INSTRUCTIONS: Select the correct answer for each of the following questions.

On January 1, 2012, Franklin Gothic Company purchased a machinery for P600,000, with an
estimated economic useful life of 12 years. Straight line method of depreciation is to be
used. On December 31, 2015, it was properly determined that the fair value less cost of
disposal is P235,000 while the value in use is P240,000. On January 1, 2018, it was
properly computed that the recoverable amount of the asset is P250,000.

1. How much is the impairment loss on December 31, 2015?

a. 0 c. 165,000
b. 110,000 d. 160,000

2. How much is the recovery from impairment that should be recognized on

January 1, 2018?
a. 50,000 c. 120,000
b. 70,000 d. 0

Hydrogen Company acquired a building on April 1, 2017 for P 18,000,000. The building is
being leased out under operating lease wherein the lessee pays rent on a quarterly basis
amounting to P 30,000. At that date, the building had an estimated useful life of 30 years
and depreciated using the straight-line method. On December 31, 2017, the fair value of
the building was P 19,200,000.

3. How much is the total net increase/decrease in profit for the year 2017
assuming the company is using fair value model?
a. 1,290,000 c. 1,320,000
b. 1,200,000 d. 840,000

Avenir Company purchased a machine for P650,000 on January 1, 2014. The estimated
salvage value of the machine was P50,000 and Avenir estimated that the machine would
have a useful life of 10 years, with depreciation being computed using the straight line
method.

On January 2016, the company spent P28,000 for the inspection and overhaul to the
machine. This cost was necessary to meet its original assessed standard of performance.
The company also spent P30,000 repairs. The repairs will not extend the useful life of the
machine but will eventually increase the company’s production.
4. How much is the depreciation expense for the year 2016?
a. 63,750 c. 67,250
b. 70,000 d. 73,500

Bodoni Corp. purchased a machinery January 1, 2015, at a cost of P1,000,000. It is being

depreciated using the straight-line method over its projected useful life of 10 years. At
December 31, 2016, the asset’s fair value was P1,200,000. Accordingly, an entry was made
on that date to recognize the revaluation write up. A revaluation was made again on
December 31, 2018 wherein the sound value of the asset was determined to be P570,000.
The company has the policy of transferring any revaluation surplus to retained earnings as
the asset is being used up.

5. How much is the revaluation surplus on December 31, 2016?

a. 500,000 c. 1,200,000
b. 400,000 d. 0
6. How much is the revaluation/impairment loss for the year 2018?
a. 330,000 c. 30,000
b. 70,000 d. 0

Helium Company is preparing its July 31 bank reconciliation. The ff. data are available:

July Data Per Bank Per Book

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Balance, June 30 P741,400 P719,400
July deposits reflected 476,000* 490,000
July checks reflected (617,000)** (610,000)
Note collected (including P2,000 interest) 202,000
Service charge (1,200)
Balance, July 31 801,200 599,400

From the June 30 bank reconciliation:

Deposits in transit, P17,000 Outstanding checks, P39,000

*Erroneously includes a deposit of P25,000 by Hello Corporation.

**Erroneously includes a check drawn by Haller Company for P15,000.

7. What is the amount of outstanding checks at July 31?

a. 47,000 c. 8,000
b. 15,000 d. 7,000

8. What is the amount of deposit in transit at July 31?

a. 31,000 c. 258,000
b. 3,000 d. 56,000

Lithium Company uses the net price method of accounting for cash discounts. In one of its
transactions on December 21, 2017, Lithium Company sold merchandise with a list price of
P4,000,000 to a client who was given a trade discount of 20% and 10%. Credit terms given
by Lithium Company were 5/10, 3/15, n/30. The goods were shipped FOB shipping point,
freight collect. Total freight charge paid was P100,000. On January 4, 2018, the client paid
his account.

9. What is the net realizable value of this accounts receivable on Dec. 31, 2017?
a. 2,693,600 c. 2,793,600
b. 2,736,000 d. 2,880,000

Information pertaining to the inventory of Boron Company for the year ended December 31,
2017 follows:

Beginning inventory P 200,000* Ending Inventory P 300,000**

Total Purchases 830,000 Purchase returns 35,000
Freight-in 10,000 Purchase discounts 5,000

*Includes items A and B costing P20,000 and P30,000, respectively. The net
realizable value of item A is P15,000 and item B is P27,000.
** Includes cost of items A and B still unsold at the end of the year. The net
realizable value of item A is P23,000 and item B is P29,000.

10. How much is the cost of goods sold under the direct method of accounting
for write-down and reversal of write-down of inventories?
a. 700,000 c. 685,000
b. 698,000 d. 693,000

11. How much is the ending inventory that should be reported in the statement
of financial position on December 31, 2017 using the allowance method?
a. 300,000 c. 299,000
b. 293,000 d. none of the choices

On August 31, 2017, Carbon Company sold goods to C Company. C company signed a non-
interest bearing note requiring payment of P80,000 annually for five years. The first
payment was made on August 31, 2017. The prevailing rate of interest for this type of note
at the date of issuance was 12%. Information on present value factors is as follows:

Present value PV of Ordinary

Periods of 1 at 10% annuity of 1 at 10%
4 0.636 3.037
5 0.567 3.605

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 12. How much should be reported as sales revenue on August 31, 2017?
a. 242,960 c. 288,400
b. 322,960 d. 368,400

13. What is the amount of interest income for the year 2017?
a. 9,719 c. 11,536
b. 12,918 d. 14,736

The petty cash fund of Oxygen Trading on December 31, 2017 is composed of the following:
Currencies and coins
10 pcs. @ P 100 ?
8 pcs. @ P 50 ?
30 pcs. @ P20 ?
Unreplenished paid vouchers for expenses and loans dated December 16-31, 2017:
Supplies 1,200
Loan to office director 1,800
Unused supplies 200
Check drawn by office manager dated 12/30/17 2,500
Check drawn by employee dated 1/18/18 1,500
Check drawn by customer dated 12/25/17 1,000
Envelope containing cash donations for the departed parent
of one employee, ( currencies attached ) 400

Upon audit of the petty cash fund on December 31, it was determined that the there
was a cash shortage of P500.

14. How much is the imprest petty cash fund established by Oxygen company?
a. 5,000 c. 8,000
b. 9,500 d. 12,000

Sodium Company had the following bank reconciliation at March 31, 2015:

Balance per bank statement, 03/31 P490,000

Add: Deposit in transit P100,000
Debit memo. 10,000 110,000
Total P600,000
Less: Outstanding checks P 125,000
Credit memo 60,000 185,000
Balance per book, 03/31 P415,000

All reconciliation items at March 31, 2015 cleared through the bank in April.
Outstanding checks at April 30, 2015, totaled P75,000; deposits in transit amounted to
P150,000; Credit memo for April-P80,000; Debit memo for April P15,000, Bank receipts
for April-P600,000 including erroneous bank credit of P100,000 corrected by the bank in
April and Bank disbursements for April -P500,000 including erroneous bank charge of
P50,000 corrected by the bank in May.

15. What is the amount of adjusted cash receipts in April?

a. 600,000 c. 550,000
b. 500,000 d. 650,000

16. What is the amount of adjusted cash disbursements in April?

a. 300,000 c. 400,000
b. 450,000 d. 600,000

On October 1, 2017, a fire damaged a warehouse of Aluminium Corporation. The entire

company and many accounting records stored in the warehouse were completely destroyed.

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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 P 575,400

Accounts payable, January 1 352,560
Accounts payable, October 1 491,400
Goods out on consignment on Oct. 1 at cost 195,000
Payments to suppliers, January to Oct. 1 1,950,000
Collections of accounts receivable, Jan. 1 to Oct. 1 3,015,200
Accounts receivable, January 1 522,360
Accounts receivable, October 1 515,560
Goods in transit on Oct.1 purchased FOB shipping point
( included in total purchases ) 69,500
Gross profit rate on sales 30%

17. How much is the estimated inventory loss?

a. 363,360 c. 488,860
b. 293,860 d. 558,360

Sulfur Corporation had the following amounts under retail inventory method:
Beg. inventory-cost 250,000 Purchases-cost 898,500
Purchase returns-cost 60,000 Sales (net of 2% discount) 1,234,800
Freight-in 80,000 Beg. inventory-retail 390,000
Sales returns 95,550 Purchases-retail 1,460,000
Purchase returns-retail 80,000
Purchase discount 18,000

18. How much is the estimated cost of ending inventory under AVERAGE
method?
a. 393,607 c. 396,394
b. 394,875 d. 395,121

On January 2, 2017, Chlorine Company decided to convert one of its building into an
investment property that is to be carried at fair value. The building was previously used as
an owner-occupied property. The building was acquired on January 1, 2015 costing
P10,000,000 with an estimated useful life of 8 years using the straight-line method. The
cost of converting the building is insignificant but as a result of the change in the usage, the
fair market value of the building was reliably valued at P8,000,000.

19. What amount should be taken directly to equity on the date of transfer?
a. 0 c. 750,000
b. 500,000 d. 2,000,000

On December 31, 2015, Nepal Corporation issued 20-year, nonconvertible bonds of

P5,000,000 for P 5,851,160 to yield 10%. Interest is payable annually on December 31 at
12%. On June 1, 2018, Nepal retires 3,000 of its own P 1,000 bonds. Total cash paid by
Nepal is P3,120,000. The accounting period of Nepal Corporation is the calendar year.

20. What is the amount of gain or loss on early retirement of bond that will be
reported in 2018 income statement?
a. 367,440 c. 617,440
b. 517,440 d. 514,740

During January 2017, Argon Company recorded the following information pertaining to its
inventory:
UNITS UNIT COST TOTAL COST
Jan. 1 balance 20,000 P 10 P 200,000
Jan. 15 sales 15,000

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Jan. 18 purchase 20,000 11 220,000
Jan. 20 purchase 15,000 12 180,000
Jan. 25 sales 24,000
Jan. 30 purchases 14,000 15 210,000
Jan. 31 sales 10,000

21. How much is the cost of goods sold assuming the company is using moving
average method?
a. 550,000 c. 810,000
b. 260,000 d. none of the choices

22. Using FIFO method, what amount of inventory should Argon report in its
January 31, 2017 balance sheet?
a. 240,000 c. 280,000
b. 260,000 d. 282,000

The following transactions (in summary) affecting accounts receivable of Potassium

Company occurred during the year ended December 31, 2017:

Sales (all on account, terms: 2/10, 1/15, n/60) P3,000,000

Cash received from customers 3,200,000
The cash received includes the following:
Customers paying within the 10-day discount period P1,764,000
Customers paying within the 15-day discount period 990,000
Recovery of accounts written-off 6,000
Customers paying beyond the discount period ?
Accounts receivable written-off as worthless 22,000
Credit memo for sales return 12,000

It is the company’s policy to provide for uncollectible accounts equal to 1% of sales.

Accounts receivable, 1/1/17: P2,000,000 ; Allowance for bad debts, 1/1/17:
P10,000.

23. How much is the accounts receivable that should be presented in the
statement of financial position on December 31, 2017?
a. 1,726,000 c. 1,702,000
b. 1,696,000 d. 1,708,000

On January 2, 2017, Oregon Company sold equipment with an estimated useful life of 10
years and immediately leased it back for 5 years for a fixed monthly rental. The
equipment’s carrying amount was P648,000. The sales price was P619,200. The fair value
of the equipment was P669,600. The lease agreement is an operating lease. At the time of
leaseback, rental payments to the new owner is equal to the prevailing market rate rent.

24. What amount of deferred loss should be recognized on January 2, 2017?

a. 50,400 c. 28,800
b. 23,040 d. 0

Calcium Company has a herd of 50, 2-year old animals and 50, 1-year old animals on Jan. 1, 2015.
20 animals aged 2.5 and 20 animals aged 1.5 were purchased on July 1, 2015.No animals were
born during 2015. The fair values less cost to sell per unit were as follows:

1.0-year old on Jan. 1, 2015- P2,500

1.5-year old on Jan. 1, 2015- 3,750
2.0-year old on Jan. 1, 2015- 5,000
2.5-year old on Jan. 1, 2015- 6,250
3.0-year old on Jan. 1, 2015- 7,500
1.0-year old on July 1, 2015- 3,000
1.5-year old on July 1, 2015- 4,500

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 2.0-year old on July 1, 2015- 6,000
2.5-year old on July 1, 2015- 7,500
3.0-year old on July 1, 2015- 9,000
1.0-year old on Dec.31, 2015- 3,500
1.5-year old on Dec.31, 2015- 5,250
2.0-year old on Dec.31, 2015- 7,000
2.5-year old on Dec.31, 2015- 8,750
3.0-year old on Dec.31, 2015- 10,500

25. How much is the increase in the fair value of the biological assets due to
physical change?
a. 190,000 c. 385,000
b. 420,000 d. 130,000

Hanoi Company leased machinery to Vietnam Company on July 1, 2017, for a ten-year
period expiring June 30, 2027. Equal annual payments under the lease are P75,000 and are
due on July 1 of each year. The first payment was made on July 1, 2017. The rate of
interest used by Hanoi and Vietnam is 9%. The cash selling price of the machinery is
P525,000 and the cost of the machinery on Hanoi's accounting records was P465,000.

26. Assuming that the lease is appropriately recorded as a sale for accounting
purposes by Hanoi, how much is the total net amount of income taken to
profit or loss for the year ended December 31, 2017?
a. 20,250 c. 80,250
b. 83,625 d. 23,625

At the beginning of 2017, Asuncion Co. purchased an asset for P600,000 with an estimated
useful life of 5 years and an estimated salvage value of P50,000. For financial reporting
purposes the asset is being depreciated using the straight-line method; for tax purposes the
double-declining-balance method is being used. Asuncion Co.’s tax rate is 40% for 2017 and
all future years.

27. At the end of 2017, which of the following deferred tax accounts and
balances is reported on Asuncion’s balance sheet?

Account Balance
a. Deferred tax asset P52,000
b. Deferred tax liability P52,000
c. Deferred tax asset P78,000
d. Deferred tax liability P78,000

Coach Company is negotiating to acquire the net assets Lacoste Company. Under the plan,
Coach is willing to pay for goodwill computed by capitalizing at 25% Lacoste’s average
earnings in excess of the 10% normal return based on appraised value of net assets. This is
the same level of income experienced by companies similar to Lacoste line of business.
Lacoste’s income for the past three years averaged P3,000,000. Lacoste’s assets and
liabilities are
Book Value Appraised Value

Assets, excluding goodwill P30,000,000 P39,000,000

Liabilities 10,500,000 10,500,000

28. What is the amount of goodwill?

a. P600,000
b. P420,000
c. P150,000
d. P105,000

The Statement of Financial Position of CPA Company at the end of 2016 and 2017 follow:

2016 2017
CASH 300,000 700,000
ACCOUNTS RECEIVABLE, NET 600,000 900,000

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MERCHANDISE INVENTORY 700,000 500,000
PREPAID EXPENSE 100,000 250,000
LONG-TERM INVESTMENT 200,000 0
MACHINERY AND EQUIPMENT 900,000 1,200,000
ACCUMULATED DEPRECIATION 150,000 250,000
LAND 0 700,000
ACCOUNTS PAYABLE 650,000 400,000
ACCRUED EXPENSES 120,000 200,000
CASH DIVIDENDS PAYABLE 10,000 20,000
NOTE PAYABLE-LONG-TERM - 400,000
ORDINARY SHARE, P10 PAR 1,000,000 1,500,000
SHARE PREMIUM-ORDINARY 50,000 350,000
RETAINED EARNINGS 820,000 1,250,000
TREASURY SHARES, AT COST 0 120,000

Additional information for the year 2017:

Land was acquired in exchange for 40,000 ordinary shares. Ordinary shares were also
issued for cash at par value. All machinery and equipment were purchased for cash except
for Machinery costing P400,000 that was acquired through issuance of long-term note.
Long-term investment was sold for P140,000. There were no other transactions affecting
long-term investments. Equipment costing P 350,000 was sold for P390,000 with book
value of P280,000. There were no other transactions affecting retained earnings other than
net income of P600,000 and cash dividends declared. Treasury shares were acquired for
cash.

29. How much is the net cash provided by/used in financing activities?
a. 60,000 c. 190,000
b. 180,000 d. 280,000

30. How much is the net cash provided by/used in investing activities?
a. 120,000 c. 680,000
b. 140,000 d. 280,000

31. How much is the net cash provided by/used in operating activities?
a. 350,000 c. 240,000
b. 300,000 d. none of the choices

On December 31, 2017, the bookkeeper of Madrid Company provided the following
information:

Accounts payable, net of P500,000 debit balance in creditor’s account P 2,500,000

Deferred tax liabilities 300,000
Long-term advances to officers 500,000
Other trade payables ( payable normally in 15 months ) 250,000
Bonds Payable 2,000,000
Stock dividends payable 800,000
Credit balance in customers’ accounts 400,000
Provision for litigation 50,000
Accrued interest on bonds payable 300,000
Salaries payable 600,000
Contingent liabilities 100,000
Premium on bonds payable 700,000
32. In the December 31, 2017 statement of financial position, how much
current liabilities should be reported?
a. 4,250,000 c. 4,200,000
b. 4,600,000 d. 4,700,000

33. In the December 31, 2017 statement of financial position, how much non-
current liabilities should be reported?
a. 3,500,000 c. 3,250,000
b. 3,000,000 d. 3,750,000

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AMV Company constructed its own factory building. The company had a P1,000,000 two-
year 12% loan specifically obtained to finance the asset construction. The construction
began on January 1, 2016 and the building was completed on December 30, 2017.
Expenditures on the building were made as follows:

January 1, 2016 800,000 March 1,2017 600,000

April 30, 2016 300,000 September 30,2017 400,000
November 1, 2016 600,000

AMV has the following outstanding loans:

General borrowings:
10% note issued prior to construction of new building;
term, 10 years 1,500,000
12% note issued prior to construction of new bulding;
Term, 15 years 2,500,000

34. How much is total initial cost of the building?

a. 2,992,266 c. 2,112,266
b. 3,112,266 d. 3,224,766

You noted the following items relative to the company’s intangible assets of Pete
Corporation at December 31, 2016.

• On January, 2015, Pete signed an agreement to operate as franchisee of Clear

Copy Service, Inc., for an initial franchise of P680,000. Of this amount, P200,000
was paid when the agreement was signed and the balance was payable in four
annual payment of P120,000 each beginning on January 1, 2016. The agreement
provides that the down payment is not refundable and no future services are
required in the franchisor. The implicit rate for loan of this type is 14%. The
agreement also provides that 5% of the revenue from the franchise must be paid to
the franchisor annually. Pete’s revenue from the franchise for 2016 was P8,000,000.
Pete estimates the useful life of the franchise to be ten years.

• Pete incurred P624,000 of experimental development costs in its laboratory to

develop a patent which was granted on January 2, 2015. Legal fees and other costs
associated with the registration of the patent totaled P131,200. Pete estimates that
the useful life of the patent will be eight years.

• A trademark was purchased from Jane Company for P320,000 on July 1, 2014.
Expenditures for successful litigation in defense of the trademark totaling P80,000
were paid on July 1, 2016. Pete estimates that the trademark’s useful life will be
indefinite.

35. What are the carrying amounts of the intangible assets (franchise, patents
and trademarks, respectively) on December 31, 2016? (Round off present
value factors to four decimal places)
a. P439,715; P98,400; P320,000
b. P439,715; P566,400; P240,000
c. P544,000; P566,400; P320,000
d. P544,000; P98,400; P240,000

On January 1, 2017 Belgium Corp. acquired 35% of the total 500,000 outstanding ordinary
shares of Brussels Company for P3,500,000. Brussels reported during 2017 a total net
income of P4,000,000 and actuarial loss from defined benefit plan from of P200,000.
Belgium received 140,000 ordinary shares during 2017 as a result of bonus issue distributed
by Brussels. The fair value of share at that time is P15 per share. Brussels distributed total
cash dividends at year end of P1,000,000.

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 36. What is the carrying value of Investment in Brussels on December 31,
2017?
a. 4,480,000 c. 6,580,000
b. 4,725,000 d. none of the choices

Dubai Corporation had the following items incurred in its “Property , Plant and Equipment” &
Research and Development activities as at December 31, 2015:

Cash paid to purchase a land with an old building at the

beginning of the year P660,000
Mortgage assumed on the land purchased 240,000
Commission paid to real estate agent 150,000
Cost of razing the old building 120,000
Special assessment for public improvement 25,000
Cost of option paid for land not acquired 80,000
Building construction labor costs 800,000
Building construction materials 672,000
Cost of temporary fencing the property during the construction 28,000
Architect’s fees 112,500
Cost of paving driveway and parking lot 70,000
Excavation expenses 135,000
Fixed overhead charged to the building 300,000
Insurance on building during construction 31,500
Construction gain 360,000
Property taxes on land covering the period 2013-2015 240,000
Interest expense on construction loan during construction 150,000
Invoice cost of machinery acquired 381,000
Freight, unloading, and delivery charges 22,500
Cost of testing and trial run 20,000
Salvage proceeds from demolished building 15,000
Proceeds from sale of produce of the machinery test runs 3,500

37. Building
a. 2,334,000 b. 2,349,000 c. 2,229,000 d. 2,306,000
38. Machinery
a. 381,000 b. 423,500 c. 420,000 d. 386,000

Rome, Inc., places a coupon in each box of its product. Customers may send in ten coupons
and P3.00, and the company will send them a CD. Sufficient CDs were purchased at P5.40
apiece. A certain number of boxes of product were sold in 2017. It was estimated that a
total of 5% of the coupons will be redeemed. In 2017, 18,000 coupons were redeemed. At
December 31, 2017, the following adjusting entry was made to record the estimated liability
for premium outstanding:

Premium expense 10,800

Estimated liability for premium 10,800

39. Compute the number of boxes of product sold in 2017.

a. 63,000 b. 1,260,000 c. 450,000 d. 1,008,000

The records of Ottohan Inc. revealed the following information on September 30, 2016:

Cost Retail
Inventory, January 1, 2016 420,899 522,368
Purchases, 2,865,240 4,076,380
Freight in 55,000
Sales 3,272,020
Purchase return 27,430 38,402
Sales allowance 25,500

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Purchase allowance 18,286
Sales returns 55,500
Sales discounts 22,200
Purchase discounts 15,500
Abnormal shrinkages 47,000 50,500
Normal shoplifting losses 150,000
Discounts granted to employees 15,500
Departmental transfer in 25,500 64,000
Departmental transfer out 35,500 75,000
Mark ups 166,973
Mark downs 226,973
Mark up cancellations 45,000
Markdown cancellation 35,000

Note: (Round off % to 2 decimal places e.g. xx%)

40. How much is the cost of Ending inventory using FIFO method?
a. 761,775 c. 730,161
b. 750,888 d. none of the choices

Zumba has the following information for its five business segments for the year 2016:
REVENUES
Segment External Internal Segment profit ( loss ) Segment assets

A P 15,000,000 P4,000,000 P 6,000,000 P 10,000,000

B 4,500,000 2,000,000 (3,000,000) 5,000,000
C 2,500,000 1,000,000 ( 2,500,000) 4,000,000
D 1,500,000 700,000 600,000 2,000,000
E 500,000 300,000 (1,500,000) 1,000,000

41. Based on revenue test, which of the foregoing are reportable segments?
a. A, B, C
b. A, B, C, D
c. A, B, C, D, E
d. A and B

On December 31, 2014, Greece Company had 20,000 ordinary shares outstanding. On April
1, 2015, 10%, P 5,000,000, 5-year bonds were issued at face value. Each P 1,000 of these
bonds is convertible into 10 ordinary shares. On August 1, 2015, Greece issued additional
30,000 ordinary shares.

42. What number of shares should be used in computing diluted earnings per
share?
a. 100,000 c. 70,000
b. 82,500 d. 32,500

On January 1, 2017, Niger 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 P 40,000. 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.

43. Which of the following is true on the date of reclassification?

a. Impairment loss is recognized amounting to P 2,000
b. Realized Gain is recognized amounting to P2,000
c. Unrealized gain is recognized amounting to P2,000
d. No amount of gain or loss is recognized

An inventory loss from market decline of P1,600,000 occurred in May 2017, after its March 31,
2017 quarterly report was issued. None of this loss was recovered by the end of the year.

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 44. How should this loss be reflected in the company's quarterly income
statements?
Three Months Ended
3/31/17 6/30/17 9/30/17 12/31/17
a. -0- -0- -0- P1,600,000
b. -0- P 533,333 P533,333 P 533,333
c. -0- P1,600,000 -0- -0-
d. P400,000 P 400,000 P400,000 P 400,000

On December 30, 2017, Thanos Company classifies a non-current asset as held for sale.
Immediately before the classification as held for sale, the cost of the property is P500,000
and accumulated depreciation of P 200,000. The hotel is depreciated on the straight line
method with a useful life of 20 years. The estimated fair value less cost to sell on this date
is P270,000. On December 31, 2018, the fair value less cost to sell is P 310,000.

45. How much is the gain that should be recognized on December 31, 2018?
a. 62,500 c. 40,000
b. 30,000 d. 27,500

Angola Company provided the following information for the year 2015:

Income before income tax P 400,000

Revenues 1,600,000
Income from operations 440,000
Operating expenses 1,000,000
Income from continuing operations 200,000
Net income 180,000

46. How much did the company report as discontinued operations?

a. (40,000) b. (20,000) c. 160,000 d. 200,000

The following information pertains to Kentucky Corporation defined benefit plan for the year
2017:

Defined benefit obligation, January 1, 2017 P 2,500,000

Fair value of plan assets, January 1, 2017 2,000,000
Actual return on plan assets 300,000
Fair value of plan assets, December 31, 2017 2,100,000
Present value of additional DBO settled 175,000
Defined benefit obligation, December 31, 2017 2,400,000
Current service cost 500,000
Discount rate 10%
Benefits paid to retirees (at scheduled retirement) 620,000
Contribution made during the year 600,000

47. How much is the total service cost for the year 2017?
a.500,000 b. 750,000 c. 505,000 d. 755,000

Philippines Inc. has the following securities in its investment to profit or loss securities on
December 31, 2017:
Aggregate Number of Aggregate
Number Fair value of shares as Fair value of
of shares remaining of remaining
originally Original shares as of 12/31/2017 shares as of
acquired Cost 12/31/2016 12/31/2017

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 Phi Co. common 9,000 P45,000 P50,000 9,000 P60,000
Lip Inc. common 30,000 300,000 250,000 15,000 90,000
Pines Corp. 2,400 36,000 30,000 2,400 24,000
preferred

All of the above securities were bought in 2016. The only transaction affecting the portfolio
is the disposal of half of the investments in Lip Inc. common stocks on June 30, 2017 at P8
per share.

48. How much is the unrealized gain or (loss) to be reported in the 2017 profit
or loss statement?
a. 31,000 b. 156,000 c. 57,000 d. 207,000

On January 1, 2017, Chiara purchased debt securities which carry a 10% fixed interest for
P765,540 to be held as financial assets at amortized cost. The securities have face value of
P600,000, and interests are receivable semi-annually every June 30 and December 31. The
prevailing market interest rate of debt securities of this type is 7%.

On October 31, 2018, Chiara sold 40% of the securities including any accrued interest for a
gain of P5,250.

49. How much is the carrying value of the bond investment on December 31, 2017?
a. P762,334
b. P759,016
c. P600,000
d. P771,840

On December 1, 2017, Ronald Company purchased P5,000,000, 15% face value bonds at
98. The bonds mature on November 30, 2027 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. Ronald classified this investment as trading securities.

On November 30, 2020 after receiving the periodic interest, Ronald sold the investment at
101.

The bonds were quoted in the market at 98, 99, 102, 100 and 97 on December 31, 2017,
2018, 2019, 2020 and 2021, respectively.

50. How much is the gain or loss on sale of the investments?

a. P50,000 gain
b. P50,000 loss
c. P150,000 gain
d. P150,000 loss

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