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2 - ACG015 - Intermediate Accounting Part 3 - Questionnaire
2 - ACG015 - Intermediate Accounting Part 3 - Questionnaire
2023 / 10:00–12:00PM
Direction: Read each question carefully. Choose the best answer among the choices presented. Final
answersaretobeplaced in the answer sheet through shading. Strictly no erasures on the final answers. You may use this
questionnaireasyour working paper.
For Numbers 1 to 4:
On December 31, 2021, Tito Co. signed a 4-year noncancelable lease for a new machine requiringP120,000annual
payments beginning December 31, 2021. The machine has a useful life of 8 years, with nosalvagevalue.The rate implicit
on the lease is 12%. Tito has a purchase option amounting to P20,000. It is certainthatthecompany will exercise this
option. The fair value of the machine at the inception of the leaseamountedtoP447,794.
1. How much is the initial cost of the right-of-use asset on December 31, 2021? a. P420,926 c.
P480,000
b. P474,660 d. P500,000
2. How much is the interest expense in 2022?
a. Nil c. P57,600
b. P36,111 d. P60,000
3. How much is the lease-related liability to be shown as current in the statement of financial
positiononDecember 31, 2021?
a. P300,926 c. P83,889
b. P217,037 d. P36,111
4. How much is the lease-related liability to be shown as non-current in the statement of financial positionon
December 31, 2021?
a. P300,926 c. P83,889
b. P217,037 d. P36,211
For Numbers 5 to 8:
On December 31, 2021, Tracy Co. signed a 4-year, noncancelable lease for a right of use of machinerequiringP150,000
annual payments beginning December 31, 2021. The annual payments include payment for insuranceand property taxes
amounting to P20,000. On the same data, Tracy Co. paid P40,000 incremental coststhataredirectly attributable to
negotiating and arranging a lease. The machine has a useful life of 8 years, withnosalvage value. The rate implicit on the
lease is 10%. Tracy Co. Guarantee a residual value of P50,000at theendof the lease term. The fair value of the machine
at the incpetion of the lease amounted to P518,561.
5. How much is the initial cost of the right of use asset on December 31, 2021? a. P487,447 c.
P527,447
b. P495,975 d. P577,447
6. How much is the interest expense in 2022?
a. Nil c. P52,745
b. P35,745 d. P57,745
7. How much is the lease-related liability to be shown as current in the statement of financial
positiononDecember 31, 2021?
a. P357,447 c. P94,255
b. P263,192 d. P35,745
8. How much is the lease-related liability to be shown as non-current in the statement of financial positionon
December 31, 2021?
a. P357,447 c. P94,255
b. P263,192 d. P35,745
b. P5,685,000 d. P3,500,000
35. What amount should be reported as interest income for current year?
a. P682,200 c. P900,000
b. P648,000 d. P960,000
36. What amount should be reported as gross income on sale?
a. P1,485,000 c. P3,500,000
b. P1,685,000 d. P4,000,000
37. What is the treatment of initial direct cost incurred by the lesse in a finance lease? a. Added to the lease
liability.
b. Added to the carrying amount of the right of use asset.
c. Expensed immediately.
d. Added to the carrying amount of the right of use asset and lease liability.
38. In computing depreciation of a right of use asset under a finance lease, the lessee shoulddeduct a. The residual
value guarantee and depreciate over the lease term.
b. An unguaranteed residual value and depreciate over the lease term.
c. The residual value guarantee and depreciate over the useful life of the asset.
d. An unguarnteed residual value and derepciation over the useful life of the asset. 39. Net
Investment in a direct financing lease is equal to
a. Cost of the asset.
b. Cost of the asset plus initial direct cost paid by lessor.
c. Cost of the asset minus guaranteed residual value.
d. Cost of the asset plus unguaranteed residual value.
40. Net investment in a sales type lease is equal to
a. Gross investment in the lease unearned finance income.
b. Cost of the underlying asset.
c. The lease payments
d. The lease payments less unguaranteed residual value.
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