1.

On December 31, 2020, the cash account of Gambit Company shows the following composition:

Petty cash fund, P180,000;

Cash in bank (payroll fund), P2,000,000;
Interest and dividend fund, P250,000;
Tax fund, P120,000;
Cash in bank (current account), P3,000,000;
Certificate of deposit (terms 90 days), P1,000,000;
Certificate of deposit (terms 180 days), P1,500,000; >more than 3months<
Cash in foreign bank-restricted, P500,000; >restricted cash<
Money market fund, (60 days), P500,000;
Money market funds (6 months), P900,000; >more than 3months<
Customer’s check dated February 15, 2021, P60,000; >postdated check considered as accounts receivable<
Customer’s check dated December 30, 2020 returned for lack of funds, P40,000; >returned check<
A 30-day BSP treasury bill, P1,000,000;
A 3-year BSP treasury bill acquired three months prior to maturity, P1,200,000;
Sinking fund cash, P800,000; >noncurrent assets not included as part of cash<
Contingent fund, P900,000 >noncurrent assets not included as part of cash<
Fund for the acquisition of fixed asset, P500,000; >noncurrent assets not included as part of cash<
Travelers’ checks, P60,000;
Cashiers’ checks, P100,000.

What is the correct cash and cash equivalents balance to be reported by Gambit Company on December 31, 2020?
D
a. P 7,810,000
b. P 8,210,000
c. P 8,910,000
d. P 9,410,000

2. The balance sheet of Alaska Company as of December 31, 2021 shows Cash of P17,500. It was found to include
some of the following items:
Postal money orders from customers P 2,400 correct
Notes receivable in the possession of a collection agency (3,200)
Receipts for expense advances for the account of credit suppliers (600)
Customers’ postdated checks, returned by the bank marked “NSF” (1,800)
Traveler’s check 500 correct
Currencies and coins on hand 600 correct
Checks in payment of accounts not yet delivered to payee 6,000 correct
PCF (P160 in currency and P840 in expense receipts) 1,000 less 840

What is the correct cash balance? B

a. P 9,660
b. P 11,060
c. P 12,860
d. P 14,260
3. On February 1, 2021, MAGI Corporation factored receivables without recourse with a face amount of P600,000
to NGAT Corporation. MAGI Corporation advances P490,000 to NGAT Corporation. NGAT Corporation’s holdback
rate is 5% of the factored receivables.

What amount of loss should MAGI Corporation recognize as a result of factoring of receivables? C
a. P 0
b. P 140,000
c. P 80,000
d. P 110,000
Solution:
MAGI ‘s Advances 490,000
Face amount of AR 600,000
Factor’s holdback (600,000 x 5%) (30,000) 570,000
Loss on factoring (80,000)

4. On October 31, 2020, PARASAPANGARAP Company discounted at the bank a customer’s P600,000 interest-
bearing note, 6-month, 12% note, dated July 1, 2020 with recourse. The bank discounted the note at 10%.

How much is the gain or loss should the company recognize as a result of discounting the notes receivable? D
a. P 10,600
b. P 1,400
c. P 24,000
d. P 0 >there is no gain or loss if this problem is accounted as secured borrowing<

5. On January 1, 2021, Allyssa Company acquired 30% of the voting share capital of Ruby Company for P5,000,000
which was equal to the book value of interest acquired.
The investee reported net profit of P4,000,000 for 2021 and P6,000,000 for 2022 but paid no dividends during the
two-year period.
On July 1, 2022, Alyssa sold half of the investment for P4,500,000.
The fair value of the remaining investment was P4,800,000 on July 1, 2022 and P5,500,000 on December 31, 2022.
The remaining investment is to be held at fair value through other comprehensive income.

What amount of gain or loss on reclassification shall be recognized on July 1, 2022? B

a. P 1,950,000
b. P 1,250,000 - gain
c. P 950,000
d. P 700,000
Solution:
Acquisition cost, Jan 2021 P 5,000,000
Share in 2021 net profit (4M x 30%) 1,200,000
Share in 2022 net profit (6M x 30% x 6/12) 900,000 *Jan 2022- June 2022*
Carrying amount of investment, June 30, 2022 P 7,100,000
 Fair Value – July 1, 2022 P 4,800,000
Carrying amount of retained investment
(7,100,000/2) *sold half of the investment* (3,550,000)
Gain from remeasurement/reclassification P 1,250,000

6. October 1, 2021, Michael Company purchased 30,000 shares of Scottie Company at P180 per share which
reflected book value as of that date.
At the time of the purchase, Scottie had 100,000 ordinary shares outstanding. Michael had no ownership interest
in Scottie before the purchase.
The nine months ending September 30, 2021 of Scottie recorded profit of P2,960,000.
For the year ended December 31, 2021, Scottie reported profit of P4,800,000. Scottie paid Michael dividends of
P120,000 on December 31, 2021.
For the year 2022, Scottie reported profit of P2,800,000 and paid dividends of P1,700,000 to its ordinary
shareholders.
On January 2, 2023, Michael sold 20,000 ordinary shares of Scottie for P250 per share.
For year ended December 31, 2023, the reported profit of Scottie was P4,000,000 and dividends of P40,000 was
paid to Michael.
Market value of the remaining shares at this time is P2,300,000.

(6.1) What is the investment carrying value at December 31, 2022? A

a. P 6,162,000
b. P 5,970,000
c. P 5,832,000
d. P 5,400,000
Solution: *30,000 shares / 100,000 shares = 30%
Acquisition cost, October 1, 2021
(30,000 shares x P180) P 5,400,000
Carrying amount of interest purchase
(100,000 shares x P180 x 30%) (5,400,000)
No Excess of cost 0

Acquisition cost, October 1, 2021

(30,000 shares x P180) P 5,400,000
Share in 9months Sept 2021 & Dec 2021
(4,800,000 - 2,960,000 x 30%) 552,000
Share in 2021 dividend (120,000)
Carrying amount – DEC 2021 P 5,832,000
Share in 2022 net profit
(2,800,000 x 30%) 840,000
Share in 2022 dividend
(1,700,000 x 30%) (510,000)
Carrying amount – DEC 2022 P 6,162,000

(6.2) What is the gain (loss) on the sale of 20,000 shares at January 2, 2023? D
a. P 1,400,000
 b. P 1,020,000
c. P 1,000,000
d. P 892,000
Solution:
Fair Value – January 2, 2023
(20,000 shares x P250) P 5,000,000
Carrying amount of retained investment
(6,162,000 x 20,000/30,000 shares) *sold 20,000 shares* (4,108,000)
Gain from sale P 892,000

7. On April 30, 2022, Rabiya Company purchased for cash 18,000 shares of the 60,000 voting shares of Catriona
Company for P650,000. This amount exceeded the underlying equity acquired in the net assets of Catriona
Company by P150,000.
The excess is attributable to undervaluation of Catriona’s land and equipment by P250,000 and P100,000
respectively.
At April 30, 2022, the equipment had a remaining useful life of 5 years.
The remaining excess was attributable to goodwill.
During the year 2022, Catriona reported profit of P600,000, of which P120,000 was earned during January through
April. *walang share si Rabiya sa 120k kasi April palang sya nag purchased ng shares kay Catriona*
Catriona declared and distributed a dividend of P4 per share on June 30, 2022.
Market price of Catriona shares at December 31, 2022 is P40 per share.

(7.1) How much goodwill is included in the carrying amount of investment? D

a. P 150,000
b. P 105,000
c. P 71,250
d. P 45,000
Solution: *18,000 shares/60,000 shares = 30%
Excess of cost over carrying amount P 150,000
Undervaluation of Land (250,000 x30%) (75,000)
Undervaluation of Equipment (100,000 x 30%) (30,000)
Goodwill – remainder P 45,000
*relate on page 474 – Intacc1 valix

(7.2) Based on same data in no. 7, what is the carrying amount of the investment in associates at December 31,
2022? B
a. P 708,500
b. P 718,000
c. P 716,000
d. P 720,000
Solution:
Share in net profit
(600K – 120K x 30%) P 144,000
Amortization of excess on Equipment
(30K/5yrs x 8/12) *May-Dec (4,000)
Investment Income – 2022 P 140,000

Cost of Investment – April 30,2022 P 650,000

Investment Income 140,000
Share in cash dividend
(60,000 shares x P4 x 30%) (72,000)
Carrying amount of investment P 718,000

8. On January 1, 2022 Belgium Corp. acquired 35% of the total 500,000 outstanding ordinary shares of Brussels
Company for P3,500,000.
Brussels reported during 2022 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 2022 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.

What is the carrying value of Investment in Brussels on December 31, 2022? A

a. P 4,480,000
b. P 4,725,000
c. P 6,580,000
d. P 4,840,000
Solution:
Cost of investment P 3,500,000
Share in net income
(4M – 200K x 35%) 1,330,000
Share in cash dividends
(1M x 35%) (350,000)
Carrying value of Investment P 4,480,000

9. On January 1, 2022, 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. *100k-40k=60k
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.

Which of the following is true on the date of reclassification? D

a. Impairment loss is recognized amounting to P2,000
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 *FVLCTS – 62,000 vs CV – 60,000
*based on PFRS 5 – page 675 CFAS book valix (black)*
*may impairment loss if yung FVLCTS yung mas mababa
*may gain if may subsequent increase in FVLCTS

10. On December 30, 2022, 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 P200,000. *500k-200k = 300k
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, 2023, the fair value less cost to sell is P 310,000.

How much is the gain that should be recognized on December 31, 2023? B
a. P 62,500
b. P 30,000
c. P 40,000
d. P 27,500
*based on PFRS 5 – page 675 CFAS book valix (black)* Subsequent net increase in fair value
Solution:
FVLCTS P 270,000 FVLCTS (new) P 310,000
CV 300,000 FVLCTS 270,000
Impairment loss P 30,000 Gain P 40,000 exceed the IL.
*PFRS 5, an entity shall recognize a gain but NOT IN EXCESS of any impairment loss previously recognized.