1. LOATH HATE Co. purchased a lot for ₱8,000,000.

Immediately after the purchase, LOATH

Co. started the construction of a new building on the lot. Additional information follows:
Legal cost of conveying title to land ₱ 40,000
Special assessment 20,000
Survey costs 60,000
Materials, labor, and overhead costs 22,000,000
Cash discounts on materials purchased not taken 120,000
Clerical and other costs related to construction 56,000
Excavation costs 400,000
Architectural fees and building permit 240,000
Supervision by management on construction 48,000
Insurance premiums paid for workers 520,000
Payment for claim for injuries not covered by
insurance 180,000
Savings on construction 800,000
Cost of changes to plans and specifications due to
560,000
inefficiencies
Paving of streets and sidewalks (not included in
blueprint) 40,000
Income earned on a vacant space rented as parking
lot during construction 36,000

2. TRANSCEND EXCEED Co. traded-in an old machine for a new model. Pertinent data are as
follows:
Old equipment:
Cost 200,000
Accumulated depreciation 80,000
Average published retail value 24,000

New equipment:
List price 380,000
Cash price without trade in 280,000
Cash price with trade in 220,000

3. On January 1, 20x1, KNAVE RASCAL Co. acquired a machine for a total cost of ₱80,000,000.
The machine was depreciated using the sum-of-the-years’ digits method over a period of 10
years. On January 1, 20x4, KNAVE Co. changed its depreciation method to the double
declining balance method.

4. On December 31, 20x1, the building of HISTRIONAL THEATRICAL Co. with a historical
cost of ₱80,000,000, accumulated depreciation of ₱20,000,000, and an estimated useful life of
20 years has been appraised by a professional appraiser at a fair value of ₱100,000,000.
 5. XYZ Corporation bought a machine on January 1, 20x2. In purchasing the machine, the
company paid ₱50,000 cash and signed an interest-bearing note for ₱100,000. The estimated
useful life of the machine is five years, after which time the residual value is expected to be
₱15,000.

6. Turtle Co. purchased equipment on January 2, 20x1, for ₱50,000. The equipment had an
estimated five-year service life. Turtle’s policy for five-year assets is to use the 200% double-
declining depreciation method for the first two years of the asset’s life, and then switch to
the straight-line depreciation method.

7. FORTITUDE ENDURANCE Co. purchased a piece of equipment on August 14, 20x1 for a
total cost of ₱400,000. The equipment has an estimated useful life of 10 years and a residual
value of ₱80,000. It is the policy of FORTITUDE Co. to provide for full-year depreciation in
the year of acquisition and none in the year of disposal. On May 12, 20x4, the equipment was
sold for ₱120,000. Disposal costs of ₱8,000 were incurred.

Use the following information for questions 8-9 :

On January 1, 20x1, Entity A had the following general borrowings. A part of the proceeds was used
to finance the construction of a qualifying asset:
Principal
12% bank loan (1.5 years) ₱ 1,000,000
10% bank loan (3-year) 8,000,000
Expenditures made on the qualifying asset were as follows:
Jan. 1 ₱ 5,000,000
March 1 4,000,000
August 31 3,000,000
December 1 2,000,000
Construction was completed on December 31, 20x1.

10. On January 1, 20x1, Entity A obtained a 12%, ₱6,000,000 loan, specifically to finance the
construction of a building. The proceeds of the loan were temporarily invested and earned interest
income of ₱180,000. The construction was completed on December 31, 20x1 for a total construction
cost of ₱7,000,000. How much is the historical cost of the newly constructed building?

11. In 20x1, OBSTREPEROUS NOISY Mining Corp. acquired the right to use 1,000 acres of land
to mine for gold. The lease cost is ₱200,000,000, and the related exploration costs on the
property amounted to ₱40,000,000. It is the policy of OBSTREPEROUS Mining Corp. to
capitalize all costs of exploration and evaluation of mineral resources. Intangible
development costs of drilling, tunnels, shafts, and wells incurred before opening the mine
amounted to ₱340,00,000. At the end of the mine’s economic useful life, OBSTREPEROUS
 Mining Corp. is required by legislation to restore the site. Estimated restoration costs have a
fair value of ₱20,000,000. OBSTREPEROUS Mining Corp. estimates that the mine will
provide approximately 100,000,000 ounces of gold. Actual ounce of gold mined in 20x2
totaled 300,000 ounces.

Use the following information for questions 12-13

In 20x1, BUCOLIC RURAL Co. acquired land for a total cost of ₱40,000,000 to be used to quarry
marble, limestone, and construction aggregates. Costs incurred to obtain legal right to explore the
property amounted to ₱8,000,000. Expenditures incurred in the exploration for and evaluation of
mineral resources before technical feasibility and commercial viability of extracting a mineral
resource are demonstrable totaled ₱12,000,000. Intangible development costs of drilling, tunnels,
shafts, and wells before the actual production totaled ₱20,000,000. BUCOLIC Co. estimates that total
recoverable reserves are 100,000,000 units. Furthermore, BUCOLIC Co. expects to sell the land for
₱4,800,000 after resource is depleted. However, no buyer will pay this price unless the mine is
drained, filled and leveled, a process that will cost ₱800,000. It is BUCOLIC’s policy to capitalize all
exploration costs.

Actual units quarried in 20x1 through 20x4 totaled 30,000,000 units. On January 1, 20x5, BUCOLIC
Co. estimated that the remaining recoverable reserves are only 25,000,000 units and after the
reserves are exhausted, the land will be sold for ₱3,200,000. Costs of disposal are estimated at
₱1,200,000. Actual units quarried in 20x5 totaled 6,000,000 units.

Use the following information for questions 14-15:

On December 31, 20x1, Entity A determines that its building is impaired. Entity A gathers the
following information:

Building 2,000,000
Accumulated depreciation 600,000
Fair value less costs of disposal
(FVLCD) 900,000
Value in use (VIU) 1,080,000

After the impairment, the building is assessed to have a remaining useful life of six years and no
residual value.

On December 31, 20x2, Entity A determines an indication that the impairment loss recognized in the
prior period may no longer exist. The revised recoverable amount of the building on December 31,
20x2 is ₱1,280,000. If no impairment loss had been recognized in the prior period, the carrying
amount of the building on December 31, 20x2 would have been ₱1,200,000.