REVIEWER COMPRE

1. It is a any contract that gives rise to both a financial asset of one entity and a financial liability or equity
instrument of another entity.
a. Financial instrument c. debt instrument
b. Equity instrument d. derivative instrument

2. Which of the following cannot be considered a financial asset?

a. Cash
b. A contractual right to receive cash or another financial asset from another entity
c. A contractual right to exchange financial instruments with another entity under conditions that are
potentially unfavorable
d. An equity instrument of another entity

3. Financial assets include all of the following, except

a. prepaid expenses c. trade accounts receivable
b. cash in bank d. loans receivable

4. Financial liabilities include all of the following, except

a. Trade accounts payable c. bonds payable
b. Notes payable d. income tax payable

5. Which of the following is not classified as a financial instrument?

A.Convertible bond c. warranty provision
B. Foreign currency contract d. loan receivable

6. Which instrument is best described as a contract that evidences a residual interest in the assets of an
entity after deducting the liabilities?
a. Financial liability c. equity
b. Guarantee d. financial asset

7. All of the following is not a category of financial assets?

a. Financial assets at fair value through profit or loss
b. Financial assets at fair value through other comprehensive income
c. Financial assets at amortized cost
d. Financial assets held for sale

8. All of the following financial assets shall be measured at fair value through profit or loss, except
a. Financial assets held for trading
b. Financial assets designated on initial recognition as at fair value through profit or loss
c. Investments in quoted equity instruments
d. Financial assets at amortized cost

9. As a rule, transaction costs that are directly attributable to the acquisition of a financial asset shall be
a. Capitalized as cost of the financial asset
b. Expensed when incurred
c. Charged to retained earnings
d. Included as a component of other comprehensive income

10. If the financial asset is held for trading or if the financial asset is measured at fair value through profit
or loss, transaction costs directly attributable to the acquisition shall be
 a. Capitalized as cost of the financial asset
b. Expensed immediately when incurred
c. Deferred and amortized over a reasonable period
d. Included as component of other comprehensive income

11. The usual factors considered in classifying investments in securities as short-term are
a. Type of investment only
b. Ready marketability only
c. Ready marketability and type of investment
d. Ready marketability and management intentions

12. Statement I Unrealized gains and losses on financial assets held for trading shall be included in
profit or loss
Statement II Unrealized gains and losses on financial assets measured at amortized cost shall be
included as component of other comprehensive income
a. Only statement I is true
b. Only statement II is true
c. Both statements are true
d. Bothe statements are false

13. On derecognition of a financial asset, the difference between the consideration received and the
carrying amount of the financial asset shall be
a. Recognized in profit or loss only for financial asset measured at fair value
b. Recognized in profit or loss only for financial asset measured at amortized cost
c. Recognized in profit or loss for both financial asset measured at fair value and financial asset at
amortized cost
d. Recognized in other comprehensive income for financial asset at amortized cost and profit or loss
for financial asset at fair value

14. When an entity reclassifies a financial asset at amortized cost to financial asset at fair value, the fair
value is determined at the reclassification date, and the difference between the previous carrying
amount and fair value
a. Is included in profit or loss
b. Is included in other comprehensive income
c. Is included in retained earnings
d. Is not recognized

15. Which of the following is incorrect in regard to trading investments?

a. Trading investments are held with the intention of selling them in a short period of time
b. Unrealized gains and losses are reported as part of net income
c. Any discount or premium is not amortized
d. All of the statements are correct

16. Debt investments that meet the business model and contractual cash flow tests are reported at
a. Net realizable value c. amortized cost
b. Fair value d. the lower of amortized cost and fair value

17. At which of the following dates has the shareholder theoretically realized income from dividend?
a. The date the dividend is declared
b. The date of record
c. The date the dividend check is mailed by the entity
 d. The date the dividend check is received by the shareholder

18. Property dividends are recorded

a. As dividend income at carrying amount of the property
b. As dividend income at fair value of the property
c. As return of investment and therefore credited to investment account
d. By means of memorandum only

19. What is the effect of stock dividend of the same class?

a. Increase in investment account and increase in cost per share
b. Decrease in investment account and decrease in cost per share
c. No effect in investment account and decrease in cost per share
d. No effect in investment account and increase in cost per share

20. Shares in lieu of cash dividend are recorded as

a. Income at fair value of the shares received
b. Income at par value of the shares received
c. Income at the cash dividend that would have been received
d. Stock dividends

21. What is the effect of share split up?

a. Increase in number of shares and increase in cost per share
b. Decrease in number of shares and decrease in cost per share
c. Increase in number of shares and decrease in cost per share
d. Decrease in number of shares and increase in cost per share

22. An investor owns 10% of the ordinary shares of an investee throughout the year. The investee has no
preference shares outstanding. The investor’s interest gives the right to
a. Be paid 10% of the investee’s profits in cash each year.
b. Receive dividend equal to 10% of the par value each year
c. Received dividends equal to 10% of the total dividend paid by the investee for the year to
shareholders
d. Keep investee from issuing any additional shares unless the investor is willing to buy 10% of the
newly issued shares.

23. It is an entity over which the investor has significant influence

a. Associate c. venture capital organization
b. Investee d. mutual fund

24. Which of the following statements is incorrect concerning the equity method?
a. The investment in associate is initially recorded at cost
b. The investment in associate is increased or decreased by the investor’s share of the profit or loss of
the investee after the date of acquisition
c. The investor’s share of the profit or loss of the investee is not recognized in the investor’s profit or
loss
d. Distributions received from the investee reduce the carrying amount of the investment

25. Goodwill arising from an investment in associate is

a. Included in the carrying amount of the investment and amortized over the useful life
b. Included in the carrying amount of the investment is not amortized
c. Excluded in the carrying amount of the investment but charged to retained earnings
 d. Excluded in the carrying amount of the investment but charged to retained earnings

26. When the investor discontinues the use of the equity method because significant influence is lost, the
investment in associate retained by the investor shall be measured at
a. Fair value c. amortized cost
b. Carrying amount d. original cost

27. Which of the following statements best describes the term “significant influence”?
a. The holding of a significant proportion of the share capital in another entity
b. The contractually agreed sharing of control over an economic entity
c. The power to participate in the financial and operating policy decisions of an entity
d. The mutual sharing in the risks and benefits of a combined entity

28. When an investor uses the equity method to account for investment in ordinary shares, cash dividends
received by the investor from the investee shall be recorded as
a. Dividend income
b. A deduction from the investor’s share of the investee’s profits
c. A deduction from the investment account
d. A deduction from the shareholders’ equity account, dividends to shareholder.

29. An investor uses the equity method to account for an investment in ordinary shares. After the date of
acquisition, the investment account of the investor would
a. Not be affected by its share of the earnings or losses of the investee
b. Not be affected by its share of the earnings of the investee, but be decreased by its share of the
losses of the investee.
c. Be increased by its share of the earnings of the investee, but not be affected by its share of the
losses of the investee.
d. Be increased by its share of the earnings of the investee and decreased by its share of the losses of
the investee.

30. An investor uses the cost method to account for investment in ordinary shares. Dividends received in
excess of the investor’s share of investee’s earnings subsequent to the date of investment
a. Increase other comprehensive income
b. Decrease in the investment account
c. Increase in the investment account
d. Increase dividend revenue

31. Accrued interest on bonds that are purchased between interest dates
a. Is ignored by both the seller and the buyer
b. Increases the amount a buyer must pay to acquire the bonds
c. Is recorded as a loss on the sale of the bonds
d. Decreases the amount a buyer must pay to acquire the bonds

32. The effective interest method of amortizing bond discount provides for
a. Increasing discount amortization and increasing interest income
b. Increasing discount amortization and decreasing interest income
c. Decreasing discount amortization and increasing interest income
d. Decreasing discount amortization and decreasing interest income

33. The effective interest rat on bonds is lower than the stated rate when bonds sell
a. At maturity value c. below face value
 b. Above face value d. at face value

34. The effective interest rate on bonds is higher than the stated rate when bonds sell
a. At face value c. below face value
b. Above face value d. at maturity value

35. An investor purchased a bond as a long-term investment on January 1. Annual interest was received on
December 31. The investor’s interest income for the year would be lower if the bond was purchased at
a. A discount c. par
b. A premium d. face value

36. A bond purchased on June 1 of the current year has interest payment dates of April 1 and October 1.
Bond interest income for the current year ended December 31 is for
a. 3 months c. 6 months
b. 4 months d. 7 months

37. Which of the following is an investment property?

a. Property being constructed or developed on behalf of third parties
b. Property that is being constructed and developed as investment property
c. Property held for future development and subsequent use as owner-occupied property
d. Owner-occupied property awaiting disposal.

38. An investment property shall be measured initially at

a. Cost
b. Cost less accumulated impairment loss
c. Depreciable cost less accumulated impairment losses
d. Fair value less accumulated impairment losses

39. In an exchange with commercial substance

a. Gain or loss is recognized entirely
b. A gain or loss is computed by comparing the fair value of the asset received with the fair value of
the asset given up
c. Only gain should be recognized
d. Only loss should be recognized

40. Which of the following terms best describes the removal of an asset from the statement of financial
position?
a. Derecognition c. writeoff
b. Impairment d. depreciation
1. Reclassifications of investments between categories are accounted for*

a. Prospectively, at the end of the period after the change in the business model

b. Prospectively, at the beginning of the period after the change in the business model

c. Retrospectively, at the end of the period after the change in the business model

d. Retrospectively, at the beginning of the period after the change in the business model

2. When a debt investment at amortized cost is reclassified to FVPL, the

difference between the previous carrying amount and fair value at
reclassification date is*

a. Recognized in profit or loss

b. Not recognized

c. Recognized in other comprehensive income

d. Included in retained earnings

3. When the interest payment dates of a bond are May 1 and November 1,
and a bond is purchased on June 1, the amount of cash paid by the
investor would be*

a. Decreased by accrued interest from June 1 to November 1

b. Decreased by accrued interest from May 1 to June 1

c. Increased by accrued interest from June 1 to November 1

d. Increased by accrued interest from May 1 to June 1

4. Transaction costs on trading bond investment are*

a. Part of the initial carrying amount

 b. Expensed immediately

c. A component of other comprehensive income

d. Accounted for separately as deferred charge

5. Bonds usually sell at a discount when investors are willing to invest in

bonds*

a. At the stated interest rate

b. At rate lower than the stated interest rate

c. At rate higher than the stated interest rate

d. Because a capital gain is expected

6. When an entity holds between 20% and 50% of the voting power of an
investee, which statement is true?*

a. The investor must use the equity method.

b. The investor must use the equity method unless circumstances indicate that it is unable to
exercise significant influence over the investee.

c. The investor must use the fair value method unless it can be clearly demonstrated that the
investor has significant influence over the investee.

d. The investor must use the fair value method.

7. When an investor uses the cost method to account for investment in

ordinary shares, cash dividends received by the investor from the investee
should be recorded as*

a. Dividend income

b. An addition to the investor’s share of the investee’s profit

 c. A deduction from the investor’s share of the investee’s profit

d. A deduction from the investment account

8. When an investor uses the equity method to account for investment in

ordinary shares, the investment account is increased when the investor
recognizes*

a. A proportionate interest in the net income of the investee

b. A cash dividend received from the investee

c. Periodic amortization of the goodwill related to the purchase

d. None of the above

9. It is an entity over which the investor has significant influence.*

a. Associate

b. Investee

c. Venture capital organization

d. Mutual fund

10. Which statement is incorrect concerning the equity method?*

a. The investment is initially recorded at cost.

b. The investment in associate is increased or decreased by the investor’s share in the profit or loss
of the investee after the date of acquisition.

c. The investor’s share in the profit or loss of the investee is recognized in the investor’s profit or
loss.

d. Distributions received from the investee are accounted for as dividend income.
11. A nonmonetary exchange is recognized at fair value of the asset
exchanged unless*

a. Exchange has commercial substance

b. Fair value is not determinable

c. The assets are similar in nature

d. The assets are dissimilar

12. Costs directly attributable to bring the asset to the location and
condition for the intended use include all of the following except*

a. Cost of employee benefit not arising directly from the acquisition of property, plant and equipment

b. Cost of site preparation

c. Initial delivery and handling cost

d. Installation and assembly cost

13. In an exchange with commercial substance*

a. Gain or loss is recognized entirely

b. Gain or loss is not recognized

c. Only gain should be recognized

d. Only loss should be recognized

14. An entity purchased a machinery that it does not have to pay until after
three years. The total payment on maturity will include both principal and
interest. The cost of the machine would be the total payment multiplied by
what time value of money concept?*
 a. Present value of annuity of 1

b. Present value of 1

c. Future amount of annuity of 1

d. Future amount of 1

15. If an entity is able to determine reliably the fair value of the asset
received and the fair value of the asset given in an exchange transaction,
the cost is measured at*

a. Fair value of asset given

b. Fair value of asset received

c. Carrying amount of the asset given

d. Book value of the asset received

16. If the qualifying asset is financed by specific borrowing, the

capitalizable borrowing cost is equal to*

a. Actual borrowing cost incurred

b. Actual borrowing cost incurred up to completion of asset

c. Actual borrowing cost incurred up to completion of asset minus any investment income from the
temporary investment of the borrowing

d. Zero

17. Which of the following may not be considered a qualifying asset?*

a. A power generation plant that normally takes two years to construct

b. An expensive private jet that can be purchased from a local vendor

 c. A toll bridge that usually takes more than a year to build

d. A ship that normally takes one to two years to complete

18. The cost of land typically includes all of the following except*

a. Grading, filling, draining and clearing cost

b. Special assessment

c. Private driveway and parking lot

d. Assumption of any lien on the property

19. When an entity acquired land with an old building and immediately
demolished the old building so that the land can be used for the
construction of a plant, the cost incurred to demolish the old building
should be*

a. Expensed as incurred

b. Added to the cost of the plant

c. Added to the cost of the land

d. Amortized over the estimated time period between the demolition of the building and the
completion of the plant

20. The single cost of acquiring land and an unusable old building is*

a. Charged to the land only

b. Charged to the building only

c. Allocated between land and building based on relative fair value

d. Allocated between land and building based on carrying amount

21. Which statement best describes the term depreciation?*

a. The systematic allocation of the cost of an asset less residual value over the useful life

b. The removal of an asset from the statement of financial position

c. The amount by which the recoverable amount of an asset exceeds carrying amount

d. The amount by which the carrying amount of an asset exceeds recoverable amount

22. A machine with a four-year estimated useful life and an estimated 15%
residual value was acquired at the beginning of the current year. The
increase in accumulated depreciation for the second year using the double
declining balance method would be*

a. Original cost x 85% x 50%

b. Original cost x 50%

c. Original cost x 85% x 50% x 50%

d. Original cost x 50% x 50%

23. A machine with a 5-year estimated useful life and an estimated

residual value was acquired at the beginning of the current year. At the
end of the fourth year, accumulated depreciation using the sum of year’s
digits method would be*

a. Original cost less residual value multiplied by 1/15

b. Original cost less residual value multiplied by 14/15

c. Original cost multiplied by 14/15

d. Original cost multiplied by 1/15

24. An asset has a nine-year useful life and is to be depreciated under the
sum of year’s digits method. The annual depreciation expense would be
the same as that under the straight-line method in the*

a. third year

b. fifth year

c. seventh year

d. ninth year

25. If there is a change from double declining balance to straight line

method*

a. The accumulated depreciation is adjusted through retained earnings based on straight line

b. The accumulated depreciation is adjusted through net income based on straight line

c. The accumulated depreciation is not adjusted but the remaining carrying amount is allocated over
the remaining life using the straight line method

d. The accumulated depreciation is not adjusted but the remaining carrying amount is allocated over
the original life using the straight line method

26. Which of the following is not part of depletable amount?*

a. Acquisition cost

b. Exploration cost

c. Tangible development cost

d. Intangible development cost

27. Which of the following statements is true?*

a. Wasting assets are material objects of economic value produced by man.

 b. Wasting assets can be replaced only by the process of nature.

c. Wasting assets are replaceable.

d. Natural resources can be produced by man.

28. Acquisition cost is*

a. the price paid to obtain the property containing the natural resource

b. the cost incurred in an attempt to locate the natural resource that can economically be extracted
or exploited

c. the cost incurred to exploit or extract the natural resource that has been located through
successful exploration

d. the cost to be incurred in order to bring the property to its original condition

29. Development cost is*

a. the price paid to obtain the property containing the natural resource

b. the cost incurred in an attempt to locate the natural resource that can economically be extracted
or exploited

c. the cost incurred to exploit or extract the natural resource that has been located through
successful exploration

d. the cost to be incurred in order to bring the property to its original condition

30. Estimated restoration cost is*

a. the price paid to obtain the property containing the natural resource

b. the cost incurred in an attempt to locate the natural resource that can economically be extracted
or exploited

c. the cost incurred to exploit or extract the natural resource that has been located through
successful exploration
 d. the cost to be incurred in order to bring the property to its original condition

31. Which of the following cannot be considered a financial asset?*

a. Cash

b. A contractual right to receive cash or another financial asset from another entity

c. A contractual right to exchange financial instruments with another entity under conditions that are
potentially unfavorable

d. None of the above

32. Which should be classified as financial asset?*

a. Patent

b. Trade receivables

c. Inventory

d. Land

33. Financial assets include all of the following except*

a. Prepaid expenses

b. Cash in bank

c. Trade receivables

d. Loans receivable

34. The irrevocable election to present subsequent changes in fair value in

other comprehensive income is applicable only to*

a. Investment in equity instrument that is not held for trading

 b. Investment in equity instrument that is held for trading

c. Financial asset measured at amortized cost

d. All of the above

35. Equity investments irrevocably accounted for at fair value through

other comprehensive income are*

a. Nontrading investments of less than 20%

b. Trading investments of less than 20%

c. Investments of between 20% and 50%

d. Investments of more than 50%

36. It is the date on which the stock and transfer book of the entity is
closed for registration. Only those shareholders registered as of this date
are entitled to receive dividends.*

a. Date of declaration

b. Date of record

c. Date of payment

d. Date of mailing the dividend check

37. Property dividends are recorded*

a. As dividend income at carrying amount of the property

b. As dividend income at fair value of the property

c. As return of investment and therefore credited to investment account

d. By means of memorandum only

38. Cash received in lieu of share dividend is accounted for as*

a. Dividend income

b. Return of investment

c. Partly dividend income and partly return of investment

d. If the share dividends are received and subsequently sold at the cash received and gain or loss is
recognized

39. What is the effect of share split up?*

a. Increase in number of shares and increase in cost per share

b. Decrease in number of shares and decrease in cost per share

c. Increase in number of shares and decrease in cost per share

d. Decrease in number of shares and increase in cost per share

40. Liquidating dividends are credited to*

a. Income

b. Retained earnings

c. Investment account

d. Share capital

II. Classification

Direction: Choose IP if the asset stated in each item is an investment property, and NI if not.

41. A new office building to be used as head office*

IP

42. A property wherein significant ancillary services are provided to

occupants*

IP

43. A building held to earn rentals*

IP

44. A machine that is leased under operating lease*

NI

45. A property intended for sale in the ordinary course of business*

IP

46. A property that is in the process of construction for sale*

IP

47. A building owned by the company and being leased out under one or
more operating leases*

IP

48. A building that is leased under finance lease*

IP

49. A building being constructed on behalf of another company*

IP

50. A property held for capital appreciation*

IP
III. Problem-solving Questions

Direction: Please analyze the problems carefully. Choose the letter of the best answer.

On January 1, 2018, ALMA Company purchased 8% bonds in the face

amount of ₱8,000,000. The bonds mature on January 1, 2023 and were
purchased for ₱8,670,000 to yield 6%. Interest is payable annually every
December 31. The business model for this investment is to collect
contractual cash flows and to sell bonds in the open market.

51. How much is the interest income for 2018?*

a. ₱640,000

b. ₱520,200

c. ₱513,012

d. ₱720,000

52. What is the amount of unrealized loss as component of other

comprehensive income for 2018?*

a. ₱670,000

b. ₱405,100

c. ₱810,200

d. ₱550,200
53. What amount of cumulative unrealized loss is recognized on December
31, 2019?*

a. ₱1,193,212

b. ₱1,410,000

c. ₱730,000

d. ₱670,000

54. How much is the interest income for 2020?*

a. ₱505,393

b. ₱640,000

c. ₱867,600

d. ₱960,000

On January 1, 2018, AL Company purchased, as a long-term investment,

₱5,000,000 face value of MA Company’s 8% bonds for ₱4,562,000. The
bonds were purchased to yield 10% interest. The bonds mature on January
1, 2023 and pay interest annually on December 31. The effective interest
method is used.

55. What amount of interest income should be recognized in 2019?*

a. ₱456,200

b. ₱461,820

c. ₱400,000

d. ₱369,456
56. What is the carrying amount of the bond investment on December 31,
2019?*

a. ₱4,680,020

b. ₱4,662,000

c. ₱4,618,200

d. ₱4,562,000

ALMA Company acquired 20,000 shares of Alpha Company on January 1,

2018 at ₱120 per share. Alpha Company had 80,000 shares outstanding
with a carrying amount of ₱8,000,000. The difference between the carrying
amount and fair value of Alpha Company on January 1, 2018 is attributable
to a broadcast license which is an intangible asset. Alpha Company
recorded earnings of ₱3,600,000 and ₱3,900,000 for 2018 and 2019
respectively and paid per-share dividend of ₱16 in 2018 and ₱20 in 2019.
ALMA Company has a 20-year straight line amortization policy for the
broadcast license.

57. How much is the investment income for 2018?*

a. ₱900,000

b. ₱920,000

c. ₱320,000

d. ₱880,000

58. What is the carrying amount of the investment in associate on

December 31, 2018?*

a. ₱2,980,000
 b. ₱3,300,000

c. ₱2,960,000

d. ₱2,060,000

59. How much is the investment income for 2019?*

a. ₱975,000

b. ₱995,000

c. ₱935,000

d. ₱955,000

60. What is the carrying amount of the investment in associate on

December 31, 2019?*

a. ₱3,515,000

b. ₱2,400,000

c. ₱3,555,000

d. ₱4,275,000

On January 1, 2018, Papasa Co. acquired a 10% interest in an investee for

₱3,000,000. The investment was accounted for using the cost method. On
January 1, 2019, the entity acquired a further 15% interest in the investee
for ₱6,750,000. On such date, the carrying amount of the net assets of the
investee was ₱36,000,000 and the fair value of the 10% interest was
₱4,500,000. The fair value of the net assets of the investee is equal to the
carrying amount except for an equipment whose fair value exceeds
carrying amount by ₱4,000,000. The equipment has a remaining life of 5
years. The investee reported net income of ₱8,000,000 for 2019 and paid
cash dividend of ₱5,000,000 on December 31, 2019.

61. What amount of gain on remeasurement to equity should be recognized

for 2019?*

a. ₱1,500,000

b. ₱4,500,000

c. ₱2,250,000

d. ₱0

62. What is the amount of goodwill from the acquisition on January 1,

2019?*

a. ₱2,250,000

b. ₱1,250,000

c. ₱1,350,000

d. ₱350,000

63. What is the carrying amount of the investment in associate on

December 31, 2019?*

a. ₱11,250,000

b. ₱11,800,000

c. ₱12,000,000

d. ₱14,300,000
ALMA Company purchased an investment property on January 1, 2016 for
₱2,200,000. The property had a useful life of 40 years and on December 31,
2018 had a fair value of ₱3,000,000. On December 31, 2018, the property
was sold for net proceeds of ₱2,900,000. The entity used the cost model to
account for the investment property.

64. What is the carrying amount of the investment property on December

31, 2018?*

a. ₱2,200,000

b. ₱2,035,000

c. ₱2,145,000

d. ₱2,090,000

65. What is the gain or loss to be recognized on December 31, 2018

regarding the disposal of the property?*

a. ₱865,000 gain

b. ₱810,000 gain

c. ₱100,000 loss

d. ₱700,000 gain

ALMA Company incurred the following costs in purchasing a land as

factory site:
66. How much is the land?*

a. ₱2,425,000

b. ₱2,455,000

c. ₱2,495,000

d. ₱2,695,000

67. How much is the building?*

a. ₱9,505,000

b. ₱9,490,000

c. ₱9,250,000

d. ₱9,530,000

ALMA Company was constructing an asset that qualified for interest

capitalization. The construction began at the beginning of the current year
and was completed at the end of the current year. The weighted average
carrying amount of expenditures was ₱6,000,000. The entity had
outstanding notes payable during the entire year of construction
comprising ₱6,000,000 8% interest, and ₱9,000,000 9% interest. None of
the borrowings were specified for the construction of the qualified asset.

68. What amount of interest should be capitalized?*

a. ₱480,000

b. ₱516,000

c. ₱810,000

d. ₱960,000

69. How much is the interest expense for the year?*

a. ₱960,000

b. ₱645,000

c. ₱774,000

d. ₱0

70. What is the capitalization rate to be used in determining the

capitalizable cost?*

a. 8%

b. 9%

c. 8.60%

d. 8.50%

ALMA Company provided the following:

71. What is the composite life of the assets?*

a. 13.3

b. 16.0

c. 18.0

d. 19.8

72. What is the composite rate of depreciation?*

a. 6.25%

b. 5.70%

c. 2.50%

d. 7.50%

ALMA Company paid ₱7,000,000 for property containing natural resource of

2,000,000 tons of ore. The present value of the estimated cost of restoring
the land after the resource is extracted is ₱500,000. The land will have a
value of ₱1,500,000 after it is restored for suitable use. Tunnels, bunk
houses and other fixed installations are constructed at a cost of
₱8,000,000 and such expenditures are charged to mine improvements.
Operations began on January 1, 2018 and resources removed totaled
600,000 tons. During 2019, a discovery was made indicating that available
resource after 2019 will total 2,000,000 tons. At the beginning of 2019,
additional bunk houses were constructed in the amount of ₱400,000. In
2019, only 400,000 tons were mined because of a strike.

73. What amount should be recorded as depletion for 2018?*

a. ₱1,650,000

b. ₱1,800,000

c. ₱2,250,000

d. ₱1,500,000

74. What amount should be recorded as depletion for 2019?*

a. ₱700,000

b. ₱640,000

c. ₱875,000

d. ₱900,000

75. What amount should be recorded as depreciation for 2018?*

a. ₱2,400,000

b. ₱1,200,000

c. ₱1,000,000

d. ₱500,000

76. What amount should be recorded as depreciation for 2019?*

 a. ₱2,400,000

b. ₱1,200,000

c. ₱1,000,000

d. ₱500,000

77. ALMA Company purchased a coal mine for ₱2,000,000. An amount of

₱500,000 was incurred to prepare the coal mine for extraction of the coal.
It was estimated that 750,000 tons of coal would be extracted from the
mine during the useful life. The entity planned to sell the property for
₱100,000 at the end of the useful life. During the current year, 15,000 tons
of coal were extracted and sold. What would be the depletion amount per
ton for the current year?*

a. ₱3.30

b. ₱2.60

c. ₱3.20

d. ₱2.50

On January 1, 2018, ALMA Company purchased 10% bonds in the face

amount of ₱3,000,000. The bonds mature on January 1, 2028 and were
purchased for ₱3,405,000 to yield 8%. The entity used the effective
interest method of amortization and interest is payable annually every
December 31. The business model for this investment is to collect
contractual cash flows composed of interest and principal. On December
31, 2019, the entity changed the business model for this investment to
realize fair value changes. On January 1, 2020, the fair value of the bonds
was ₱2,845,000 at an effective rate of 11%.

78. What is the interest income for 2019?*

 a. ₱337,740

b. ₱300,000

c. ₱272,400

d. ₱270,192

79. What amount in profit or loss should be recognized in 2020 as a result

of the reclassification?*

a. ₱531,600

b. ₱502,292

c. ₱154,200

d. ₱0

80. What is the interest income for 2020?*

a. ₱300,000

b. ₱312,950

c. ₱267,807

d. ₱284,500

9. .An impairment loss is the excess of the carrying amount of the debt investment over

a.Expected cash flows

b.Present value of the expected cash flows

c.Contractual cash flows

d.Present value of the contractual cash flows

10.Under IFRS, an entity

a. Should evaluate every investment for impairment.

b. Accounts for an impairment as component of OCI.

c. Calculates the impairment loss on debt investment as the excess of carrying amount over the
expected discounted future cash flow.

d.All of the choices are correct.

QUESTION 31-19 Multiple choice (IFRS)

1. Reclassifications of investments between categories are accounted for

a. Prospectively, at the end of the period after the change in the business model.

b.Prospectively, at the beginning of the period after the change in the business model.
c.Retrospectively, at the end of the period after the change in the business model.

d.Retrospectively, at the beginning of the period after the change in the business model.

2. Transfers of investments between categories

a. Result in omitting recognition of fair value in the year of the transfer.

b. Are accounted for at fair value for all transfers.

c. Are not recognized if investments are transferred from held for collection to fair value.

d.Should always affect net income.

3. When a debt investment at amortized cost is reclassified to FVPL, the difference between the
previous carrying amount and fair value at reclassification date is

a.Recognized in profit or loss

b.Not recognized

c.Recognized in other comprehensive income

d.Included in retained earnings

4.When a debt investment at FVPL is reclassified to amortized cost, what is the new carrying amount
at amortized cost?

a.Fair value at reclassification date

b.Face amount of the debt investment

c.Present value of the contractual cash flows

d.Original carrying amount of the debt investment

5.Which statement is true when a debt investment amortized cost is reclassified to FVOCI?

a.The debt investment is measured at fair value at reclassification date.

b.The difference between the previous carrying amount and fair value at reclassification date is
recognized in other comprehensive income.

c.The original effective rate is not adjusted.

d.All of these statements are true.

6.Which statement is true when a debt investment at FVOCI is reclassified to amortized cost?

a.The fair value at reclassification date becomes the new carrying amount.

b.The cumulative gain or loss previously recognized in OCI is removed from equity and adjusted
against the fair value at reclassification date.

c.The original effective rate is not adjusted.

d.All of these statements are true.