Professional Documents
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Intramuros Manila
MOCK FINALS EXAM
9. The equity method is not applicable under all of 14. The following statements are true about real
the following circumstances, except property taxes except:
A. The investor is a wholly-owned subsidiary
B. The investor’s debt and equity instruments are a. It is an outright expense.
not traded b.If unpaid real property taxes are assumed by the
C. The investor is in the process of filing financial buyer, the taxes are capitalized only up to the date
statements with a regulatory body for the purpose of of acquisition.
issuing debt and equity instruments in a public c.Capitalizable to the land account because it
market increases the value of the land.
D. The ultimate parent of the investor produces d. Taxes paid after the date of acquisition are treated
consolidated financial statements as an expense.
10.The excess of investor’s share of the net fair 15. PAS 16 requires a business to review the
value of the associate’s net assets over the cost of depreciation method and the useful life and residual
the investment is value estimated at the end of each year. A change in
A. Included in the determination of the investor’s any of these is accounted for using
share of the associate’s profit or loss in the period in
which the investment is acquired
B. Exclude in the determination of the investor’s a. a specific transitional provision of a PFRS
share, but include in other comprehensive income
C. Ignored since there is no relevance for any b. prospective application
period. c. retrospective application
D. A deferred gain d. either a or b
11. An investor uses the equity method to account 16. When an item of property, plant and equipment
30% investment. Amortization of the investor’s share is acquired by issuing equity shares, which of the
of the excess fair value over carrying amount of following is the best basis for establishing the
depreciable asset at the date of the purchase shall historical cost of the acquired asset?
be reported in the investor’s income statement as
part of a. Historical cost of the asset to the seller
A. Other Expense b. Historical cost of a similar asset acquired in
B. Depreciation Expense another transaction by the buyer
C. Equity in earnings of investor c. Fair value of the asset received or the fair
D. Amortization of Goodwill value of the shares issued, whichever is more
readily determinable
12. If before operation, a machinery acquired had an d. Historical cost of the asset is zero since
initial operating loss, The initial operating loss should noncash is paid in the acquisition
be:
17. Donated equipment for which the fair value has
a.Capitalized as part of the cost of the plant.
been determined shall be recorded as a debit to the
b.Expensed and charged to the income statement.
equipment account and a credit to
c.Deferred and amortized over a reasonable period.
d. Charged to retained earnings.
a. Other Comprehensive income
13. The following statements are true about depreciation b. Retained earnings
period except: c. Share Capital
d. Income
a.Depreciable amount of an asset shall be allocated
on a systemic basis over the useful life. 18. The following statements are deemed true
b.Depreciation of an asset begins when it is about investment property and investment in
available for use. associates except one.
c.Depreciation ceases when the asset is
A. Transferring an investment from one probable that the borrowing costs will
classification to another should occur only when result in future economic benefits to the
the business model for managing the investment entity but the costs cannot be measured
changes. reliably.
d. The asset is qualifying asset and it is
B. An impairment loss is a difference between probable that borrowing costs will result
an investment’s cost and the expected future in future economic benefits to the entity
cash flows. and the cost can be measured reliably.
22.Which of the following may not be considered
a qualifying asset?
C. If the investment and owner-occupied a. A power generation plant that normally
portions could be sold or leased out takes two years to build
separately, the portions shall be accounted for b. An expensive private jet that can be
separately as an investment property purchased from a vendor.
and owner-occupied property. c. A toll bridge that usually takes more
than a year to build.
d. A ship that normally takes one to two
D. If the investment and owner-occupied
years to complete.
property portions cannot be sold or leased out 23. An entity can commence capitalization of
separately, the property is investment property if borrowing costs on a new construction project
only an insignificant portion is when
held for manufacturing or administrative a. Loan interest relating to project starts to
purposes. incur
b. Technical site planning commences
c. Expenditures on the project starts to
19. Which of the following costs incurred
incur
internally to create an intangible asset is d. Construction work commences
generally expensed? 24. Agricultural Produce as it grows on bearer
A. Research and development costs plants is measured at year end using
B. Filing costs A. Fair value
C. Legal costs B. Fair value less cost of disposal
C. Fair value plus cost of disposal
D. All of the above
D. Fair value less cost of disposal upon point of
harvest
20. Factors considered in determining an
25. Agricultural Produce harvested is measured
intangible asset’s useful life include all of the at year end using
following except A.Fair value
B. Fair value less cost of disposal
A. The expected use of the asset C. Fair value plus cost of disposal
B. Any provisions for renewal or extension D. Fair value less cost of disposal upon point of
of the asset’s legal life harvest
C. The amortization method used
D. Any legal or contractual provisions that
may limit the useful life
21. Borrowing costs can be capitalized as cost 26. On June 30, 2023, Juls, Inc. exchanged
of the asset when 2,000 shares of Seely Corp. P30 par value
a. The asset is a qualifying asset. common stock for a patent owned by Gore Co.
b. The asset is a qualifying asset and it is The Seely stock was acquired in 2023 at a cost
not probable that the borrowing costs of P55,000. At the exchange date, Seely
will result in future economic benefits to common stock had a fair value of P46 per share,
the entity. and the patent had a net carrying value of
c. The asset is a qualifying asset and it is P110,000 on Gore's books. Juls should record
the patent at years and on December 31, 2021, had a fair
A. P55,000. value of P6,800,000. On December 31, 2021,
B. P60,000. the property was sold for net proceeds of
C. P92,000. P7,500,000. The entity used the cost model to
account for the investment property.
D. P110,000.
27. Chrissy Co. incurred the following costs
What is the gain to be recognized for 2021
during 2011:
regarding the disposal of the investment
Significant modification to the P160,000
property?
formulation of a chemical product
A. 900,000
Trouble-shooting in connection with 150,000 B. 800,000
breakdowns during commercial
production C. 1,000,000
D. 1,100,000
Cost of exploration of new formulas 200,000
30. FAE Company, a real estate entity, had
Seasonal or other periodic design 185,000 buildings and estates.
changes to existing products
Cost Fair Value
Laboratory research aimed at discovery 225,000
Bldg used for office 60,000,000 40,000,000
of new technology
of administrative
In its income statement for the year ended staff of FAE
December 31, 2011, Chrissy should report
Land held for 30,000,000 50,000,000
research and development expense of
ordinary course of
A. P585,000 business
B. P735,000
On December 31, 2020, the entity had land that
C. P770,000
D. P920,000 was held for sale in the ordinary course of
28. Kara Company purchased new machinery business. the entity decided to hold the land for
on a deferred payment basis. A downpayment of
capital appreciation. The accounting policy is to
P200,000 was made and 6 monthly installments
of P250,000 are to be made at the end of each carry all investment property at fair value.
month. The cash equivalent price of the machine On December 31, 2020, what amount should be
was P1,000,000. Additionally, the entity incurred
recognized in profit or loss as a result of the
P25,000 and P6,000 for insurance while the
machinery is in transit and installation cost transfer of the land to an investment property?
respectively. How much is the cost of the A. 20,000,000
machinery? B. 35,000,000
a. P1,700,000 C. 15,000,000
D. 10,000,000
b. P1,731,000
c. P1,000,000
d. P1,031,000