Practical Accounting - Part 1

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The CARTel prepared the following post-closing trial balance at year-end: Property plant and equipment Intangible assets Investment in associate Deferred tax assets Inventory Trade receivables Cash on hand Equity investments held at FVTPL Equity investments not held for trading Investment in bonds Demand deposit in bank Receivable from employees Receivable from associates Bank loans Employee benefits Finance lease payables Trade payables Warranty obligation Rent payable Interest payables Current tax liability Bank overdraft Share capital

2,400,000 850,000 1,100,000 40,000 500,000 600,000 1,150,000 550,000 500,000 400,000 200,000 10,000 300,000 1,100,000 250,000 400,000 550,000 20,000 10,000 20,000 210,000 40,000 4,000,000

What is the total amount of financial assets? a. 4,810,000 b. 3,710,000 c. 3,750,000 d. 3,160,000 What is the total amount of financial liabilities? a. 2,330,000 b. 2,120,000 c. 1,720,000 d. 1,930,000 What is the total shareholder’s equity? a. 4,000,000 b. 8,600,000 c. 6,000,000 d. 2,600,000 Jude Medina Buenavista Grande III Company provided the following trial balance on December 31, 2015 which has been adjusted for income tax expense: Cash Accounts receivable, net Cost in excess of billings on long-term contracts Billings in excess of cost on long-term contracts Prepaid taxes Property, plant and equipment, net Note payable - noncurrent Share capital Share premium Retained earnings unappropriated Retained earnings restricted for notes payable Earnings from long-term contracts

600,000 3,500,000 1,600,000 700,000 450,000 1,510,000

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1,620,000 750,000 2,030,000 900,000 160,000 6,680,000

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Costs and expenses

5,180,000 12,840,000 12,840,000 The entity used the percentage of completion method to account for long-term construction contracts for financial statement and income tax purposes. All receivables on these contracts are considered to be collectible within 12 months. During 2015, estimated tax payments of P450,000 were charged to prepaid taxes. The entity has not recorded income tax expense. There were no temporary or permanent differences. The tax rate is 30%. On December 31, 2015, what amount should be reported as Total retained earnings a. 1,950,000 b. 2,110,000 c. 2,400,000 d. 2,560,000 Total noncurrent liabilities a. 1,620,000 b. 1,780,000 c. 2,320,000 d. 2,560,000 Total current assets a. 5,000,000 b. 4,100,000 c. 5,700,000 d. 6,225,000 Total shareholders’ equity a. 2,780,000 b. 3,840,000 c. 4,890,000 d. 5,340,000 Questions 36 to 37 are based on the following: M ‘n M & Associates presented the following items in its current year statement of comprehensive income: Remeasurement gain from defined benefit plans using fair value method Gains from equity instruments measured at FVTOCI Translation gains Effective gains on a cash flow hedge instruments Ineffective gains on a cash flow hedge instruments Revaluation surplus Impairment loss

500,000 300,000 200,000 500,000 400,000 200,000 100,000

1.

What amount should be presented in the other comprehensive income?

a. b. c. d.

2,100,000 1,700,000 1,500,000 1,200,000

2.

What amount should be presented in the profit or loss?

a.

500,000

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b. 800,000 c. 300,000 d. 1,000,000 Questions 38 to 41 are based on the following: Hello KT & Co., an investment entity, provided the following data for the current year: Dividend income from investments Distribution income from trusts Interest income from deposits Income from bank treasury bills Unrealized gain on derivative contracts Income from dealing in securities and derivatives held for trading Write-down on securities and derivatives held for trading Other income Finance costs Administrative staff costs Sundry administrative costs Income tax expense

9,200,000 500,000 700,000 100,000 400,000 600,000 150,000 250,000 300,000 3,800,000 1,200,000 1,700,000

What is the total income before tax? a. 11,200,000 b. 10,750,000 c. 11,350,000 d. 11,600,000 What is the total amount of expense before tax? a. 5,300,000 b. 5,450,000 c. 7,000,000 d. 5,000,000 What is the net income for the year? a. 4,600,000 b. 4,200,000 c. 3,700,000 d. 4,100,000 What is the comprehensive income for the year? a. 4,200,000 b. 4,600,000 c. 3,800,000 d. 5,900,000 Jude Abragan Company provided the following information for the current year: Income from continuing operation Income from discontinued operation Unrealized gain on financial asset - FVTPL Unrealized loss on equity investment - FVOCI Unrealized gain on debt investment - FVOCI Unrealized gain on future contracts designated as cash flow hedge Translation loss Remeasurement gain Loss on credit risk of financial liability - FVTPL Revaluation surplus during the year

4,000,000 500,000 800,000 1,000,000 1,200,000 400,000 200,000 600,000 300,000 2,500,000

What amount should be presented in the income statement? a. 4,500,000

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b. c. d.

7,700,000 8,500,000 7,200,000

What amount should be presented in the income statement? a. 4,500,000 b. 7,700,000 c. 8,500,000 d. 7,200,000 What amount should be presented in the comprehensive income? a. 4,500,000 b. 7,700,000 c. 8,500,000 d. 7,200,000 Mamsy Company reported the following components of other comprehensive income for the current year: Unrealized loss on future contract designated as cash flow hedge Revaluation surplus during the year Unrealized gain on nontrading equity investment measured at FVOCI Remeasurement gain on employee benefits Gain on translation of financial statements of a foreign operation Loss from charge in fair value attributable to credit risk of a financial liability designated at FVTPL.

500,000 350,000 150,000 120,000 150,000 200,000

In preparing the statement of comprehensive income, what net amount should be reported as components of other comprehensive income that may not be recycled to profit or loss? a. b. c. d.

350,000 420,000 620,000 470,000

Casey Company’s net income is P7,410,000 for the current year. The auditor raised questions with regard to the following accounts: Unrealized loss on equity investments at FVOCI Gain on early retirement of bonds payable Adjustment to profit of prior period for error in depreciation, net of tax effect Loss from fire Gain from change in fair value attributable to the credit risk of financial liability designated at FVTPL

(540,000) 2,200,000 (750,000) (1,400,000) 500,000

What amount should be presented as adjusted net income? a. 6,500,000 b. 7,200,000 c. 8,200,000 d. 8,700,000 Dumb Company’s year-end is December 31, 2015 and the 2015 financial statements were authorized for issue on March 31, 2016. The entity had the following events:  On February 1, 2016, the entity determined that the total cost of an equipment purchased is P3,700,000. The equipment was purchased on November 21, 2015 but unrecorded on December 31, 2015.  On March 15, 2016, the entity discovered that the 2015 depreciation expense was overstated by P470,000. Cabidog Abanilla Romanca Tegio Law and Professional Firm

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 On March 20,2016, the entity issued P100,000 ordinary shares at par of P10 per share.  On March 27, 2016, the entity filed a case against another entity for present infringement. Legal counsel assessed that it is probable that the entity will win the case for an amount of P550,000. What amount should be replaced as adjusting events on December 31, 2015? a. b. c. d.

4, 720,000 5,170,000 4,170,000 3,700,000

On July 1, 2015, RR Company decided to discontinue its electronic division. Analysis of the records for the year disclosed the following relative to the electronic division: Operating loss for the year Loss on disposal of some assets during 2015 Expected loss in 2016 Expected gain in 2016 What amount should be reported as pretax loss from discontinued operation in 2015? a. 8,000,000 b. 8,500,000 c. 9,500,000 d. 7,500,000 ABC Company identified the following segments for the current year: Segment A B C D E F

Revenue Profit 10,000,000 1,750,000 8,000,000 1,400,000 6,000,000 1,200,000 3,000,000 550,000 4,000,000 575,000 2,000,000 525,000

Assets 20,000,000 17,500,000 12,500,000 7,500,000 5,500,000 3,000,000

What are the reportable segments? a. Segments A, B and C b. Segment A, B, C, and D c. Segments A, B, C, D and E d. Segments A, B, C, D, E and F DEF Company identified the following segments for the current year: Combined profits of segments reporting profits Combined loss of segments reporting loss Combined profit and loss of all segments

6,000,000 (4,000,000) (2,000,000)

To qualify as reportable segment, the segment profit or loss should at least be? a. 200,000 profit b. 500,000 profit c. 400,000 loss d. 600,000 profit Warren Company provided the following data on December 31. 2015 Petty cash fund Cash on hand

25,000 500,000 Cabidog Abanilla Romanca Tegio Law and Professional Firm

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Current account Cash in sinking fund Money market placement Saving deposit - set aside for dividend payable on June 30,2016

1,250,000 1,500,000 1,000,000 250,000

The petty cash fund included unreplenished petty cash vouchers of P10,000. The cash on hand included a customer check of P200,000 received on December 15, 2015 but dated January 15, 2016. The sinking fund restricted for the payment of bond payable that is due on July 31, 2017. What amount of cash and cash equivalents should be reported on December 31, 2015? a. 1,815,000 b. 2,815,000 c. 3,315,000 d. 4,315,000 Pretty Inse has supplied you with the following list of its bank accounts and cash at December 31, 2016: Checking account (compensating balance of P15,000 with no restriction), P48,000; Savings account, 2%, P30,000; Certificate of deposit, 6 months, 10%, due April 20, 2017, P60,000; Money market (30-day certificate), current rate, 9.7%, P40,000; Payroll account, P20,000; Certificate of deposit, 3 months, 10% due February 15, 2017, P75,000 and Petty cash, P1,500; Bills 10,000. What should be the balance to be reported as “Cash Equivalents” in the December 31, 2016 statement of financial position of Pretty Inse Corporation? a. P145,000 c. P224,500 b. P115, 000 d. 125,000 What should be the balance to be reported as “Cash and Cash Equivalents” in the December 31, 2016 statement of financial position of Pretty Inse Corporation? a. P145,000 c. P224,500 b. P115, 000 d. 125,000 Lady Tsunade had the following bank reconciliation on June 31, 2015: Balance per bank statement, June 30 Deposit in transit Total Outstanding checks Balance per book, June 30 The bank statement for the month of July showed the following: Deposits (including P200,000 note collected for Lady Tsunade) Disbursements (including P140,000 NSF check and P10,000 debit memos)

3,000,000 400,000 3,400,000 (900,000) 2,500,000 9,000,000 7,000,000

All reconciling items on June 30 cleared through the bank in July. The deposit in transit amounted to P1,000,000 and the outstanding checks totaled P600,000 on July 31. What is the cash in bank to be reported on July 31, 2015? a. 5,000,000 b. 5,400,000 c. 4,600,000 d. 4,900,000 What is the cash in bank balance per ledger on July 31, 2015? a. 5,400,000 b. 5,350,000 c. 5,550,000 d. 4,500,000 What is the amount of cash receipts per ledger for July? a. 9,000,000 b. 9,400,000 c. 9,600,000

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d. 8,400,000 What is the amount of cash disbursement per cash ledger for July? a. 7,000,000 b. 6,550,000 c. 6,850,000 d. 6,700,000 Paolo Company reported current receivables on December 31, 2015 which consisted of the following: Trade accounts receivable Allowance for uncollectible accounts Claims against shipper for goods lost in transit in November 2015 Selling price of unsold goods sent by Paolo on consignment at 130% of cost and not included in the ending inventory Security deposit on lease of warehouse used for storing inventories

930,000 20,000 30,000 260,000 300,000

What is the corrected current net receivables on December 31, 2015 a. b. c. d.

1,500,000 1,200,000 1,240,000 940,000

Pi Incorporated had the following information relating to its accounts receivable: Accounts receivable, December 31, 2015 Credit sales for 2016 Collection from customer for 2016 Accounts Written off, August 30, 2017 Estimated uncollectible receivables per aging of receivables, December 31, 2016

P1,950,000 8,100,000 7,125,000 187,500 247,500

What is the total amount of receivable from clients? a. P2,490,000 c. P2,775,000 b. P2,677,500 d. P2,925,000 How should the asset be presented in it’s 2016 statement of financial position? a. P2,490,000 c. P2,775,000 b. P2,677,500 d. P2,925,000 Papa Hermes Company received a seven-year zero-interest-bearing note on February 22, 2015, in exchange for property it sold to Kuya Emman Company. There was no established exchange price for this property and the note has no ready market. The prevailing rate of interest for this type was 7% was on February 22, 2016 and 8% on December 31, 2015 and 2016, respectively? a. 0% and 0% c. 7% and 7% b. 7% and 7.7% d. 7.5% and 8% On December 31, 2016, Nicolo Gwapito Corporaton sold for P150,000 an old machine having an original cost of P210,000 and book value of P60,000, the term of the sale were as follows: P30,000 down payment P60,000 payable on December 31 each of the next two years The agreement of sale made no mention of interest; however, 9% would be a fair rate for this type of transaction. What should be the amount of the notes receivable, net of the un-amortized discount and gain on sale, respectively on December 31,2016? a. P105,546 & 75,546 c. P120,000 & P60,000 b. P135,546 & 75,546 d. P211,092 & P90,000

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Cebuano Company provides for doubtful accounts based on 30% of credit sales. The following data are available for 2016: Credit sales during 2016 P2,100,00 Allowance for doubtful accounts, 1/1/2016 170,000 Collections of accounts written off 80,000 (customer accounts re-established) Customer accounts written off 300,000 What is the balance to be presented in the company’s statement of financial position? a. 630,000 c. 500,000 b. 420,000 d. 580,000 What is the amount to be presented in the company’s statement of financial performance? a. 630,000 c. 300,000 b. 420,000 d. 630,000 Bryan Company determined that the net realizable value of accounts receivable on December 31, 2015 based on the aging of accounts receivable was P325,000 Allowance for uncollectible accounts Uncollectible accounts written off during the year Uncollectible accounts recovered Accounts receivable December 31

30,000 18,000 2,000 50,000

What is the uncollectible account expense for the current year? a. 5,000 b. 11,000 c. 15,000 d. 21,000 On December 30, 2015, Ken Company sold a machine in exchange for a noninterest-bearing note requiring ten annual payments of P100,000. The first payment was made on December 30,2015. The market interest rate for similar notes at date of issuance was 8%. Period 9 10

Present value of ordinary Present Value 0.50 6.25 0.46

annuity of 1 at 8% 6.71

On December 31, 2015, what amount should be reported as note receivable? a. 450,000 b. 460,000 c. 625,000 d. 671,000 Popong and Company factored P600,000 of accounts receivable. Control was surrendered. The factor accepted the accounts receivable subject to recourse for nonpayment. The factor assessed a fee of 3% and retains a holdback equal to 5% of the accounts factored. In addition, the factor charged 15% interest computed on a weighted-average time to maturity of fifty-four days. The fair value of the recourse obligation is P9,000. What amount of cash was initially received? a. b. c. d.

529,685 538,685 547,685 556,685

Anjanette Company purchased P 2,000,000, 8%, five-year note that required five equal annual year-end payments of P 500,900. The note was discounted to yield 9%. At the date of purchase,

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the entity recorded the note at the present value of P 1, 948,500. The entity did not elect the fair value option. What is the total interest revenue earned over the life of this note? a. b. c. d.

504,500 556,000 800,000 900,000

On September 30, 2016 Scianti Boy discounted at the bank a customer’s P600,000, 6-month, 10% note receivable dated May 31, 2016. The bank discounted the note at 12%. What amount of gan or loss should Scianti Boy recognize from the transfer assuming the discounting is treated as a sale? a. None b. P2,600

c. P12,600 d. P17,400

What amount of loss from the transfer should Scianti Boy recognize assuming the factoring agreement is considered as borrowings? a. None c. P12,600 b. P2,600 d. P17,400 Wiz Papa Company has the following information pertaining to its merchandise inventory as of December 31,2016: Inventory on hand (including merchandise received on consignment of P20,000) Inventory purchased with a buy back agreement Merchandise in transit FOB shipping point excluding P5,000 freight cost Merchandise in transit Free alongside, including delivery cost alongside the vessel of P6,000 and the cost of shipment P3,000 Merchandise in transit, CIF(excluding insurance costs and freight of P8,000)

200,000 100,000 155,000 250,000 175,000

What amount should Wiz Papa Company report as value of its inventory in its 2016 statement of financial position? a. P749,000 c. P770,000 b. P767,000 d. P876,000 Information pertaining to the inventory of KALAY Company as of December 31,2016 follows: A Historical Cost Estimated selling price Estimated cost of disposal Normal profit margin Current replacement cost

B C P 2,000,000 P2,500,000 P3,500,000 2,200,000 3,600,000 4,000,000 300,000 800,000 600,000 440,000 720,000 800,000 2,500,000 3,000,000 2,700,000

KALAY records losses that result from applying the LCNRV rule, what amount should the inventory be valued on December 31, 2016? a. P7,800,000 c. P8,000,000 b. P7,900,000 d. P8,100,000 Joshy Company reported inventory on December 31, 2015 at P1,500,000 based on a physical count priced at cost and before any necessary adjustment for the following:  Merchandise costing P90,000, shipped FOB shipping from a vendor on December 30, 2015 was received and recorded on January 5, 2016.  Goods in the shipping area were excluded from inventory although shipment was not made until January 4, 2016. The goods, billed to the customer FOB shipping point on December Cabidog Abanilla Romanca Tegio Law and Professional Firm

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30, 2015, had a cost of P120,000. What amount should be reported as inventory on December 31, 2015? a.1,500,000 b.1,590,000 c.1,620,000 d.1,710,000 Mervic Company reported accounts payable on December 31, 2015 at P900,000 before any necessary year-end adjustments relating to the following:  Goods were in transit from a vendor to Mervic on December 31, 2015. The invoice cost was P50,000, and the goods were shipped FOB shipping point on December 29, 2015. The goods were received on January 4, 2016.  Goods shipped FOB shipping point on December 201, 2015 from a vendor Mervic were lost in transit. The invoice cost was P25,000. On January 5, 2016, Mervic filed a P25,000 claim against the common carrier.  Goods shipped FOB destination on December 21, 2015 from a vendor to Mervic were received on January 6, 2016. The invoice cost was P15,000. What amount should be reported as accounts payable on December 31, 2015? a. 925,000 b. 940,000 c. 950,000 d. 975,000 Marty Pogi uses the average retail inventory method of determining the value of their inventory. The following information is made available: Inventory beginning Purchases Freight in Purchases return Purchase allowances Department transfer in Net Mark-ups Net Mark-downs Sales Sales return Sales discounts Employee discounts Loss from breakage

P

Cost 1,100,000 15,800,000 400,000 600,000 300,000 400,000

Market P 2,200,000 26,300,000 1,000,000 800,000 600,000 900,000 24,700,000 350,000

200,000 600,000 50,000

The cost ratio using the average retail inventory method is a. 58.13% c. 62% b. 61.07 % d. 60% The estimated ending inventory at retail is a. P3,000,000 c. P2,800,000 b. P3,600,000 d. P3,650,000 The estimated ending inventory cost is a. P1,743,945 c. P1,832,143 b. P2,198,571 d. P1,800,000 The estimated cost of good sold is a. P15,267,857 c. P15,000,000 b. P14,901,429 d. P15,056,055 Cabidog Abanilla Romanca Tegio Law and Professional Firm

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If the inventory at retail based on physical count at December 31 is P1,700,000, the estimated inventory shortage is a. P780,000 c. P755,709 b. P793,000 d. P-0Walang, Makakapigil, Sa’kin & Company, an audit firm, would like to know how much should they record on their books a property invoiced at P500,000 after the seller offered them discounts of 5%, 2%, 1% and 2/10, net 30. a. P500,000

b. P451,628

c. P460,845

d. P490,000

The Jude Jeff Deo Company imported a new machine at a peso equivalent of P330,000. The company has to pay non-refundable purchase taxes of P10,000 and P15,000 VAT. Cost of transporting the asset was P5,000 and the cost of preparing the asset for its intended use include P5,000 installation. How much is the initial cost of the machine? a. P350,000 b. P355,000

c. P360,000 d. P365,000

On October 1, 2016, Bibi Nico Company purchased a machine for P250,000 that was placed in service on November 30, 2016. Bibi Nico incurred additional costs for this machine, as follows: Shipping Installation Testing

10,000 15,000 35,000

In Nico’s December 31, 2016 balance sheet, the machine’s cost should be reported at a. P250000 c. P300,000 b. P295,000 d. P310,000 During 2016, Kiyen Company made the following expenditures relating to its plant building: New paint for the plant building Major improvements in the electrical wiring Partial replacement of roof tiles Continuing and frequent repairs

110,000 100,000 80,000 200,000

How much should be capitalized in the above expenditures a. 490,000 b. 210,000 c. 180,000 d. 100,000 During the year, Dayag Incorporated made the following expenditures relating to plant building: Continuing and frequent request repairs 40,000 Repainted the plant building 10,000 Major improvements to the electric wiring system 32,000 Partial replacement of roof tiles 14,000 How much should be charged to repair and maintenance expense? a. 96,000 b. 82,000 c. 64,000 d. 54,000

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On January 1, year 1, the firm purchased for P2,400,000 a machine with useful life of 10 years, no scrap value. The machine was depreciated by the double declining balance method and the carrying amount of the machine was P1,536,000 on December 31, year 2. The firm can justify the change to straight line method of depreciation effective January 1, year 3. What would be the depreciation expense for year 3? a. 307,200 b. 240,000 c. 192,000

d. 153,600

The following account balance relating to property, plant & equipment of Jan Merbs Company appear on the books on January 1, 2016: Land Building Accumulated depreciation Machinery Accumulated depreciation

P2,000,000 15,000,000 3,750,000 3,000,000 1,500,000

Assets have been carried at cost since their acquisition. All assets were acquired on January 1, 2006. The straight line method is used. On January 1, 2016, the entity revalued the property, plant & equipment. On such date, competent appraisers submitted the following: Replacement Cost Land P5,000,000 Building 25,000,000 Machinery 5,000,000 What is the deprecation for 2016? a. P 531,250 c. P 525,000 b. P 875,000 d. P 626,000 What is the revaluation surplus on December 31, 2016? a. P11,500,000 c. P11,150,000 b. P20,250,000 d. None Christian Company maintains its records under PAS/PFRS. During the current year Christian sold a piece of equipment used in production. The equipment had been accounted for using the revaluation method and details of the accounts and sale are presented below. Sales price Equipment book value Revaluation surplus

P100,000 90,000 20,000

Which of the following is correct regarding recording the sale? a. The gain that should be recorded in profit and loss is P30,000. b. The gain that should be recorded in other comprehensive income is P10,000. c. The gain that should be recorded in other comprehensive income is P30,000. d. The gan that should be recorded in profit and loss is P10,000; the P20,000 revaluation surplus should be transferred to retained earnings. An asset was acquired on January 1, 2011 for P1,600,000 and expected to have a 10-year useful economic life. Straight line method of depreciation will be used. At January 1, 2015 the asset is appraised as having a sound value of P1,440,000. On January 1, 2017 the asset was appraised at a sound value of P240,000. What is the replacement cost of the asset on January 1, 2015? a. P1,440,000 c.P2,200,000 b. P1,600,000 d. P2,400,000 What is the amount of impairment loss to be recognized on January 1,2017?

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a. None b. P720,000

c. P320,000 d. P400,000

Patrick Bryan Company’s generating-unit has been assessed for impairment and it has been determined that the unit has incurred an impairment loss of P240,000. The carrying amounts of the assets were as follows: Building Equipment Land Fittings

P6,000,000 2,000,000 3,500,000 2,500,000

The cash generating unit has not recorded any amount of goodwill. What amount of impairment loss should be allocated to the building? a. P50,000 c. P87,500 b. P62,500 d. P102,857 If the fair value less cost to sell of the building is P5,960,000, what amount of impairment loss should be allocated to the equipment? a. P34,286 c. P62,500 b. P50,000 d. P87,500 CARAMELK Co. has equipment with a carrying amount of P800,000. The expected future net cash flows from the equipment are P815,000, and its fair value is P680,000. The equipment is expected to be used in operations in the future. What amount (if any) should CARAMELK report as an impairment should be reported a. b. c. d.

no impairment should be reported P 120,000 P 15,000 P 135,000

The following costs were considered in valuing the cost of new building on January 1,2016. Purchase price of land and old building Cost of Demolition of Old building Architect’s Fee Cost of materials Laborer’s wages Engineer’s Fee Cost of Excavation intended for the new building Discounts availed for the materials Scrap Sales, out of the demolition Legal fees related to the transfer of title Cost of parking lot Assessment fees by the Government for the Land Cost of building permits and other inspection fees

P1,000,000 100,000 150,000 2,500,000 1,500,000 150,000 100,000 25,000 45,000 25,000 100,000 50,000 25,000

The cost allocated to the old building amounted to P500,000. The overhead related to the construction is 25% of cost of materials and 75% of Direct labor. In addition, the entity incurred normal spoilages of 10,000. Moreover, during the course of constructing the building, 2 workers met an accident. These workers were hospitalized and the entity paid 150,000 as part of the insurance. How much is the cost of the land? a. P500,000 c. P550,000 b. P525,000 d. P575,000

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How much is the cost of the new building? a. P6,683,750 c. P6,458,750 b. P6,465,000 d. P6,583,750 Assuming the construction was finished during the year, how much was expensed during the year? a. P500,000 c. P650,000 b. P150,000 d. P810,000 Assuming that if the new building was purchased will be P 7,000,000; how much is the savings from constructing the building be recognized in the P/L? a. P316,250 c. P535,000 b. P541,250 d. P -0What amount should be considered as land improvements? a. P100,000 c. P150,000 b. P-0d. P250,000 Assuming that the building has an estimated useful life of 25 years with a salvage value of P150,000 and was finished on December 1, 2016, applying PAS 16, how much is the depreciation to be recognized? a. P261,350 b. P257,350

c. P21,779 d. P21,446

In June 2016, Jimma Company acquired a machine in exchange for a non-monetary asset with a cost of P1,200,000 and an accumulated depreciation of P600,000 and paid a cash difference of P160,000. The market value of the non-monetary asset was determined to be P650,000. If the exchange has commercial substance, what is the cost of the new asset acquired and the amount of gain to be recognized, respectively? a. P440,000 & P50,000 c. P810,000 & P50,000 b. P440,000 & P210,000 d. P810,000 & P210,000 If the exchange lacks the necessary commercial substance, what would be the cost of the new asset acquired and the amount of gain to be recognized, respectively? a. P760,000 & P-0c. P810,000 & P50,000 b. P760,00 & P50,000 d. P810,000 & P210,000 To save transportation costs,Hermes acquired its needed equipment in exchange of its inventory located in the supplier’s business place. The equipment acquired has cash price of P650,000. The inventory of Hermes has cost of P550,000, and Hermes paid P80,000 cash for the difference in fair value of the two assets in exchange. In the books of Hermes, the exchange is to be accounted as resulting to a. gain of P20,000 b. loss of P20,000 c. gain of P30,000 d. loss of P30,000 Gracelle Company borrowed P400,000 on a 10 percent note payable to finance a new warehouse Gracelle is constructing for its own use. The only other debt on Gracelle’s books is a P600, 000, 12 percent mortgage payable on an office building. At the end of the current year, average accumulated expenditures on the new warehouse totaled P475,000. Gracelle should capitalize interest for the current year in the amount of (use 2 decimal palaces) a.40, 000 b. 47, 500 c. 49, 000 d. 380,000

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Questions 47 to 50 are based on the following data: January 1, 2015, R.G. Manabat & Co. Disclosed the following balances: Land Land improvements Buildings Machinery and equipment

4,000,000 1,300,000 20,000,000 8,000,000

During the current year, the following transactions occurred: A tract of land was acquired for P2,000,000 cash as a building site. A plant facility consisting of land and building was acquired in exchange for 200,000 shares of the entity. On the acquisition date, each share had a quoted price of P45 on a stock exchange. The plant facility was carried on the seller’s books at P1,600,000 for land and P5,400,000 for the building at the exchange date. Current appraised value for the land and building, respectively, are P2,000,000 and P8,000,000. The building has an expected life of forty years with a P200,000 residual value. Items of machinery and equipment were purchased at a total cost of P4,000,000. Additional costs incurred were freight and unloading P100,000 and installation P300,000. The equipment has a useful life of ten years with no residual value. Expenditure totaling P1,200,000 were made for new parking lot, streets and sidewalks at the entity’s various plant locations. These expenditures had an estimated useful life of fifteen years. Research and development costs were P1,100,000 for the year. A machine costing P200,000 on January 1, 2008 was scrapped on June 30, 2015. Straight line depreciation had been recorded on the basis of a 10-year life with no residual value. A machine was sold for P500,000 on July 1, 2015. Original cot of the machine sold was P700,000 on January 1, 2012, and it was depreciated on the straight line basis over an estimated useful life of eight years and a residual value of P50,000. What is the total cost of the land on December 31, 2015? a. 7,800,000 b. 7,600,000 c. 8,000,000 d. 6,800,000 What is the total cost of the land improvements on December 31, 2015? a. 1,200,000 b. 3,600,000 c. 1,300,000 d. 2,500,000 What is the total cost of the building on December 31, 2015? a. 28,000,000 b. 25,400,000 c. 27,200,000 d. 27,000,000 What is the total cost of the machinery and equipment on December 31, 2015? a. 12,400,000 b. 11,500,000 c. 11,000,000 d. 11,700,000 A mining property was acquired at cost of P12,000,000. It has estimated life of 5 years. After

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exploration cost of P1,000,000, it was developed at cost of P1,500,000 (intangible). At the end of its life, the property could be sold for P3,000,000 after restoration cost of P500,000. Confirmed deposit is at 40,000,000 units. For its 1st year of operation, 7,500,000 units were produced at production cost of P5,250,000. P7,125,000 of production were sold during the year. The depletion cost in the inventory is? a. 112,500 b. 140,625

c. 262,500

d. 2,137,500

What amount of depletion should be included in cost of goods sold? a. 112,500 b. 140,625 c. 262,500 d. 2,137,500 What is the depletion? a. 112,500 b. 140,625

c. 262,500

d. 2,137,500

In January 2015, Aldwin Company purchased a mineral mine for P36,000,000 with removable are estimated by geological survey at P4,000,000 tons. The property has an estimated value of P3,600,000 after the ore has been extracted. The entity incurred P10,800,000 of development cost preparing the property to the original condition at an estimated cost of P2,500,000. The present value of the estimated restoration cost is P1,800,000. During 2015, 400,000 tons were removed and 300,000 tons were sold. For the year ended December 31, 2015, what amount of depletion should be included in cost of goods sold? a. 4,500,000 b. 3,375,000 c. 4570,000 d. 34275000 For the year ended December 31, 2015, what amount of depletion should be recognized? a. 4,500,000 b. 3,375,000 c. 4570,000 d. 34275000 Bench Company provided the following data on December 31, 2015: Unamortized bond issue cost 150,000 Organization cost 200,000 Losses incurred in the early years of the entity’s operations Computer software (integral part of a computer controlled machine) Patent 1,500,000 Amount set up by the Board of Directors as goodwill Franchise 2,000,000

500,000 1,000,000 400,000

What total amount of intangible assets should be recognized on December 31, 2015? a. 3,500,000 b. 4,500,000 c. 3,700,000 d. 3,900,000 Juanico Company provided the following information for 2015: Current period depreciation on the building housing R and D activities Cost of market research study Current period depreciation on a machine used in R and D Activities Salary of R and D director Salary of VP who spends 1/4 of his time overseeing R and D activities

1,500,000 1,000,000 500,000 1,200,000 2,400,000

What total amount should be recognized as R and D expense for 2015?

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a. b. c. d.

4,800,000 6,600,000 5,600,000 3,800,000

Elijah Company incurred the following costs during the current year; Laboratory research aimed at discovery of new knowledge 75,000 Design of tools, jigs, molds, and dies involving new technology 22,000 Quality control during commercial production, including routine testing 35,000 Equipment acquired two years ago, having an estimated useful life of five years with no residual value, used in various R and D projects entire year 150,000 Research and development services performed by Star Company for Elijah 23,000 Research and development service performed by Elijah Company for Kaye 2,000 What amount of research and development expense should be reported in the current year? a. 120,000 b. 150,000 c. 187,000 d. 217,000

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