1st Final Departmental Examinations

Subject Code: ACCO 20053

Course Subject: Intermediate Accounting 1

1. Which of the following is not a major characteristic of a plant asset?

a) Possesses physical substance
b) Acquired for use in operations
c) Yields services over a number of years
d) All of these are major characteristics of a plant asset

2. If goods are in transit are shipped FOB destination

a) The seller has legal title to the goods until they are delivered.
b) The buyer has legal title to the goods until they are delivered.
c) The transportation company has legal title to the goods while the goods
are in transit.
d) No one has legal title to the goods until they are delivered.

3. Which of the following statements are true regarding inventories?

I. Goods that have been purchased FOB destination but are in transit,
should be excluded from a physical count of goods.
II. An error that overstates the ending inventory will also cause net income
for the period to be overstated.
III. The first-in, first out (FIFO) inventory method results in an ending
inventory valued at the most recent cost.
IV. A company may use more than one inventory costing method
concurrently.

a) I only
b) I and II
c) I, II, and III
d) I, II, III, and IV

4. Which of the following is an agricultural produce?

a) Tobacco plants
b) Sheep
c) Tea
d) Wool
5. When a plant asset is disposed of, a gain or loss may result. The gain or loss
would be classified as an extraordinary item on the income statement if it
resulted from
a) An involuntary conversion and the conditions of the disposition are
unusual and infrequent in nature.
b) A sale prior to the completion of the estimated useful life of the asset.
c) The sale of a fully depreciated asset
d) An abandonment of the asset.

6. To determine an inventory valuation using the retail method under the

average method, the computation of the cost to retail percentage should?
a) include markups but not markdowns
b) include markups and markdowns
c) include markdowns but not markups
d) exclude markups and markdowns

7. Annual crops and similar plants that die once their produce has been
harvested are considered __________ and therefore classified as ____________?
a) consumable plants; biological asset
b) biological asset; consumable plants
c) bearer plants; PPE
d) PPE; bearer plants

8. The cost formulas permitted under PAS 2 are:

a) FIFO and weighted average
b) Specific identification, FIFO,
c) Specific identification and weighted average
d) Specific identification, FIFO, and weighted average

9. If the NRV subsequently increases at an amount equal to or more than the

previous write-down, the previous write-down is?
a) Increased
b) Decreased
c) Reversed
d) Both a and c

10. The cost of an item of property, plant, and equipment comprises:

I. Its purchase price, including import duties and non-refundable
purchase taxes, after deducting trade discounts and rebates.
 II. Any cost directly attributable to bringing the asset to the location
and condition necessary for it to be capable of operating in the
manner intended by management.
III. The initial estimate of the costs of dismantling and removing the item
and restoring the site on which it is located, the obligation for which
an entity incurs either when the item is acquired or as a consequence
of having used the item during a particular period for purposes other
than to produce inventories during that period.

a) I, II and III
b) I and II only
c) I and III only
d) I only

11. The cost of inventory does not include

a) Salaries of staff
b) Storage cost necessary in the production process before a further
production stage
c) Abnormal amount of waste materials
d) Irrecoverable purchase taxes

12. To produce an inventory valuation which approximates the lower of cost

and NRV using the retail method, the computation of the ratio of cost to
retail should
a) include markup but not markdown
b) Include mark up and markdown
c) Ignore both mark up and markdown
d) Include markdown and not mark up

13. Any entity purchased an equipment that it does not have to pay until after
3 years. The total payment on maturity will include both principal and
interest. The cost of the equipment would be the total payment multiplied
by what time value of money concept?
a) Present value of annuity of 1
b) Present value of 1
c) Future amount of annuity of 1
d) Future amount of 1
14. Which of the following are essential characteristics of property, plant and
equipment?
I. Estimated useful life is not beyond 12 months
II. Intended for sale in the ordinary course of business
III. Physical existence
IV. Held for use in the production or supply of goods and services, for
rental to others, or for administrative purposes.
a) I, II, III, and IV
b) I,II, and III
c) I,II, and IV
d) III and IV

15. Biological assets are initially recognized in the books at

a) fair value less estimated cost to sell
b) purchase price
c) price price plus transaction costs
d) fair value

16. Which of the following defines a bearer plant?

a) Used in the production or supply of agricultural produce
b) Expected to bear produce for less than a period
c) Has remote likelihood of being sold as agricultural produce including
incidental scrap sales
d) All of the above

17. According to PAS 41, Agriculture, the usual measurement of:

a) Agricultural produce is at fair value at point of harvest
b) Agricultural produce is at fair value minus costs to sell at the point of
harvest and at each subsequent balance sheet date
c) Biological assets is at fair value less costs to sell on initial recognition and
at each subsequent balance sheet date
d) Biological assets is at cost minus accumulated depreciation and
impairment losses

18. Which among the statements is not correct regarding Retail Inventory
Method?
a) Retail inventory method requires that a record be kept of the total cost and
retail of goods purchased.
b) Under Retail inventory method, purchase discounts usually are
considered as an addition of the cost of purchases.
 c) Under Retail inventory method, freight costs are treated as a part of the
purchase cost;
d) Under Retail inventory method, purchase returns and allowances are
ordinarily considered both a reduction of the price at both cost and retail

19. Costs directly attributable to bringing the asset to the location and
condition necessary for it to be capable of operating in the manner
intended by management exclude:
a) Professional fees
b) Costs of site preparation
c) administration and other general overhead costs
d) installation and assembly costs

20. Under the revaluation model, how often shall revaluations be made?
a) Annually
b) Every three or five years
c) It depends upon the entity’s accounting policy
d) It depends upon the changes in fair values of the items of property, plant
and equipment being revalued.

21. Which of the following statements is true?

S1 – Property, plant and equipment does not apply to biological assets
S2 – Property, plant and equipment does not apply to mineral rights and
reserves
a) S1 only
b) S2 only
c) Both statements
d) Neither S1 nor S2

22. When property is acquired by issuing equity shares, which of the following
is the best basis for establishing the historical cost of the acquired asset?
a) Historical cost of the asset to the seller
b) Historical cost of a similar asset
c) Fair value of the asset received
d) Fair value of shares issued

23. Which is not a major characteristics of property, plant and equipment?

a) The property, plant and equipment are subject to depreciation.
 b) The property, plant and equipment are tangible assets.
c) The property, plant and equipment are used in business.
d) The property, plant and equipment are expected to be used over a period
of time.

24. The customer's copy of the account provided by the bank to the depositor
to record deposits and withdrawals is called
a) Sales Book
b) Cash Book
c) Pass Book
d) Purchases Book

25. The statement that explains the causes of the difference between the cash
book and bank statement is called
a) Bank Statement
b) Financial Statement
c) Income Statement
d) Bank Reconciliation Statement

26. Spare parts and servicing equipment are usually accounted for as:
a) Inventory
b) A separate class of fixed assets
c) Expenses written off to the profit or loss on buying
d) Equipment

27. Repairs and maintenance costs are normally

a) Recorded as deferred expense
b) Capitalized
c) Expensed in the profit as incurred
d) Ignored

28. The following costs should be accounted for as:

(i) Costs incurred while an item, capable of operating in the manner
intended by management, has yet to be brought into use, or is operated
at less than full capacity.
(ii) Initial operating losses, such as those incurred while demand for the
item’s output builds up; and
(iii) Costs of relocating, or reorganizing part, or all, of an undertaking’s
operations.
a) (Capitalized as) fixed assets
 b) Extraordinary items
c) Expenses
d) Inventory

29. If payment for a fixed asset is deferred beyond normal credit terms, any
additional payment above the cash cost of the asset will be accounted for
as:
a) Repairs and maintenance
b) Cost of fixed asset
c) Borrowing cost
d) Expenses

30. In the case of an exchange of assets, if the acquired asset cannot be valued:
a) The cost of the asset given up is used
b) The residual value is used
c) The asset cannot be capitalized
d) The asset can be capitalized

31. Sunny Farm Company is engaged in raising dairy livestock. Information

regarding its activities of its dairy livestock is found below:

Carrying value at January 1, 2022 P25,000,000

FV less cost to sell of biological assets purchased 5,000,000
Gain arising from change in fair value less cost to sell 900,000
attributable to price change
Gain arising from change in fair value less cost to sell 3,000,000
attributable to physical change
Decrease due to sales 4,000,000
Decrease due to harvest 800,000

What is the carrying amount of Sunny Farm Company’s biological assets

on December 31, 2022 statement of financial position?

a) P33,100,000
b) P29,100,000
c) P33,900,000
d) P29,900,000

32. The following pertains to Backyard Farm’s biological assets:

Price of the asset in the market P 15,000
Estimated commissions to brokers and dealers 800
Estimated transport and other costs necessary to get asset to 600
the market
Selling price in a binding contract to sell 7,000

The entity’s biological assets should be valued at

a) P13,600
b) P14,200
c) P21,200
d) P14,400

33. The following information pertains to Baby Pink Company at December 31,
2022:
Inventory, January 1 P 2,800,000
Purchases during the year 13,200,000
Inventory, December 31:
Cost 2,400,000
Net realizable value 2,000,000

Prior to 2022, the application of the lower of cost and net realizable value
never produced a write down in the company’s inventory to an amount
below cost. What is the cost of goods sold assuming the company applies
the lower of cost and net realizable value using the allowance method?
a) P14,000,000
b) P15,600,000
c) P13,600,000
d) P16,000,000

34. Forest Green Company reported inventory on December 31, 2022 at

P1,000,000 based on physical count priced at cost and before any necessary
adjustment for the following:

• Merchandise costing P60,000, shipped FOB shipping point from a vendor

on December 30, 2022 was received and recorded on January 5, 2023.
• Goods in the shipping area were excluded from inventory although
shipment was not made until January 5, 2023.
 The goods billed to the customer FOB shipping point on December 30, 2022
has a cost of P250,000.

What amount should be reported as inventory on December 31, 2022?

a) P810,000
b) P690,000
c) P1,250,000
d) P1,310,000

35. Lavender Company provided the following information for the current year:

Beginning inventory P 900,000

Purchases 5,200,000
Purchase returns 100,000
Freight-in 80,000
Sales 6,400,000
Sales discounts 45,000
Sales returns 55,0000

At year-end, a physical inventory revealed that the ending inventory was

only P750,000. The gross profit on sales has remained constant at 30%. The
entity suspects that some inventory may have been pilfered by one of the
employees.

What is the estimated cost of missing inventory at year-end?

a) P888,500
b) P850,000
c) P808,500
d) P1,208,500

36. The following items relate to the acquisition of a new machine by HoneyBee
Company in 2022:

Invoice price of machinery P 5,000,000

Cash discount not taken 60,000
Freight on new machine 25,000
Cost of removing the old machine 24,000
Loss on disposal of the old machine 220,000
Gratuity paid to operator of the old machine who was laid off 90,000
Installation cost of new machine 80,000
Repair cost of new machine damaged in the process of 12,000
installation
Testing costs before machine was put into regular operation 20,000
Salary of engineer for the duration of the trial run 55,000
Operating cost during first month of regular use 300,000
Cash allowance granted because the new machine proved to be 250,000
inferior quality

How much should be recognized as cost of the new machine?

a) P5,120,000
b) P4,820,000
c) P4,870,000
d) P4,990,000

37. The Silver Company determined that, due to obsolescence, equipment with
an original cost of P900,000 and accumulated depreciation at December 31,
2022, of P420,000 had suffered permanent impairment, and as a result
should have a carrying value of only P300,000. In addition, the remaining
useful life of the equipment was reduced from eight years to three year.

What is the impairment loss recognized on December 31, 2022?

a) P0
b) P140,000
c) P1,040,000
d) P120,000

38. Use the same information given in No.37. In its December 31, 2022
statement of financial position, what amount should Silver Company report
as accumulated depreciation?

a) P900,000
b) P880,000
c) P760,000
d) P780,000

39. Hans Company provided the following data for the current year:
 Inventory – January 1 Cost P2,500,000
Net realizable value 2,800,000
Net Purchases 6,900,000
Inventory – December 31 Cost 2,000,000
Net realizable value 2,700,000

What amount should be reported as costs of goods sold using allowance

method?

a) P7,700,000
b) P10,100,000
c) P7,400,000
d) P7,600,000

40. Anna Company for the year ended December 31, 2020 revealed the
following:
• During 2020, Anna received P40,000 as cash advance from a customer for
merchandise to be manufactured and shipped during 2021. The P40,000
was credited to sales revenue.
• Inventory at January 1, 2020 was understated by P71,000.
• Inventory at December 31, 2020 was understated by P96,000.
• Profit (before adjustments) reported on the 2020 profit or loss was
P900,000.

What is the correct profit for the year ended Dec. 31, 2020?
a) P845,000
b) P1,027,000
c) P965,000
d) P885,000

41. On October 1, 2020, Olaf Company entered into a cancellable purchase

commitment of purchasing 2,000 Watermelon Umbrellas at a cost of P55
each umbrella on February 5, 2021. On December 31, 2020, the market
price of each umbrella drops to P52. On February 5, 2021, the market price
of the umbrella rises to P56. In the foregoing transaction, how much is the
recorded purchase at February 5, 2021?
a) P104,000
b) P110,000
c) P112,000
d) P118,000
42. A physical count of inventory on December 31, 2019 revealed that Sven
Company had inventory on hand at that date with a cost of P5,900,000. The
annual examination identified that the following items were excluded from
this amount:
• Merchandise of P390,000 is held by Sven on consignment.
• Merchandise costing P330,000 was shipped by Sven FOB Destination to
a customer on December 31, 2019. The customer was expected to receive
the goods on January 5, 2020.
• Merchandise costing P460,000 was shipped by Sven FOB Shipping Point
to a customer on December 29, 2019. The customer was expected to
receive the goods on January 5,2020.
• Merchandise costing P930,000 shipped by a vendor Sven Destination on
December 31, 2019 was received by Sven on Jan. 5, 2020.
• Merchandise costing P410,000 purchased FOB Shipping Point was
shipped by the supplier on December 31, 2019 and received by Sven on
January 5, 2020.

What amount should appear for inventory on December 31, 2019?

a) P6,690,000
b) P6,700,000
c) P7,030,000
d) P6,640,000

43. Inasal Corp. purchased a forest plantation at a lump-sum amount of

P6,500,000. This plantation includes land, fences and trees and plants. The
fair value of the land and fences are determinable which is P4,000,000 and
P2,000,000, respectively.

If there is no market value available for the trees and plants, how much is
to be reported as biological assets in Inasal Corp.’s balance sheet?

a) P500,000
b) P6,500,000
c) P800,000
d) P885,000
44. Hot Chicken Co. provided the following assets in a forest plantation and
farm:

Freestanding trees 7,000,000

Land under trees 600,000

Road in forest 350,000

Animals related to recreational activities 2,200,000

Bearer plants 2,300,000

Bearer animals 2,800,000

Agricultural produce growing on bearer plants 700,000

Agricultural produce harvested 1,900,000

Plants with dual use 2,100,000

What total amount should be reported as biological assets?

a) P14,700,000
b) P12,500,000
c) P12,600,000
d) P14,800,000

45. Dark Company provided the following data at year-end :

Items shipped today, invoice mailed, FOB shipping point P300,000

Items shipped today, invoice mailed, FOB destination P200,000
Finished goods in company-owned retail store,
including 50% profit on cost. P750,000
Goods in process P500,000
Materials P800,000
Unexpired insurance on inventories P220,000
Items on counter for sale P150,000

Compute the correct amount of inventory

a) P2,150,000
b) P2,400,000
c) P1,870,000
 d) P2,370,000

46. Dark Company provided the following data at year-end :

Items shipped today, invoice mailed, FOB shipping point P300,000

Materials in transit shipped FOB shipping point,
excluding freight of 40,000. P110,000
Materials in transit, FOB Destination P50,000
Finished goods in transit to customers, shipped FOB destination P60,0000
Goods held on consignment P50,000
Items currently being used for window display P200,000
Items in receiving department, refused by because of damage P50,000

Compute the correct amount of inventory

a) P460,000
b) P370,000
c) P710,000
d) P410,000

47. Love Company regularly buys accounting books and is allowed a trade
discount of 20% and 10%. The entity made a purchase on Feb 1 and received
any invoice with a list price of P600,000, a freight charge of P50,000, and
payment terms of net 30 days. What is the cost of the purchase?
a) P482,000
b) P468,000
c) P432,000
d) P650,000

48. During the year, Gray Company purchased a new machine. A P200,000 down
payment was made and a three monthly installment of P400,000. The cash
price would have been P1,300,000. The entity paid no installation charges
under the monthly payment plan but a P20,000 installation charge would
have been incurred with a cash purchase. What amount should be
capitalized as cost of the machine?
a) P1,420,000
b) P1,400,000
c) P1,320,000
d) P1,300,000
49. Steve Company exchanged the equipment with a carrying amount of
P1,200,000 and a fair value of P2,000,000 for the equipment and P100,000
cash. The fair value of the equipment received was P1,800,000. The cash
flows from the new equipment are not expected to be significantly different
from the cash flows of the old equipment. At what amount should the
equipment received in the exchange be recorded?
a) P2,000,000
b) P1,800,000
c) P1,100,000
d) P1,200,000

50. Steve Company exchanged the equipment with a carrying amount of

P1,200,000 and a fair value of P2,000,000 for the equipment and P100,000
cash. The fair value of the equipment received was P1,800,000. The cash
flows from the new equipment are not expected to be significantly different
from the cash flows of the old equipment. What is the gain on exchange?
a) P0
b) P800,000
c) P600,000
d) P200,000

51. The following information pertains to Logtu Company's biological assets at

December 31, 2022

Selling price in a binding sale agreement P3,200,000

Price of the assets in an active market P3,000,000
Estimated brokers' and dealers' commissions P20,000
Transport and other costs expected to be incurred to being the assets to the
market P10,000

At what amount should the biological assets be presented on the statement

of financial position?
a) P3,000,000
b) P2,980,000
c) P3,200,000
d) P3,210,000

52. Miranda Corporation was incorporated on February 1, 2022. The following

items relate to the Miranda’s property and equipment transactions:
Payment to building contractor P15,000,000
Payment of medical bills of employees 25,000
 Cost of open house party to celebrate 45,000
opening of new building
Cost of windows broken by vandals 18,000
distracted by the celebration
Cost of paving driveway and parking lot 72,000
Cost of installing lights in parking lot 10,000
Architects fee for new building 90,000
Building permit for new construction 54,000

What is the total cost amount to be expensed?

a) P88,000
b) P188,00
c) P145,000
d) P15,170,000

53. On December 31, 2020, the building of Arena Company with a carrying
amount of P25,000,000 and remaining useful life of 8 years has been
determined to have a fair value of P40,000,000. Income tax rate is 35%.
Arena Co. depreciates its building using the straight-line method.
Compute for the revaluation surplus after tax.

a) P20,000,000
b) P14,000,000
c) P15,000,000
d) P9,750,000

54. Piper Company values its inventory at the lower of FIFO cost or net
realizable value (NRV). The inventory accounts at December 31, 2021, had
the following balances.
Raw materials P 450,000
Work in process 900,000
Finished goods 1,105,000

On January 10, 2021, Piper purchased raw materials with a list price of
P350,000 and was given a trade discount of 20% and 10%; terms 1/15,
n/30. Bolinao values inventory at the net invoice price.

On February 5, 2021, Piper repossessed an inventory item from a customer

who was overdue in making payment. The unpaid balance on the sale is
P11,500. The repossessed merchandise is to be refinished and placed on
sale. It is expected that the item can be sold for P36,000 after estimated
 refinishing costs of P12,800. The normal profit for this item is considered
to be P7,600.

The entry on January 10 will include a debit to Raw Materials Inventory of:
a) P249,480
b) P252,000
c) P280,000
d) P350,000

55. Using the same information given in No. 54, the repossessed inventory on
February 5 is most likely to be valued at:
a) P4,100
b) P15,600
c) P27,100
d) P30,800

56. On, January 21, 2021, the biological assets of Trio Company consist of ten
2-year-old animals with fair value less cost to sell of P12,000 each for a total
of P120,000.
Transactions during the year include the following:

• One animal aged 2.5 years was purchased on July 1, 2021 for P13,800
• One animal was born on July 1, 2021
• No animals were sold or disposed during the year

Per unit values less costs to sell are as follows:

Newborn animal at July 1 P10,000
2.5 - year old animal on July 1 13,800
New born animal on December 31 12,000
0.5 - year old animal on December 31 12,800
2 - year old animal on December 31 13,500
2.5 - year old animal on December 31 14,200
3 - year old animal on December 31 15,000

What is the fair value less cost to sell on December 31, 2021?
a) P143,800
b) P163,300
 c) P177,800
d) P188,300

57. Using the same information given in No. 56, what is the carrying amount on
December 31, 2021?
a) P145,800
b) P143,800
c) P140,800
d) P135,800

58. Using the same information given in No. 56, the increase in fair value of
biological assets in 2021 due to price change is:
a) P34,000
b) P37,000
c) P19,500
d) P21,500

59. On December 31, 2005, Reese Co. is in financial difficulty and cannot pay
a note due that day. It is a P600,000 note with P60,000 accrued interest
payable to Trear, Inc. Trear agrees to accept from Reese equipment that has
a fair value of P290,000, an original cost of P480,000, and accumulated
depreciation of P230,000. Trear also forgives the accrued interest, extends
the maturity date to December 31, 2008, reduces the face amount of the
note to P250,000, and reduces the interest rate to 6%, with interest payable
at the end of each year.

Reese should recognize a gain or loss on the transfer of the equipment of

a) P0.
b) P40,000 gain
c) P60,000 gain
d) P190,000 loss

60. Using the same information given in No. 59, Reese should recognize a gain
on the partial settlement and restructure of the debt of
a) P0
b) P15,000
c) P55,000
d) P75,000
61. Using the same information given in No. 59, Reese should record interest
expense for 2008 of
a) P0
b) P15,000
c) P30,000
d) P45,000

62. Lockey Company prepared the following bank reconciliation on June 30.

Balance per bank 9,800,000

Deposit in Transit 400,000
Outstanding Checks (1.400,000)

Balance per book 8,800,000

There were total deposits of P6,500,000 and charges for disbursements of

P9,000,000 for July per bank statements.

All reconciliation items on June 30 cleared the bank on July 31. Deposit
in transit totaled P600,000 and checks outstanding amounted to
P1,000,000 on July 31.

What is the adjusted cash in bank on July 31.

a) P7,300,000
b) P7,900,000
c) P6,900,000
d) P6,300,000

63. Bright Company purchased a trace of land for a factory site at P3,000,000.
The entity razed an old building on the property to make room for the
construction of the new building and sold the materials salvaged from the
demolition. Demolition of old building, 200,000. Legal fees for purchase
contract, 250,000. Title guarantee insurance, 50,000. Proceeds from sale of
salvaged materials, 20,000.

What is the carrying amount of land?

a) P3,300,000
b) P3,320,000
c) P3,500,000
 d) P3,520,000

64. Grant Company's accounting records indicated the following information:

Inventory, 1/1/21, P 600,000

Purchases during 2021, 3,000,000
Sales during 2021, 4,000,000

A physical inventory taken on December 31, 2021, resulted in an ending

inventory of P700,000. Grant's gross profit on sales has remained constant
at 30% in recent years. Grant suspects some inventory may have been taken
by a new employee.

At December 31, 2001, what is the estimated cost of missing inventory?

a) P100,000
b) P150,000
c) P200,000
d) P300,000

65. Entity K purchased an asset on Year 1 amounting to P500,000. The residual

value amounts to P50,000 and the useful life is 5 years. Other information
includes:

Hours useful Number of units

attained
Year 1 12,000 hrs Year 1 35,000 units
Year 2 11,000 hrs Year 2 34,000 units
Year 3 10,000 hrs Year 3 33,000 units
Year 4 9,000 hrs Year 4 32,000 units
Year 5 8,000 hrs Year 5 31,000 units
50,000 165,000
hours units

Calculate the asset carrying values for Year 3.

a) P90,000
b) P320,000
c) P230,000
d) P270,000
66. EeniJuan Company acquired equipment items during the past month,
details of which are as follows:
• Equipment A was purchased with an invoice price of P990,000 with a
cash discount of 10%. The discount was taken. Freight charges
amounted to P30,000. EeniJuan requested installation of the
equipment charging the entity P75,000.
• Equipment 2 was purchased with an invoice price of P1,600,000 with
a cash discount available at 5%. The discount was not taken.
Accordingly, supplies to be used for Equipment 2 was also purchased
amounting to P67,000.

How much is the cost of Equipment A?

a) P891,000
b) P921,000
c) P996,000
d) P966,000

67. Heindi Ta Yo Company is now a growing company. An acquisition of land

and construction of a new building was undertaken. The following
information related to the scenario:
• Land, at purchase price, P800,000.
• Legal fees related to land purchase, P55,000.
• Full construction cost of the new building, P6,760,000.
• Professional fees paid to the architect, P100,000.
• Sale of scrap materials from the old building previous situated in the
land, P60,000.
• Demolition cost of old building for the construction of the new
building, P80,000.
How much is the cost of building?
a) P6,860,000
b) P6,920,000
c) P6,940,000
d) P7,000,000

68. CawPareen Inc. purchased a construction crane on January 1, 2019 for

P25,000,000. The crane is being depreciated using the straight-line method
with a 20-year useful life and 10% residual value.
 On December 31, 2022, the entity determined that indicators of impairment
exist for the asset. On this date, the entity estimated that the crane has a
remaining useful life of 10 years, that its residual value will be zero.

It was also determined that the net cash inflows from the asset will total
P2,000,000 per year, and that its fair value less cost to sell is P10,000,000.
The appropriate discount rate is 8%.

How much is the impairment loss on December 31,2022?

a) P7,000,000
b) P13,420,163
c) P6,079,837
d) P7,079,837

69. Using the same information above, how much is the depreciation expense
in 2023?
a) 1,432,016
b) 1,342,016
c) 1,324,106
d) 1,423,016

70. CiaPahrin Company took a physical inventory on December 31 and

determined that goods costing P200,000 were on hand. Not included in the
physical count were P25,000 of goods purchased from Pelzer Corporation,
f.o.b. shipping point, and P22,000 of goods sold to Alvarez Company for
P30,000, f.o.b. destination. Both the Pelzer purchase and the Alvarez sale
were in transit at year-end. What amount should Stallman report as its
December 31 inventory?
a) 230,000
b) 247,000
c) 255,000
d) 225,000
Summary of Answers
1. D
2. A
3. D
4. D
5. A
6. B
7. A
8. D
9. C
10. A
11. C
12. A
13. B
14. D
15. A
16. A
17. C
18. B
19. C
20. D
21. C
22. C
23. A
24. C
25. D
26. A
27. C
28. C
29. C
30. A
31. B
32. A
33. C
34. D
35. A
36. C
37. B
38. A
39. C
40. D
41. B
42. D
43. A
44. C
45. A
46. D
47. A
48. C
49. C
50. A
51. B
52. A
53. D
54. A
55. B
56. C
57. B
58. A
59. B
60. D
61. A
62. C
63. A
64. A
65. C
66. C
67. D
68. D
69. B
70. B

Summary of Answers – Explained

1. (D)
2. (A) If goods are shipped FOB destination, legal title (and control) is not
transferred until the goods are delivered to the buyer’s destination.
3. (D)
4. (D) Agricultural produce is the harvested product of the entity’s biological
assets.
5. (A)
6. (B)
7. (A)
8. (D)
9. (C)
10. (A)
11. (C) Inventory cost should not include abnormal waste storage costs,
administrative overheads, unrelated to production selling costs... [IAS 2.16 and
2.18]
12. (A)
13. (B) PV of 1 since the entity does not have to pay until after 3 years.
14. (D) The major characteristics of property, plant, and equipment are: (1) They are
acquired for use in operations and not for resale. (2) They are long-term in
 nature and usually subject to depreciation. and (3) They possess physical
substance.
15. (A) In reference to IAS 41 paragraph 13.
16. (A) Bearer plant is a living plant that:
• Used in the production or supply of agricultural produce
• Expected to bear produce for more than a period
• Has remote likelihood of being sold as agricultural produce except
incidental scrap sales
17. (C) According to PAS 41, Biological assets should be measured on initial
recognition and at subsequent reporting dates at fair value less costs to
sell, unless fair value cannot be reliably measured.
18. (B) Under retail inventory method:
• Under Retail inventory method, purchase discounts usually are
considered as a reduction of the cost of purchases.
• Under Retail inventory method, freight costs are treated as a part of the
purchase cost;
• Under Retail inventory method, purchase returns and allowances are
ordinarily considered both a reduction of the price at both cost and retail
19. (C) Administration and other general overhead costs are not costs of an item
of property, plant and equipment.
20. (D) Revaluations shall made the sufficient regularity to ensure that the carrying
amount does not differ materially from that which would be determined using
fair value at the end of the reporting period. The frequency of revaluation
depends upon the changes in fair values of the items of PPE being
revalued.
21. (C)
22. (C)
23. (A)
24. (C)
25. (D)
26. (A) The IASB decided to clarify that items such as spare parts, stand-by
equipment and servicing equipment shall be recognized as property, plant and
equipment when they meet the definition of property, plant and equipment. If
they do not meet this definition they are classified as inventory (Classification of
Servicing Equipment - Amendments to IAS 16)
27. (C)
28. (C)
29. (C)
30. (A)
31. (B) P29,100,000

Carrying value, January 1 P25,000,000

Assets Purchased 5,000,000
Gain from change in FV less cost to sell due to price change 900,000
Gain from change in FV less cost to sell due to physical change 3,000,000
Decrease due to sales (4,000,000)
Decrease due to harvest (800,000)
Carrying value, December 31 29,100,000

32. (A) P13,600

Fair Value (15,000 - 600) P14,400

Cost to sell (800)
Total 13,600

33. (C) P13,600,000

Inventory, January 1 P 2,800,000

Purchases during the year 13,200,000
Cost of goods available for sale 16,000,000
Less: Inventory, December 31 (2,400,000)
Cost of goods sold 13,600,000

34. (D) P1,310,000

Physical count P 1,000,000

Merchandise shipped FOB shipping point on December 60,000
30,2022 from a vendor
Goods shipped FOB shipping point to a customer on January 250,000
4, 2023
Correct inventory 1,310,000

35. (A) P888,500

Sales P6,400,000
Sales return (55,000)
Net sales 6,345,000
Inventory, January 1 P 900,000
Purchases 5,200,000
Purchase returns (100,000)
Freight in 80,000
Goods available for sale 6,080,000
Cost of good sold (70% x 6,345,000) (4,441,500)
Inventory, December 31 1,638,500
Physical Inventory, December 31 750,000
Cost of missing inventory 888,500

36. (C) P4,870,000

Invoice price of machinery 5,000,000

Cash discount not taken -60,000
Freight on new machine 25,000
Installation cost of new machine 80,000
Testing costs 20,000
Salary of engineer for the duration of the trial run 55,000
Cash allowance -250,000
Cost of the new machine 4,870,000

37. (B) P140,000

Original cost of equipment P1,500,000

Accumulated Depreciation (460,000)
Carrying value 1,040,000
Recoverable amount (900,000)
Impairment Loss 140,000

38. (A) P900,000

Accumulated depreciation prior to impairment 460,000

Impairment loss credited to accumulated depreciation 140,000
Depreciation expense for the year after impairment (900,000 / 3
years) 300,000
Accumulated depreciation, December 31, 2022 900,000
39. (C) P7,400,000
Inventory – Jan. 1 P2,500,000

Net Purchases 6,900,000

Inventory – Dec. 31 (2,000,000)

Cost of Goods Sold P7,400,000

40. (D) P885,000

Unadjusted profit P900,000

Overstated sales (40,000)

Inventory, beg. – understated (71,000)

Inventory, end – understated 96,000

Adjusted profit 885,000

41. (B) P110,000

No. of umbrellas purchase P2,000

Purchase price 55

Cost P110,000

42. (D) P6,640,000

Unadjusted balance P5,900,000

Sold FOB destination 330,000

Purchased FOB shipping point 410,000

Adjusted inventory P6,640,000

43. (A) P500,000

Lump-sum price P6,500,000
 FV of Land (4,000,000)

FV of fence (2,000,000)

Value assigned to the trees – Biological Assets P500,000

44. (C) P12,600,000

Freestanding trees P7.000,000

Bearer animals 2,800,000

Agricultural produce growing on bearer plants 700,000

Plants with dual use 2,100,000

Total – Biological assets P12,600,000

45. (A) P2,150,000

Items shipped today, invoice mailed, FOB destination P200,000
Finished goods in company-owned retail store,
including 50% profit on cost (750,000 ÷150%) P500,000
Goods in process P500,000
Materials P800,000
Items on counter for sale P150,000
Correct amount of inventory 2,150,000
46. (D) P410,000
Materials in transit shipped FOB shipping point,
excluding freight (110,000 + 40,000) P150,000
Finished goods in transit to customers, shipped FOB destination P60,000
Items currently being used for window display P200,000
Correct amount of inventory P410,000
47. (C) P482,000
P600,000 x 80% x90% = 432,000 + 50,000 = P482,000
48. (C) P1,320,000
Cash price P1,300,000
Installation charge P20,000
Capitalized cost P1,320,000

49. (C) P1,100,000

Carrying Amount P1,200,000
Less : cash received P100,000
 Cost of new equipment P1,100,000

50. (A) P0
Since there is no commercial substance

51. (B) P2,980,000

Price of the assets in an active market P3,000,000
Estimated brokers' and dealers' commissions P20,000
Biological asset to be presented P2,980,000

52. (A) P88,000

Solution:
Payment of medical bills of employees P25,000
Cost of open house party 45,000
Cost of windows broken by vandals 18,000
Total cost amount that should be expensed P88,000

53. (D) P9,750,000

Solution:
Fair Value P40,000,000
Carrying Amount (25,000,000)
Revaluation surplus before tax P15,000,000
Deferred Tax Liability
15,000,000 x 35% (5,250,000)
Revaluation surplus after tax P9,750,000
15,000,000 x 65%

54. (A) P249,480

Solution:
List Price P350,000
Multiply: Trade Discount
100-20% 80%
100-10% 90%
Purchase Discount (100-1%) 99% __
Amount debited to RM P249,480

55. (B) P15,600

Solution:
Estimated selling price P36,000
Less refinishing costs (12,800)
Net realizable value 23,200
Less normal profit (7,600)
Valuation of repossessed inventory P15,600
56. (C) P177,800
Ten animals from January 1 now 3 years old each (15,000 x 10) P150,000
One animal purchased on July1 now 3 years old 15,000
One animal born on July 1 now 0.5 year old 12,800
Fair Value Less Cost to Sell, December 31 P177,800

57. (B) P143,800

Solution:
Carrying amount, January P120,000
One 2.5 year old animal purchased on July 1 13,800
One animal born on July 1 10,000
Carrying amount, December 31 P143,800

58. (A) Refer to no. 56 and 57

Solution:
Increase in Fair Value (P177,800 – P143,800) P34,000

59. (A) P40,000

P290,000 – (P480,000 – P230,000) = P40,000

60. (D) P75,000

(P600,000 + P60,000) – [P290,000 + P250,000 + (P250,000 × .06 × 3)] =
P75,000

61. (A) P0
The effective-interest rate is 0%.

62. (C) P6,900,000

Balance per bank, June 30 P9,800,000
Bank Deposits for July 6,500,000
Bank Disbursement for July (9,000,000)
Balance per Bank-July 31 7,300,000
Deposit in Transit – July 600,000
Outstanding Checks (1,000,000)
Adjusted bank balance P6,900,000
63. (A) P3,300,000
Purchase Price P3,000,000
Legal Fees 250,000
Title Guarantee Insurance 50,000
Adjusted bank balance P3,300,000
64. (A) P100,000
P4,000,000 × .70 = P2,800,000 (COGS)
P600,000 + P3,000,000 – P2,800,000 – P700,000 = P100,000.

65. (C) P230,000

Asset cost 500,000.00

Less: Residual value 50,000.00
Depreciable amount 450,000.00
Divide by: Useful life 5 years
Annual depreciation 90,000

Carrying Amount 500,000

Less: Accumulated Depreciation 270,000
(Annual depreciation of 90,000 x 3 years)
Carrying Value for Year 3 230,000

66. (C) P996,000

Invoice price, net of discount

P990,000 x 90% P891,000
Freight charges 30,000
Installation charges 75,000
Cost of equipment A 996,000

67. (D) P7,000,000

Building
Construction cost P6,760,000
Professional fees – architect 100,000.
Sale of scrap materials 60,000.
Demolition cost 80,000
P7,000.000

68. (D) P7,079,837

 Initial cost P25,000,000
Residual cost 2,500,000
Depreciable cost 22,500,000
Divide by: Useful life 20 years
Depreciation P1,125,000

Initial cost P25,000

Accum. Dep. (2019-2022) 4,500,000
Carrying amount, 12/31,2022 P20,500,000

FV less cost to sell P10,000,000

Value in use (PV annuity; 2M; 10 years; 8%) 13,420,163
Recoverable amount (higher) P13,420,163

• Recoverable amount is lower than then carrying amount, thus, there is

impairment.

Carrying amount, 12/31,2022 P20,500,000

Recoverable amount 13,420,000
Impairment loss P7,079,837

69. (B) P1,342,016

New carrying amount, 1/1/2023 P13,420,163

Remaining useful life 10 years
Depreciation, 2023 P1,342,016

70. (B) P247,000

Inventory per physical count, 12/31 P200,000

Goods-in-transit purchased FOB shipping point 25,000
Goods-in-transit sold FOB destination 22,000
Inventory, 12/31 P247,000