Chapter 13

PROBLEM 13-1 (IFRS) Freestanding trees 5,000,000

Forrester Company provided the following Land under trees 600,000
assets in a forest plantation and farm:
Roads in Forest 300,000
1. What amount should be reported as Animals related to 1,000,000
biological assets? recreational Activities
A. 7,800,000
Bearer Plants 1,500,000
B. 7,200,000
C. 8,400,000 Bearer Animals 2,000,000
D. 9,200,000
Agricultural Produce 800.000
2. What total amount should be included ingrowing on bearer plants
property, plant, and equipment?
A. 4,600,000
Agricultural Produce 1,200,000
B. 3,400,000
Harvested
C. 1,800,000
D. 4,200,00 Plant with dual use 1,400,000
PROBLEM 13-2 (IFRS)
Joan Company provided the following data;
Value of Biological 6,000,000
1. What is the carrying amount of the Asset at acquisition
biological asset on December 31, 2022? cost on 12/31/2021
A. 7,400,000 Fair Value Surplus on 500,000
B. 7,300,000 Initial recognition at
C. 7,500,000 fair value on
D. 6,500,000 12/31/2021
2. What amount of net gain from change in fair
value of biological asset should be reported Increase in fair value 900,000
in the 2022 income statement? on 12/31/2022 due to
A. 1,400,000 growth and price
B. 1,300,000 fluctuation
C. 900,000 Decrease in Fair value 100,000
D. 800,000 due to harvest in 2022
 Carrying Amount on 5,000,000
PROBLEM 13-3 (IFRS) January 1
Salve Company is engaged in raising
Increase Due to purchases 2,000,000
dairy livestock. The entity provided the
following information during the current
year Gain arising from change 400,000
in fair value less cost of
1. What is the carrying amount of the disposal attributable to
biological asset on December 31? price change
A. 6,950,000
B. 6,000,000 Gain arising from change 600,000
C. 8,000,000 in fair value less cost of
D. 7,150,000 disposal attributable to
Physical change

Decrease due to Sales 850,000

Decrease due to harvest 200,000

Problem 13-4 (IAA)

Legend Dairy produced milk for local ice cream producers. The entity began operations at the
beginning of the current year by purchasing milking cows for P2,000,000.

The entity provided the following information at year-end relating to the milking cows:

Carrying amount – beginning 2,000,000

Change in fair value due to growth and price change 400,000
Decrease in fair value due to harvest 50,000
Newborn calf at year-end at fair value 200,000
Milk harvested during the year but not yet sold 250,000

1. What amount of net gain on biological asset should be reported in the current year?
a. 400,000 b. 350,000 c, 800,000 d. 550,000
2. What amount of gain on agricultural produce should be reported in the current year?
a. 250,000
b. 200,000
c. 600,000
d. 650,000

3. What is the carrying amount of the biological asset at year-end?

a. 2,000,000
b. 2,400,000
c. 2,550,000
d. 2,800,000
Problem 13-5 (IAA)

Africa Company purchased 2,000 llamas at the beginning of current year. These llamas will be sheared
semiannually and their wool sold to specialty clothing manufacturers. The llamas were purchased for P5,000,000.

During the current year, the change in fair value due to growth and price change is P350,000, the wool harvested
but not yet sold is valued at net realizable value of P100,000 and the decrease in fair value due to harvest is
P50,000.

What is the carrying amount of the biological asset at year-end?

a. 5,300,000
b. 5,400,000
c. 5,400,000
d. 5,100,000
Problem 13-6
Jamaica Company is a producer of coffee. On December 31, 2021, the entity
harvested coffee beans with fair value less cost of disposal of P3,500,000 at the
point of harvest.
Because of long aging and maturation process after harvest, the harvested coffee
beans were still on hand on December 31, 2022.
On such date, the fair value less cost of disposal is P3,900,000 and the net
realizable value is P3,200,000.

What amount should be reported as coffee beans inventory on December 31,

2022?
A.3,000,000
B.3,500,000
C.3,200,000
D.3,900,000
Problem 13-7
On January 1, 2017, Farm Company planted trees on its land. The entity purchased the
land two years ago at a cost of P1,000,000.
The trees were considered bearer plants and had accumulated cost of P500,000 on
December 31, 2021.
By January 1, 2022, the trees had matured and were expected to bear produce for a
period of 5 years.
On December 31, 2022, the trees produced fruits with fair value less cost of disposal on
such date at P50,000. There was no harvest during 2022.
On December 31, 2023, the fruits were harvested and the fair value less cost of disposal
on such date was P75,000.
1. What is the carrying amount of the property, plant, and equipment on December
31, 2022?
A.1,500,000
B.1,400,000
C.1,000,000
D.0
Problem 13-7
1.

2. What is the carrying amount of the biological asset on December 31, 2022?
A.550,000
B.450,000
C.50,000
D.0

1. What amount should be recognized as gain from agricultural produce for the year-ended
December 31, 2023?
A.75,000
B.50,000
C.25,000
D.0
Problem 13-8 (IFRS)
At the beginning of the current year, Honey Company had a herd of 10 2-year-old animals.
One animal aged 2.5 years was purchased on July 1 for P108, and one animal was born on July 1.
No animals were sold or disposed of during the year.

Fair value less cost of disposal per unit

2-year-old animal on January 1 100
2.5-year-old animal on July 1 108
Newborn animal on July 1 70
2-year-old animal on December 31 105
2.5-year-old animal on December 31 111
Newborn animal on December 31 72
3-year-old animal on December 31 120
0.5-year-old animal on December 31 80

1. What amount should be reported as fair value of the biological assets on December 31?
a. 1,400
b. 1,320
c. 1,440
d. 1,360
2. What amount of gain from change in fair value of biological assets should be
recognized in the current year?
a. 222
b. 292
c. 300
d. 332

3. What amount should be recognized as gain from biological assets attributable to

price change?
a. 292
b. 222
c. 237
d. 55
Problem 13-9 (IFRS)
Dairy Company provided the following information for the current year:
Cash 500,000
Trade and other receivables 1,500,000
Inventories 100,000
Dairy livestock – immature 50,000
Dairy livestock – mature 400,000
Property, plant and equipment, net 1,400,000
Trade and other payables 520,000
Note payable - long-term 1,500,000
Share capital 1,000,000
Retained earnings – beginning 800,000
Fair value of milk produced 600,000
Gain from change in fair value 50,000
Inventories used 140,000
Staff cost 120,000
Depreciation expense 15,000
Other operating expenses 190,000
Income tax expense 55,000
1. What amount should be reported as net income for the current year?
a. 650,000
b. 600,000
c. 130,000
d. 185,000

2. What amount should be reported as fair value of biological assets at year-end?

a. 550,000
b. 450,000
c. 500,000
d. 400,000
Problem 13-10
Farmland company has different kinds of farm animals at the beginning of current year.
During the current year, several acquisitions occurred related to these farm animals.
Carrying amount on Jan 1:
15 horses (1 year old) 1,000,000
10 dairy cattle (2 years old) 400,000
8 carabaos (2.5 years old) 200,000
20 Hogs (3 years old) 500,000
2,100,000
Purchases on June 30:
4 dairy cattle (1 year old) 150,000
6 carabaos (6 months old) 100,000
250,000
Fair value less cost of disposal on Dec 31:
15 horses ( 1 year old) 1,200,000
10 dairy cattle (2 years old) 520,000
8 carabaos (2.5 years old) 250,000
20 hogs (3 years old) 550,000
4 dairy cattle (1 year old) 170,000
6 carabaos (6 months old) 110,000
2,800,000
There were no farm animals sold during the year and neither were there any newborns nor
deaths
1. What is the carrying amount of the biological assets on Dec 31?
a. 3,160,000
b. 2,350,000
c. 2,800,000
d.. 2,380,000
2. What amount should be reported as gain from change in fair value attributable to price
change?
a. 810,000
b. 450,000
c. 360,000
d. 0
3. What amount should be reported as gain from change in fair value attributable to
physical change?
a. 810,000
b. 450,000
c. 360,000
d. 700,000
Problem 13-11
At the beginning of the current year, Divine Company purchased a vineyard costing
P6,000,000. It was determined that the grape vines can produce fruit for a period of 8
years.
During the year, the entity harvested grapes with a fair value less cost of disposal of
P2,000,000. By the end of the year, the grapes were sold for P3,500,000. The entity
incurred operating expenses of P500,000.
1. What amount should be reported as gross income on sales?
a. 3,500,000
b. 1,500,000
c. 2,000,000
d. 1,750,000
2. What amount should be reported as pretax net income?
a. 1,250,000
b. 2,750,000
c. 2,250,000
d. 3,000,000
Chapter 14
PROBLEM 14-1 (AICPA ADAPTED)
Zeta Company reported Sales Revenue of 2020 2021
P4,600,000 in the income statement for the year
Accounts 1,000,000 1,300,000
ended December 31, 2021
Receivable
The entity wrote off uncollectible accounts Allowance for 60,000 110,000
totaling 50,000 during the current year uncollectible
accounts
Advances 200,000 300,000
1. Under Cash Basis, what amount should be from
reported as sales for the current year? customers
A. 4,400,000
B. 4,350,000
C. 4,300,000
D. 4,250,000
PROBLEM 14-2 (AICPA ADAPTED)
During 2021, Kew Company, a service
organization, had P200,000 in cash sales and
P3,000,000 in credit sales

The accounts receivable balances were P400,000

and P485,000 on December 31, 2020 and 2021,
respectively.

1. Under Cash Basis, what amount should be

reported as sales for the current year?
A. 3,285,000
B. 3,200,000
C. 3,115,000
D. 2,915,000
PROBLEM 14-3 (AICPA ADAPTED)
Spee Company provided the following information Cash Sales 2,000,000
for the current year: Gross Returns and 100,000
allowances
On January 1,customers owed P1,000,000. On Credit Sales 3,000,000
December 31, customers owed P750,000. The Gross Discounts 150,000
entity used the direct write-off method for bad
debts. No bad debts were recorded for in the
current year

1. Under Cash Basis, what amount of sales

revenue should be reported for the current
year?
A. 5,000,000
B. 4,750,000
C. 4,250,000
D. 1,900,000
PROBLEM 14-4 (IAA)
Jacqueline Company began the current year with Accounts Written- 100,000
accounts receivable of P1,000,000 and allowance off
for doubtful accounts of P50,000. During the Cash Sales 500,000
current year, the following events occurred; Sales on Account 3,000,000
Doubtful accounts 200,000
At the end of the current year, the entity showed a expense
balance in accounts receivable of P1,700,000 recognized

1. Under Cash Basis, what amount should be

reported as sales?
A. 2,700,000
B. 2,200,000
C. 3,500,000
D. 3,320,000
PROBLEM 14-5 (AICPA ADAPTED)
Gerber Company reported that all insurance Prepaid Insurance 150,000
premiums paid are debited to prepaid insurance. on January 1
For interim reporting, the entity made monthly Charges to 625,000
charges to insurance expense with an offset to insurance expense
prepaid insurance. The entity provided the during the year
following information for the current year including year-end
adjustment of
P25,000
1. What amount of insurance premium was paid in
the current year? Prepaid Insurance 175,000
A. 625,000 on December 31
B. 475,000
C. 600,000
D. 650,000
PROBLEM 14-6 (IAA)
SEASIDE Company provided the following data for Operating Expense:
the current year:
1. What amount was paid for Operating expenses? Depreciation 1,000,000.00
A. 3,270,000
B. 2,270,000
Insurance 700,000.00
C. 2,130,000 Salaries 1,500,000.00
D. 2,230,000
Total Operating Expenses 3,200,000.00

December 31 January 1
Prepaid Insurance 200,000 150,000
Accrued Salaries 100,000 120,000
payable
Problem 14-7 (AICPA Adapted)

Under accrual basis, Hamtikan Company reported rental income for the current year at P600,000.

The entity provided the following additional information regarding rental income:

Unearned rental income, January 1 50,000

Unearned rental income, December 31 75,000
Accrued rental income, January 1 30,000
Accrued rental income, December 31 40,000

What total amount of cash was received from rental in the current year?
a. 585,000
b. 615,000
c. 625,000
d. 655,000
Problem 14-8 (IAA)

Royal Company provided the following data for the current year:

Sales 10,000,000
Cost of goods sold 5,300,000
Operating expenses 3,800,000
December 31 January 1
Prepaid operating expenses 1,000,000 700,000
Accounts payable 1,350,000 1,200,000
Inventory 2,500,000 2,100,000
Accounts receivable 1,400,000 1,375,000

Under cash basis, what amount should be reported as purchases for the current year?
a. 5,550,000 b. 5,700,000 c. 5,850,000 d. 5,150,000
Problem 14-9 (AICPA Adapted)

On February 1, Tory began a service proprietorship with an initial cash investment of P200,000. the proprietorship
provided P500,000 of services in February and received full payment in March.

The proprietorship incurred expenses of P300,000 in February which were paid in April. During March, Tory drew
P100,000 against the capital account.

In the statement of financial position on March 31 prepared under cash basis, what amount should be reported as
capital?
a. 100,000
b. 300,000
c. 600,000
d. 700,000
Problem 14-10 (PHILCPA Adapted)

Miramar Company provided the following information for the current year:

December 31 January 1
Inventory 8,000,000 9,000,000
Prepaid expenses 100,000 50,000
Accounts payable 7,500,000 7,000,000
Accrued expenses 500,000 300,000
Cost of goods sold 15,000,000
Expenses 3,000,000

The expenses for the current year included depreciation of P200,000 and amortization of P100,000.

What total amount was paid for expenses during the current year?
a. 2,550,000 b. 2,850,000 c. 2,700,000 d. 3,150,000
Problem 14-11 (AICPA Adapted)

Reid Company, which began operations on January 1, 2020, has elected to use cash basis accounting for tax
purposes and accrual basis accounting for the financial statements.

The entity reported sales of P1,750,000 and P800,000 in the tax returns for the years ended December 31, 2021
and 2020, respectively.

The entity reported accounts receivable of P300,000 and P500,000 in the statement of financial position on
December 31, 2021 and 2020, respectively.

Under accrual basis, what amount should be reported as sales for the year ended December 31, 2021?
a. 1,450,000
b. 1,550,000
c. 1,950,000
d. 2,050,000
Problem 14-12 (AICPA Adapted)

Mall Company reported the following balances at the end of each year:

2021 2020
Inventory 2,600,000 2,900,000
Accounts payable 750,000 500,000

The entity paid suppliers P4,900,000 during the year ended December 31, 2021.

Under accrual basis, what amount should be reported as cost of goods sold in 2021?
a. 5,450,000
b. 4,950,000
c. 4,850,000
d. 4,350,000
Problem 14-15

1. What amount should be reported as net income under cash basis for 2021?
A.2,600,000
B.2,700,000
C.2,500,000
D.2,400,000

1. What amount should be reported as net income under accrual basis for 2021?
A.3,400,000
B.3,500,000
C.3,200,000
D.2,500,000
Problem 14-16
Calapan Company provided the following data:
January 1 December 31

Inventory 1,200,000 1,600,000

Cost of Goods Sold 5,500,000

Accounts Receivable 1,200,000 1,350,000

Accounts Payable 1,500,000 1,850,000

During the current year, accounts written off amounted to P100,000. Sales returns with credit memo totaled
P250,000.
Cash refund to customers for returned goods of P50,000 was debited to accounts receivable.
Cash receipts from customers after P500,000 sales discounts amounted to P8,000,000.
Cash payments to trade creditors totaled P5,000,000 after purchase discounts of P200,000. Purchase returns with
debit memo amounted to P400,000.
Problem 14-16

1. Under accrual basis, what amount should be reported as gross sales?

A.8,900,000
B.8,950,000
C.8,250,000
D.8,850,000

1. Under accrual basis, what amount should be reported as gross purchase?

A.5,250,000
B.5,950,000
C.5,750,000
D.5,650,000
1. What amount should be reported as cost of goods sold under accrual basis for 2021?
A.5,550,000
B.5,750,000
C.4,950,000
D.5,350,000
Problem 14-17
Emmyrelle Company provided the following selected accounts, cash receipts and disbursements
for the current year:
December 31 January 1

Accounts Receivable 250,000 300,000

Notes Receivable 150,000 100,000

Accounts Payable 120,000 160,000

Cash receipts for current year Notes Payable 200,000 150,000

Cash Sales Prepaid Insurance 30,000 10,000

500,000
Collections of Accounts receivable, net of discounts
Of P40,000
1,800,000
Collections of Notes Receivable 80,000
Bank Loan - one year, dated December 31 100,000
Purchase returns and allowances
60,000
Problem 14-17
Cash disbursements for current year
Cash Purchases
130,000
Payments on accounts payable, net of discounts
of P20,000
1,500,000
Payments on notes payable
400,000
Insurance
220,000
Other Expenses
650,000
Sales returns and allowances 50,000
1. Under accrual basis, what amount should be reported as gross sales for the current year?
A. 2,420,000
B. 2,470,000
C. 1,920,000
D. 1,970,000
Problem 14-17
1. Under accrual basis, what amount should be reported as gross sales for the

2. Under accrual basis, what amount should be reported as gross purchases for the current
year?
A. 1,960,000
B. 2,020,000
C. 1,830,000
D. 1,890,000
Problem 14-18
Otis Company acquired rights to a patent under a licensing agreement that required an
advance royalty payment. When the agreement was signed. The entity remitted royalties
earned and due under the agreement on October 31 each year.
Additionally, on the same date, the entity paid, in advance estimated royalties for the
next year. The entity adjusted prepaid royalties at year end. The entity provided the
following information for the current year:
Jan 1 Prepaid royalties
650,000
Oct 31 Royalty payment charged to royalty expense 1,100,000
Dec 31 Year-end credit adjustment to expense 250,000

What amount should be reported as prepaid royalties at year-end?

A.250,000
B.400,000
C.850,000
D.900,000
Problem 14-19
Thrifty Company reported that the unadjusted prepaid expense account on December 31, 2021
comprised the following:

• An opening balance of 15,000 for a comprehensive insurance policy the entity had paid an annual
premium of 30,000 on July 1 2020.

• A P32, 000 annual insurance premium payment July 1, 2021.

• A P20,000 advance rental payment for a warehouse that was leased for one year beginning
January 1 2022.

On December 31 2021 what amount should be reported as prepaid expense .

A. 52,000
B. 36,000
C. 20,000
D. 16,000
Problem 14-20
Rara company paid 72,000 to renew an insurance policy for 3 years on March 1 2021
On march 31, 2021 the unadjusted trial balance showed P3,000 for prepaid insurance and P72,000
for sure insurance expense.

1. What amount should be reported for prepaid insurance on March 31 2021

A. 70,000
B. 71.000
c. 72,000
D. 73,000

2. What amount should be reported for insurance expense for the three months ended March 31
2021

A. 5,000
B. 3,200
C. 2,000
D, 1,000
Problem 14-21
On July 1 2021, Roxy company obtained fire insurance at an annual premium of P72,000 payable on
July 1 of each year. The first premium payment was made July 1, 2021.
On October 1, 2021, the entity paid P24,000 for real estate taxes to cover the period ending
September 30, 2022.
On December 31, 2021, what amount should be reported as prepaid expenses?

a. 60,000
b. 54,000
c. 48,000
d. 36,000
Problem 14-22
Clay Company borrowed money under various loan agreements involving notes discounted and notes
requiring interest payments and maturity. During the year ended December 31 2021, the entity paid interest
totaling P100,000.
The December 31 statement financial of financial position included the following information:

2020 2021

Prepaid Interest 23,500 18,000

Interest payable 45,000 53,500

What amount of interest expense should be reported for the current year?
a. 86,000
b. 97,000
c. 103,000
d. 114,000
Problem 14-23 (AICPA Adapted)
On December 31, 2021, Ashe Company had a P990,000
balance in the advertising expense account before any
year-end adjustments relating to the following:
Radio advertising spots broadcast during December 2021
were billed to the entity on January 4, 2022. The invoice
cost of P50,000 was paid on January 15, 2022.
Included in the P990,000 is P60,00n for newspaper
advertising for a January 2022 sales promotional
campaign.
What amount should be reported as advertising expense for
the year ended December 31, 2021?
a. 930,000
b. 980,000
c. 1,000.000
d. 1,040,000
Problem 14-24 (AICPA Adapted)
Doren Company reported that the compensation expense
account had a balance of P490,000 on December 31, 2021
before any appropriate year-end adjustment relating to the
following:
No salary accrual was made for the week of December
25-31, 2021. Salaries for this period totaled P18,000 and
were paid on January 5, 2022.
Bonus for 2021 was paid on January 31, 2022 in the total
amount of P175,000.
What amount should be reported for compensation expense
for 2021?
a. 683,000
b. 665,000
C. 508,000
d. 490,000
Problem 14-25 (AICPA Adapted)
Pak Company reported that the professional fees expense account had a balance of P820,000 on December
31, 2021, before considering year-end adjustments relating to the following:
Consultants were hired for a special project at a total fee not to exceed P650,000.
The entity has recorded P550,000 of this fee based on billings for work performed in 2021.
The attorney's letter requested by the auditors dated January 31, 2022 indicated that legal fees of P60,000
were
billed on January 15, 2022 for work performed in November 2021, and unbilled fees for December 2021
were P70.000.

What amount should be reported for professional fees expense for the year ended December 31, 2021?
a. 1,050,000
b. 950,000
C. 880,000
d. 820,000
Problem 14-26

During 2021, Cooke company acquired patent right and remitted royalties of P3,000,000.
Prepaid royalties Dec. 31, 2020 550,000
Prepaid royalties Dec. 31, 2021 450,000
Prepaid payable Dec. 31, 2020 800,000
Prepaid payable Dec. 31, 2021 750,000
1. Under the accrual basis, what amount should be reported as royalty expense?
a. 2,950,000
b. 3,050,000
c. 3,100,000
d. 3,300,000
Problem 14-27
Rice company's salaried employees are paid biweekly. Advances made to
employees are paid back by payroll deductions.
January 1 December 31
Employee advances 240,000 360,000
Accrued salaries payable 400,000 ?
Salaries expense during the year 4,200,000
Salaries paid during the year at gross 3,900,000
1. What amount should be reported as accrued salaries payable on
December 31?
a. 940,000
b. 820,000
c. 700,000
d. 300,000
Problem 14-28

Airene company paid P1,000,000 for supplies during the current year. The full amount of
P1,000,000 was debited to supplies inventory.
The beginning balance of supplies inventory was P360,000

A physical count of the supplies on hand at year-end revealed an amount of P600,000.

1. What is the adjusting entry for supplies expense at year-end?

a. debit supplies expense and credit supplies inventory P760,000
b. debit supplies expense and credit supplies inventory P600,000
c. debit supplies expense and credit supplies expense P600,000
d. debit supplies expense and credit supplies expense P240,000
Problem 14-29
Karen company reported in the income statement for the current year P1,100,000 of wages
expense.

The previous year's statement of financial position reported P100,000 of wages payable
An analysis of the payroll records showed wage payments during the year of P950,000
The previous year's adjusting entry for unpaid wages was reversed at the beginning of the
current year.

1. What is the amount of the adjusting entry for accrued wages payable at year end?
a. 250,000 c. 150,000
b. 400,000 d. 850,000
Problem 14-30
Tara company owns an office building and leases the offices under a variety of rental agreements
involving rent paid in advance monthly or annually.
Not all tenants make timely payments of their rent. During 2021, the entity received P8,000,000
cash from tenants.
The statement of financial position contained the following data at year-end:
2020 2021
Rental receivable 960,000 1,240,000
Unearned rental income 3,200,000 2,400,000
Uncollectible rent written off 500,000
1. Under accrual basis, what amount of rental revenue should be reported for the current year?
a. 9,080,000
b. 9,580,000
c. 8,580,000
d. 7,980,000
Problem 14-31
Carey company assigns patent rights for which royalties are received. During
2021, the entity received royalty remittance of P2,500,000.
The following data are available at year-end:
2020 2021
Royalties' receivable 750,000 800,000
Unearned royalties 450,000 650,000
Under accrual basis, what amount should be reported as royalty revenue for the
current year?
a. 2,250,000
b. 2,300,000
c. 2,350,000
d. 2,550,000