9) How much is the cash shortage/overage?

Topic 03 – Bank Reconciliation

10) What it the adjusted cash in bank on December 31?

12) What is the net adjustment to cash in bank on December 31?

Topic 04 – Proof of Cash

Determine the following:

14) Adjusted cash receipt in

15) Adjusted cash disbursement

16) Adjusted cash balance as of December 31.

Topic 05 – Trade Receivable & Allowances

Allowance for doubtful accounts, January 1, 2022 250,000

What is the year-end adjustment to doubtful accounts expense?

Topic 06 – Notes Receivables (NR)

25) How much is the interest income in 2017?

27) How much is the gain or loss on sale of building?

31) How much is the interest income in 2022?

Periods Present value of 1 at 10% PV of annuity of 1 at 10%

33) How much should be reported as sales revenue on March 1, 2020?

35) How much is the initial measurement of the receivable?

Table factors for three periods 5% 10%

39) What is the carrying value of notes at of December 31, 2022?

What is the accrued interest receivable as of December 31, 2021?

Topic 07 – Loan Receivable (LR) & Impairment of LR

Principal amount 4,000,000

43) What is the interest income for 2023?

45) What is the loan impairment loss for 2023?

46) What is the interest income for 2024?

Topic 08 – Financing of Receivables

52) What amount should be recognized as loss on factoring?

Topic 09 – Inventory Composition & Inventoriable Cost

Topic 10 – Inventory System / Purchase Discount / Inventory Errors

Topic 11 – Inventory Subsequent Measurement & Impairment of Inventory

61) What is the measurement of inventory in the statement of financial position?

Replacement cost of raw materials – bars 635,000

Topic 12 – Inventory Cost Flow

Units Unit cost Total cost

70) What was the cost of the inventory on July 31?

71) What was the cost of inventory on July 1?

Units Unit cost

72) What amount of inventory should be reported under FIFO?

Topic 13 – Inventory Estimation

How much is the estimated inventory loss?

76) What is the cost of raw materials used used?

77) What is the total manufacturing cost?

78) What is the cost of goods sold?

83) What is the estimated cost of the ending inventory?

84) What is the estimated cost of goods sold?

Beginning inventory – sales price 2,500,000 Markdown cancellation 180,000

85) How much is the estimated cost of ending inventory?

86) How much is the estimated cost of goods sold?

Topic 14 – Investment in Shares Measured at Fair value

Security Cost Market value, 12/31/21 Market value, 12/31/22