PROBLEM 3-1

1. D. All of these can be considered a purpose of the notes.

2. A. Statement of compliance with PFRS
3. C. Make an explicit and unreserved statement of compliance in the notes.
4. D. Names and addresses of directors and officers
5. C. Are an integral part of financial statement.
PROBLEM 3-2
1. C. Is mandatory, as far as practicable
2. B. Is mandatory
3. B. Is mandatory
4. B. Is mandatory
5. D. The notes to financial statements
PROBLEM 3-3
1. C. IFRS requires that all notes should be clear, simple to understand and nontechnical in
nature.
2. C. Amplify items presented in the financial statements
3. D. All of these are methods of disclosing pertinent information
4. B. Whether accounting policies are consistently applied from year to year.
5. D. Disclosure of any financial facts significant enough to influence the judgement of a
primary user.
6. C. Is demonstrated by the use of supplementary information presenting the effects of
changing prices.
7. D. Significant inventory purchasing policies.
8. D. Omitted from financial statement disclosure
9. C. Method used for pricing inventory
10.D. Depreciation method
PROBLEM 3-4
1. A. To provide disclosures required by generally accepted accounting principles
2. C. Criteria for determining which investments are treated as cash equivalents
3. B. Key management personnel involved in drafting the summary of significant
accounting policies
4. D. Correct an improper presentation in the financial statements.
 5. C. The measurement basis used in preparing the financial statements and the
accounting policies used.
6. B. Basis of profit recognition on long term construction contracts
7. C. The depreciation method used only
8. A. Property, plant and equipment recorded at cost with the depreciation computed
principally straight line method

PROBLEM 3-5
D. 3,000,000
PROBLEM 3-6
A.3,500,000
PROBLEM 3-7
1. D. Two venturers simply because they share joint control over a joint venture
2. B. Between related parties, regardless of whether a price is charged.
3. D. All of these are unrelated parties
4. D. Brothers and sisters of the individual
5. D. Nature of the relationship
PROBLEM 3-8
1. D. Reimbursement of out-of-pocket expenses
2. B. Names of all the associates that an entity has dealt with during the year.
3. C. The amount of similar transaction with unrelated parties to establish that comparable
related party transaction has been entered at arm’s length
4. B.Sold a car to the uncle of the entity’s finance director.
5. D. Took out a huge bank loan
6. B.Nature of any future transactions planned between the parties and the terms
involved.
7. C. An entity that has a common director with the entity
8. D. The partner of a key manager is a major supplier of the entity
9. B. An entity providing banking facilities to the entity
10. C. Social security contribution and post employment benefits
PROBLEM 3-10
B. 9,000,000
PROBLEM 3-11
B.3,500,000
PROBLEM 3-12
C. 1,000,000
PROBLEM 3-13
D. 1,500,000
PROBLEM 3-14
B. 1,200,000
PROBLEM 3-15
A.6,150,000
PROBLEM 3-16
1. B. Make a provision for the event after reporting period in the financial statements.
2. D. Do nothing
3. D. Disclose the nonadjusting event in the notes to financial statements.
4. C. Disclose the post-reporting period event.
5. B. Note to financial statements should give details of material nonadjusting events
which could influence the economic decisions of users.
PROBLEM 3-17
1. D. Loss on a lawsuit the outcome of which was deemed uncertain at year-end
2. C. Used to record an adjustment to bad debt expense.
3. D. Destruction of a major production plant by a fire before the end of the reporting
period
4. D. A mistake in the calculation of allowance for uncollectible accounts receivable.
5. D. Issue of a large amount of ordinary shares

PROBLEM 1
On January 1, 2015, an entity acquired an equipment at a cost of P5,000,000 to be used in
the ordinary course of business. The equipment has an estimated useful life of 10 years and a
residual value of P500,000.
On January 1, 2018, the equipment was classified as held for sale. On such date, the fair
value less cost of disposal was estimated at P1,900,000. On June 30, 2018, the equipment
was sold for P1,500,000
REQUIREMENT: PROVIDE THE NECCESSARY JOURNAL ENTRIES

1. To classify the equipment as held for sale , January 1,2018

Equipment held for sale P 3,650,000
Acc. Depreciation 1,350,0000
Equipment. P 5,000,000

Cost of Equipment P5,000,000

Acc. Del. 1,350,000
((5M-500,000)/10)×3
CA 3,650,000

2.To record impairment loss

Impairment loss. P 1,750,000
Equipment held for sale. P 1,750,000

CA of Equipment P 3,650,000
Less: FV less cost of disposal 1,900,000
Impairment loss 1,750,000
2. To record sale of equipment held on sale, June 30,2018
Cash P 1,500,000
Loss on Sale 400,000
Equipment held for sale . 1,900,000
PROBLEM 2
On January 1, 2015, an entity acquired an equipment at a cost of P4,000,000 to be used in
the ordinary course of business. The equipment has an estimated useful life of 5 years and
has no residual value.
On December 31, 2016, the equipment was classified as held for sale. On such date, the Fair
Value less Cost of Disposal was P3,000,000. On July 1, 2017, the equipment was sold for
P2,900,000.
REQUIREMENT: PROVIDE THE NECCESSARY JOURNAL ENTRIES

1. To classify equipment as held for sale, December 31,2016

Equipment held for Sale 2,400,000
Acc. Depreciation. 1,600,000
Equipment. 4,000,000

Cost of Equipment P4,000,000

Acc. Dep. (4M/5)×2 1,600,000
CA 2,400,000

2. NO ENTRY

3. To record the sale of Equipment, June 1,2017

Cash 2,900,000
Equipment Held for Sale 2,400,000
Gain on Sale of Equipment 500,000

PROBLEM 3
On January 1, 2015, an entity acquired land at a cost of P2,500,000
The land was measured at Fair Value in accordance with the revaluation model.
On December 31, 2015, the fair value of the land was P3,000,000.
On June 30, 2016, the land was classified as held for sale.
On such date, the fair value was estimated at P3,500,000 and the cost of disposal at
P100,000.
On December 31, 2016, the land was sold for P3,350,000.

REQUIREMENT: PROVIDE THE NECESSARY JOURNAL ENTRIES

1. To record Land acquisition, January 1,2015
Land 2,500,000
Cash. 2,500,000
2. To record revaluation surplus on Dec 31,2015
Land 500,000
Revaluation Surplus 500,000

Fair Value P3,000,000

Less: Cost of Equipment 2,500,000
Revaluation surplus 500,000

3. record revaluation surplus on June 30 ,2016

Land 500,000
Revaluation Surplus 500,000
Fair Value P3,500,000
Less: Cost of Equipment 3,000,000
Revaluation surplus 500,000

4. To classify equipment as held for sale

Land Held for Sale 3,500,000
Land 3,500,000
5. To record impairment loss
 Impairment Loss. 100,000
Land Held for Sale. 100,000
6. To record Sale , December 31,2016
Cash 3,350,000
Loss on Sale of Land 50,000
Land Held for Sale 3,400,000
7. To record revaluation surplus transferred to retained earnings
Revaluation Surplus 1,000,000
Retained Earning s 1,000,000
PROBLEM 4
An entity purchased equipment for P5,000,000 on January 1, 2015 with a useful life of 10
years and no residual value. On December 31, 2016, the entity classified the asset as held for
sale. The fair value of the equipment on December 31, 2016 is P3,300,000 and the cost of
disposal is P100,000.
On December 31, 2017, the fair value of the equipment is P3,800,000 and the cost of
disposal is P200,000.
On the same date, the entity believed that the criteria for classification as held for sale can no
longer be met. Accordingly, the entity decided not to sell the asset but to continue use it.
REQUIREMENT: PROVIDE THE NECCESSARY JOURNAL ENTRIES

1. To record the purchase of equipment, January 1,2015

Equipment P 5,000,000
Cash 5,000,000

2. To record depreciation for year 2015

Depreciation P500,000
Accumulated Depreciation 500,000

3. To record depreciation for year 2016

Depreciation P500,000
Accumulated Depreciation 500,000
4. To classify equipment as held for sale, December 31,2016
Equipment Held for Sale P4,000,000
Accumulated Depreciation 1,000,000
Equipment 5,000,000

5. To record impairment loss

Impairment Loss. P 800,000
Equipment Held for Sale 800,000

6. To record the gain on reclassification, December 31,2017

Equipment Held for Sale P300,000
Gain on Reclassification 300,000

7. To reclassify asset as part of the PPE

Equipment P3,500,000
Equipment Held for Sale 3,500,000

8. To record depreciation
Depreciation 500,000
Accumulated Depreciation 500,000