ACC 205 - Final Examination

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II. Problem Solving

Zack Company recorded the following information pertaining to * 2 points

inventory during the month of January. Under a moving average method,
what is the moving average unit cost of the inventory on January 31?

P293

P175

P290

P266
Winter Company provided the following inventory data at year-end. * 2 points
What amount should be reported as inventory at year-end?

5,000,000

5,300,000

4,800,000

5,200,000

On December 31, 2022, a fire at Brock Company's warehouse caused * 2 points

serve damage to its entire inventory. Brock Company has a gross profit
of 30% on cost. The following data are available for nine months
September 30, 2022. What is the estimated amount of fire loss?

1,500,000

1,400,000

2,004,000

1,964,000
Boycott Coffee Project uses average retail inventory method. The * 2 points
following information is available for the current year. What is the
estimated ending inventory at cost?

1,743,945

2,198,571

1,832,143

1,800,000
On December 31, 2021, Fay Company appropriately reported a P100,000 * 2 points

unrealized loss. There was no change during 2022 in the composition of

the portfolio of non-trading equity securities held at fair value through
other comprehensive income. What cumulative amount of loss on these
securities should be reported in the statement of changes in equity for
the year ended December 31, 2022 as component of other
comprehensive income?

100, 000

200, 000

400, 000

Excelsia Company issued rights to subscribe to its stock, the Ownership * 2 points
of 4 shares entitling the shareholders to subscribe for 1 share at P100.
Jealina Company owns 50,000 shares of Excelsia Company with total
cost of P5,000,000. The share is quoted right-on at 125. The stock rights
are accounted for separately and measured initially at fair value. What is
the cost of the new investment if all of the stock rights are exercised by
Jealina Company?

1,500,000

1,250,000

1,562,500

1,450,000
On January 1, 2022, Ronaldo Company purchased 40% of the * 2 points

outstanding ordinary shares of New Company equaled P12,500,000. The

difference was attributed to equipment which had a carrying amount of
P3,000,000 and a fair market value of P5,000,000 and to building which
had a carrying amount of P2,500,000 and a fair value of P4,000,000.
The remaining useful life of the equipment and building was 4 years and
12 years, respectively. During 2022, New Company reported net income
of P5,000,000 and paid dividends of P2,500,000. What amount should
be reported as investment income for 2022?

2,000,000

1,000,000

1,800,000

1,750,000

An entity purchased an investment property on January 1, 2021 at a cost * 2 points

of P4,000,000. The property had a useful life of 20 years and on
December 31, 2022 had a fair value of P4,800,000. On December 31,
2022, the property was sold for net proceeds of P4,500,000. The entity
used the cost model to account for investment property. What is the
gain to be recognized for 2022 regarding the disposal of the property?

900,000

800,000

500,000

700,000
On August 1, 2022, Bamco Company purchased a new machine on a * 2 points

deferred payment basis. A down payment of P100,000 was made and 4

monthly installments of P250,000 each are to be made beginning on
September 1, 2022. The cash equivalent price of the machine was
P950,000. Bamco incurred and paid installation costs amounting to
P30,000. What is the amount to be capitalized as cost of the machine?

950,000

980,000

1,100,000

1,130,000

On January 1, 2022, Annibelle Company received a grant of P9,000,000 * 2 points

from the foreign government in order to defray safety and
environmental costs within the area where the entity is located. The
safety and environmental costs are expected to be incurred over three
years, respectively, P1,000,000, P2,000,000 and P3,000,000. What
income from the government grant should be recognized in 2022?

9,000,000

1,500,000

3,000,000

4,500,000
On January 1, 2022, Hamlet Company borrowed P6,000,000 at an * 2 points
annual interest rate of 10% to finance specifically the cost of building an
electricity generating plant. Construction commenced on January 1,
2022 with a cost P6,000,000. Not all the cash borrowed was used
immediately, so interest income of P80,000 was generated by
temporarily investing some of the borrowed funds prior to use. The
project was completed on October 31, 2022. What is the carrying
amount of the plant on October 31, 2022?

6,000,000

6,470,000

6,420,000

6,550,000

Ariel Company purchased a boring machine on January 1, 2020 for * 2 points

P8,100,000. The useful life of the machine is estimated at three years
with a residual value of P600,000. During the useful life, the expected
units of production from the machine are 10,000 units for 2020, 9,000
units for 2021 and 6,000 units for 2022. What is the depreciation
expense for 2021 using the most appropriate depreciation method?

2,700,000

3,000,000

2,500,000

2,916,000
On January 1, 2022 Lem Company bought machinery under a contact * 2 points
that required a down payment of P100,000, plus 24 monthly payments
of P50,000 each, for total cash payments of P1,300,000. The cash
equivalent price of the machinery was P1,100,000. The machinery has an
estimated useful life of 10 years and estimated residual value of
P50,000. Lem uses straight line depreciation. In its 2022 income
statement, what amount should Lem report as depreciation for the
machinery?

105,000

110,000

125,000

130,000

At the beginning of current year, Nilli company purchased a coal mine for * 2 points

P30,000,000. Removable coal is estimated at 1,500,000 tons. The entity

is required to restore the land at an estimated cost of 3,600,000. The
land is estimated to have a value of P3,150,000 after restoration. The
entity incurred P7,500,000 of development cost preparing the mine for
production. During the current year, 450,000 tons were removed and
300,000 tons were sold. What total amount of depletion should be
recorded for the current year?

11,385,000

10,305,000

3,870,000

7,590,000
 On January 1, 2019, Diamond Company purchased equipment for * 2 points
P5,600,000. The equipment had an 8-year useful life and residual value
of P800,000. The entity depreciated the equipment using the straight
line method. In August 2022, the entity questioned the recoverability of
the carrying amount of the equipment. On August 31, 2022, the
discounted expected net future cash inflows related to the continued
use and eventual disposal of the equipment total P3,500,000. The fair
value less cost of disposal of the equipment on such date is P3,000,000.
After any loss on impairment has been recognized, what is the carrying
amount of the equipment?

3,500,000

3,400,000

3,000,000

2,600,000

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