Income Statement – Problems

1. Kim Company reported the following data for the current year:
Legal and audit fees
1,700,000
Rent for office space
2,400,000
Interest on inventory loan 2,100,000
Loss on abandoned data processing equipment
350,000
Freight in 1,750,000
Freight out 1,600,000
Officers' Salaries 1,500,000
Insurance 850,000
Sales representative salaries 2,150,000
Research and development expense 1,000,000
The office space is used equally by the sales and accounting departments.
What amount should be classified as general and administrative expenses?
a. 5,250,000
b. 6,450,000
c. 5,600,000
d. 6,250,000
Answer: A

2. Eddie Company provided the following information for the current year:
Net accounts receivable at January
1,900,000
Net accounts receivable at December 31
1,000,000
Accounts receivable turnover 5 to 1
Inventory at January 1 1,100,000
Inventory turnover 4 to 1
What is the gross income for the current year?
a. 150,000
b. 200,000
c. 300,000
d. 400,000
Answer: A

3. Arellano Company provided the following data for the current year:
Inventory, January 1
2,000,000
Purchases 7,500,000
Purchase returns and allowances
500,000
Sales returns and allowances 750,000
Inventory on December 31
2,800,000
Gross profit rate on sales 20%
What is the cost of goods sold?
a. 6,700,000
b. 6,200,000
c. 7,200,000
d. 9,000,000
Answer: B
4. Marlin Company incurred the following costs and expenses during the current year:
Raw material purchases 4,000,000
Direct labor 1,500,000
Indirect labor - factory 800,000
Factory repairs and maintenance 200,000
Taxes on factory building 100,000
Depreciation - factory building 300,000
Taxes on salesroom and general office 150,000
Depreciation - sales equipment 50,000
Advertising 400,000
Sales salaries
500,000
Office salaries 700,000
Utilities - 60% applicable to factory 500,000
Beginning Ending
Raw Materials 300,000 450,000
Work in process 400,000 350,000
Finished goods 500,000 700,000

What is the cost of raw materials used?

a. 3,850,000
b. 4,000,000
c. 4,150,000
d. 4,750,000
Answer: A

5. Hongsa Company reported that the financial records were destroyed by fire at the
end of the current year. However, certain statistical data related to the income statement
are available.
Interest expense 200,000
Cost of goods sold 3,000,000
Sales discount 300,000
The beginning inventory was P500, 000 and decreased 20% during the year.
Administrative expenses are 25% of cost of goods sold but only 10% of gross sales.
Distribution cost represent 70% of the operating expenses
What is the amount of gross sales?
a. 7,500,000
b. 8,000,000
c. 4,500,000
d. 5,000,000
Answer: A

6. Mila Company had the following events and transactions during 2018:
 Depreciation for 2016 was understated by P300,000
 A litigation settlement resulted in a loss of P250,000
 The inventory on December 31, 2016 was overstated by P200,000
  The entity disposed of a recreational division at a loss of P600,000
 The income tax rate is 30%
What is the effect of these events on the income from continuing operations for 2018?
a. 175,000
b. 385,000
c. 665,000
d. 750,000
Answer: A

7. Amanda Company provided the following information for the current year:
Sales 50,000,000
Cost of goods sold 30,000,000
Distribution costs 5,000,000
General and administrative expenses 4,000,000
Interest expense 2,000,000
Gain on early extinguishment of long-term debt
500,000
Correction of inventory error, net of income tax - credit
1,000,000
Investment income - equity method
3,000,000
Gain on expropriation 2,000,000
Income tax expense
5,000,000
Dividends declared 2,500,000
What is the income from continuing operations?
a. 9,000,000
b. 8,000,000
c. 9,500,000
d. 7,000,000
Answer: C

8. Marianne Company provided the following information for the current year:
Sales 9,500,000
Interest revenue 250,000
Gain on sale of equipment 100,000
Revaluation surplus during the year
1,200,000
Share of profit of associate
350,000
Cost of goods sold 6,000,000
Finance cost 150,000
Distribution costs 500,000
Administrative expenses 300,000
Translation loss on foreign operation 200,000
Income tax expense
950,000
What is the net income for the current year?
a. 2,300,000
b. 3,300,000
c. 4,200,000
d. 2,100,000
Answer: A

9. Matt Company accounted for noncurrent assets using the cost model. On October 1,
2018, the entity classified a noncurrent asset as held for sale. At that date, the carrying
amount was P3,200,000, the fair value was estimated at P2,200,000 and the cost of the
disposal at P200,000.
On December 15, 2018, the asset was sold for net proceeds of P1,850,000. What
amount should be included as an impairment loss in the statement of comprehensive
income for the year ended December 31, 2018?
a. 1,000,000
b. 1,200,000
c. 1,350,000
d. 0
Answer: B

10. Emma Company accounted for noncurrent assets using the cost model. On October
30, 2018, the entity classified a noncurrent asset as held for sale. At that date, the
carrying amount was P1,500,000, the fair value was estimated at P1,100,000 and the
cost of disposal at P150,000. On November 20, 2018, the asset was sold for net
proceeds of P800,000.
What amount should be reported as impairment loss for 2018?
a. 550,000
b. 400,000
c. 700,000
d. 0
Answer: A

11. On January 1, 2018, Rina Company purchased land at a cost of P6,000,000. The
entity used the revaluation model for this asset. The fair value of the land was
P7,000,000 on December 31, 2018 and P8,500,000 on December 31, 2019. On July 1,
2020, the entity decided to sell the land and therefore classified the asset as held for
sale. The fair value of the land on this date is P7,600,000. The estimated cost of
disposal is very minimal. On December 31, 2020, the land was sold for P8,000,000.
What amount in OCI should be recognized in the statement of comprehensive income
for the year ended December 31, 2019?
a. 2,500,000
b. 1,500,000
c. 400,000
d. 900,000
Answer: B

12. Lisa Company accounted for noncurrent assets using the revaluation model. On
October 1, 2018, the entity classified a land as held for sale. At that date, the carrying
amount of the land was P5,000,000 and the balance in the revaluation surplus was
P1,500,000. At same date, the fair value of the land was estimated at P5,500,000 and
the cost of disposal at P100,000. On December 31, 2018, the fair value less cost of
disposal of the land did not change. The land was sold on January 31, 2019 for
P6,000,000.
What amount should be reported as gain on disposal of land in 2019?
a. 1,000,000
b. 2,600,000
c. 500,000
d. 600,000
Answer: D

13. On April 1, 2018, Sebastian Company had a machine with a cost of P5,000,000 and
accumulated depreciation of P3,750,000. On April 1, 2018, the entity classified the
machine as held for sale and decided to sell the machine within one year. On April 1,
2018, the machine had an estimated selling price of P500,000 and a remaining useful
life of 2 years. It is estimated that the selling cost associated with the disposal of the
machine will be P50,000. On December 31, 2018, the estimates selling price of the
machine had increased to P750,000 with estimated selling cost of P100,000.
What amount should be recognized as gain on reversal of impairment on December 31,
2018?
a. 468,750
b. 368,750
c. 300,000
d. 200,000
Answer: D

14. ART Company purchased equipment for P5,000,000 on January 1, 2018 with a
useful life of 10 years and no residual value. On December 31, 2019, the entity
classified the equipment as held for sale. The fair value of the equipment on December
31, 2019 was P3,300,000 and the cost of disposal P100,000. On December 31, 2020,
the fair value of the equipment was P3,800,000 and the cost of disposal P200,000. The
value in use was determined to be P3,300,000. On December 31, 2020, the entity
believed that the criteria for classification as held for sale can no longer be met.
Accordingly, the entity decided not to sell the asset but to continue to use it.
What is the measurement of the equipment that ceases as held for sale on December
31, 2020?
a. 3,200,000
b. 4,000,000
c. 3,500,000
d. 3,600,000
Answer: C
15. On September 30, 2018, when the carrying amount of the net assets of a business
segment was P70,000,000, Ying Company signed a legally binding contract to sell the
business segment. The sale is expected to be completed by January 31, 2019 at a sale
price of P60,000,00. In addition, prior to January 31, 2019, the sale contract obliged
Ying Company to terminate the employment of certain employees of the business
segment incurring an expected termination cost of P5,000,000 to be paid on June 30,
2019. The segment revenue and expenses for 2018 were P40,000,000 and
P45,000,000 respectively. The income tax rate is 30%.
What amount should be reported as loss from discontinued operation for 2018?
a. 14,000,000
b. 20,000,000
c. 15,000,000
d. 10,500,000
Answer: A

16. Jennie Company, an investment entity, provided the following income and expenses
for the current year:
Dividend income from investments
9,200,000
Distribution income from trusts 500,000
Interest income on deposits
700,000
Income from bank treasury bills 100,000
Unrealized gain on derivative contract as cash flow hedge
400,000
Income from dealing in securities and derivatives held for trading
600,000
Write-down of securities and derivatives held for trading
150,000
Other income
250,000
Finance cost 300,000
Administrative staff costs 3,800,000
Sundry administrative costs
1,200,000
Income tax expense
1,700,000
What is the net income for the current year?
a. 5,900,000
b. 3,700,000
c. 4,200,000
d. 5,500,000
Answer: C
17. ASH Company reported operating expenses in two categories, namely distribution
and general administrative.
The adjusted trial balance at year-end included the following expense and loss accounts
for current year.
Accounting and legal fees 1,200,000
Advertising 1,500,000
Freight out 800,000
Interest 700,000
Loss on sale of long-term investment 300,000
Officers' salaries 2,250,000
Rent for office space
2,200,000
Sales salaries and commission 1,400,000
One-half of the rented premises is occupied by the sales department.
What amount should be reported as total distribution costs?
a. 4,800,000
b. 4,000,000
c. 3,700,000
d. 3,600,000
Answer: A

18. Kawasaki Company provided the following information for the current year:
Beginning inventory
400,000
Freight in 300,000
Purchase Returns 900,000
Ending inventory 500,000
Selling expenses 1,250,000
Sales discount 250,000
The cost of goods sold is six times the selling expenses.
What is the amount of gross purchases?
a. 6,500,000
b. 6,700,000
c. 8,000,000
d. 8,200,000
Answer: D

19. ANS Company provided the following information for the current year:
Increase in raw materials inventory
150,000
Decrease in goods in process inventory 200,000
Decrease in finished goods inventory 350,000
Raw materials purchased 4,300,000
Direct labor payroll 2,000,000
Factory overhead 3,000,000
Freight out 450,000
 Freight in 250,000
What is the cost of goods sold for the current year?
a. 9,950,000
b. 9,550,000
c. 9,250,000
d. 9,150,000
Answer: A

20. SUN Company showed cost of goods sold of 4,320,000 in the statement of
comprehensive income after the first year of operations.
The total manufacturing cost comprised the following:
Materials used 50%
Direct labor incurred 30%
Manufacturing overhead 20%
Goods process in year-end amounted to 10% of the total manufacturing cost.
Finished goods at year-end amounted to 20% of the cost of goods manufactured.
What is the amount of the direct labor cost incurred?
a.1,800,000
b. 2,400,000
c. 3,000,000
d. 5,400,000
Answer: A

21. Luisa Company reported operating expenses other than interest expense for the
year at 40% of cost of goods sold but only 20% of sales. Interest expenses is s5% of
sales.
The amount of purchases is 120% of cost of goods sold. Ending inventory is twice as
much as the beginning inventory.
The net income for the year is 2,100,000. The income tax rate is 30%.
What is the amount of purchases?
a. 6,000,000
b. 7,200,000
c. 3,000,000
d. 3,600,000
Answer: B

22. Thor Company reported net income of 7,500,000 for the current year which included
the following amounts:
Unrealized loss on foreign currency translation (500,000)
Gain on early retirement of bonds payable
2,200,000
Adjustment of profit of prior year for error in
depreciation, net of tax effect (750,000)
Loss from fire
(1,400,000)
What amount should be reported as adjusted net income?
 a. 6,250,000
b. 9,500,000
c. 8,000,000
d. 8,750,000
Answer: D

23. Swing Company reported income before tax of 5,000,000 for the current year which
included the following amounts:
Equity in earnings of Cinn Company - 40% interest
1,600,000
Dividend received from Cinn Company 400,000
Adjustment of profit of prior year for arithmetical
error in depreciation
(5,000,000)
Gain on sale of equity investment at FVOCI
1,000,000
What amount should be reported as income before tax?
a. 4,100,000
b. 4,600,000
c. 5,500,000
d. 5,100,000
Answer: A

24. Kean Company provided the following information for the current year:
Income from continuing operations
4,000,000
Income from discontinued operation
500,000
Unrealized gain on financial asset - FVPL
800,000
Unrealized loss on equity investment – FVOCI 1,000,000
Unrealized gain on debt investment - FVOCI 1,200,000
Unrealized gain on futures contract designated
as a cash flow hedge
400,000
Translation loss on foreign operation 200,000
Net "remeasurement" gain on defined benefit plan
600,000
Loss on credit risk of a financial liability at FVPCL
300,000
Revaluation surplus during the year
2,500,000
What amount should be reported as net income for the current year?
a. 5,200,000
b. 7,700,000
 c. 8,500,000
d. 7,200,000
Answer: B

25. Marimae Company provided the following information for the current year:
Sales 5,000,000
Cost of goods sold 2,800,000
Foreign translation adjustment - credit 400,000
Selling Expenses 700,000
Unusual and infrequent gain
400,000
Correction of inventory error
200,000
General and administrative expenses 600,000
Income tax expense
150,000
Gain on sale of investment
50,000
Proceeds from sale of land at cost
800,000
Dividends 300,000
What amount should be reported as income from continuing operations?
a. 1,200,000
b. 1,350,000
c. 1,600,000
d. 2,000,000
Answer: A

26. Leona Company accounted for noncurrent assets using rhe cost model. On October
30, 2018, the entity classified a noncurrent asset as held for sale.
At that date, the carrying amount was 1,500,000, the fair value was estimated at
1,100,000 and the cost of disposal at 150,000.
On November 20, 2018, the asset was sold for net proceeds of 800,000.
What amount should be included as loss on disposal in the statement of comprehensive
income for the year ended December 31, 2018?
a. 550,000
b. 700,000
c. 150,000
d. 0
Answer: C

27. Ballot Company committed to sell the comic book division, a component of the
business, on September 1, 2018.
The carrying amount of the division was 4,000,000 and the fair value was 3,500,000.
The disposal date is expected on June 1, 2019. The division reported an operating loss
of 200,000 for the year ended December 31, 2018.
What amount should be reported as pretax loss from discontinued operation in 2018?
a. 500,000
b. 200,000
c. 700,000
d. 0
Answer: C

28. David Company decided on August 1, 2018 to dispose of a component of a

business. The component was sold on November 30, 2018.
The net income for the current year included income of 5,000,000 from operating the
discontinued segment from January 1 to the date of disposal. The entity incurred a loss
on the November 30 sale of 4,500,000.
What amount should be reported as pretax income or loss from discontinued operation
for 2018?
a. 4,500,000 loss
b. 5,000,000 income
c. 500,000 loss
d. 500,000 income
Answer: D

29. Vince Company had two operating divisions, one manufacturing farm equipment
and the other office supplies. Both divisions are considered separate components.
The firm equipment component had been unprofitable and on September 1, 2018, the
entity adopted a plan to sell the assets of the division.
The actual sale was effected on December 15, 2018 at a price of 3,000,000. The
carrying amount of the division's assets was 5,000,000.
The division incurred before-tax operating loss of 1,500,000 from the beginning of the
year through December 15, 2018.
The entity's after-tax income from continuing operations is 9,000,000. The income tax
rate is 30%.
What amount should be reported as net income for the current year?
a. 5,500,000
b. 6,500,000
c. 6,300,000
d. 7,600,000
Answer: B

30. In 2018, Hanabishi Company decided to discontinue the Electronics Division, a

separately identifiable component of Isuzu's business. On December 31, 2018, the
division had not been completely sold.
However, negotiations for the final and complete sale are progressing in a positive
manner and it is probable that the disposal will completed within a year.
Analysis of the records for the year disclosed the following relative to the Electronic
Division:
Operating loss for the current year
8,000,000
 Loss on disposal of some Electronic Division assets during 2018
500,000
Expected operating loss in 2019 preceding final disposal
1,000,000
Expected gain in 2019 on disposal of division 2,000,000
What amount should be reported as pretax loss from discontinued operation in 2018?
a. 8,000,000
b. 8,500,000
c. 9,500,000
d. 7,500,000
Answer: B

31. On December 31, 2018, Armani Company committed to a plan to discontinue the
operations of Underwear Division.
The fair value of the facilities was 1,000,000 less than carrying amount in 2019.
The division's operating loss for 2018 was 2,000,000 and the division was actually sold
for 1,200,000 less than carrying amount in 2019.
The entity estimated that the division's operating loss for 2019 would be 500,000.
What amount should be reported as pretax loss from discontinued operation in 2018?
a. 3,000,000
b. 2,000,000
c. 1,000,000
d. 3,200,000
Answer: A

32. Wall Company has two divisions, North and South. Both qualify as business
components.
In 2018, the entity decided to dispose of the assets and liabilities of division South and it
is probable that the disposal will be completed early next year.
The revenue and expenses of Wall Company are as follows:
2018 2017
Sales-North 5,000,000
4,600,000
Total nontax expenses – North 4,400,000
4,100,000
Sales-South 3,500,000 5,100,000
Total nontax expenses – South 3,900,000 4,500,000
During the later part of 2018, the entity disposed of a portion of division South and
recognized a pretax loss of 2,000,000 on the disposal.
What amount should be reported as pretax loss from discontinued operation in 2018?
a. 2,000,000
b. 2,400,000
c. 1,400,000
d. 1,600,000
Answer: B
33. A company’s’ beginning shareholders’ equity is 500,000,000, its net income for the
year is 50,000,000, its cash dividends for the year are 5,000,000, and the company did
not issue or repurchase any of its stock. If the company’s actual ending shareholders’
equity is 570,000,000, what is its comprehensive income?
a. 25,000,000
b. 75,000,000
c. 50,000,000
d. 0
Answer: B

34. Lexi Corporation’s information are provided for the current year:
 Sales 260,000
 Cost of Goods Sold 100,000
 Salaries and Wages 20,000
 Rent Expense
15,000
 Advertising Expense
35,000
 Cost of repairs resulting from fire 50,000
What is Lexi Corporation’s net income for the year?
a. 160,000
b. 60,000
c. 40,000
d. 50,000
Answer: C

35. A Company XYZ has an investment of 10,000 in stocks in which it holds for trading
purposes. The value of these stocks has increased to 25,000. The company sold these
positions for 30,000. What amount should the company record its unrealized gain?
a. 15,000
b. 10,000
c. 55,000
d. 20,000
Answer: D

36. EXterna Company prepared the following information in its first year of operation:
Consulting Revenue
50,000
Rent Expense
5,000
Software Licensing Fees
3,000
Dividends Paid
6,000
Advertising Expense
20,000
What is the net income for the first year of operation of the company?
a. 22,000
b. 16,000
c. 19,000
d. 20,000
Answer: A

37. Fenn Company had sales of P5,000,000 during December 2011. Experience had
shown that merchandise equaling 7% of sales will be returned within 30 days and an
additional 3% will be returned within 90 days. Returned merchandise is readily
resalable. In addition, merchandise equaling 15% of sales will be exchanged for
merchandise of equal or greater value. What amount should Fenn report for net sales in
its income statement for the month of December 2011?
a. 4,500,000
b. 4,250,000
c. 3,900,000
d. 3,750,000
Answer: A

38. On July 1,2011, Loveluck Company, a manufacturer of office furniture, supplied

goods to Kaye Company for P1,200,000 on condition that this amount is paid in full on
July 1, 2012. Kaye had earlier rejected an alternative offer from Loveluck whereby it
could have bought the same goods by paying cash of P1,080,000 on July 1,2011. What
amount should be respectively be recognized as sales revenue and interest income for
the year ended June 30, 2012?
a. 1,080,000 and 120,000
b. 1,200,000 and 120,000
c. 1,080,000 and 0
d. 1,200,000 and 0
Answer: A

39. Emco Company has the following transactions in 2011:

 Emco sells goods to a customer for P50,000 FOB shipping point on December
30, 2011.
 Emco sells three pieces of equipment on a contract over a three-year period. The
sale price of each piece of equipment is P100,000. Delivery of each piece of
equipment is on February 10 of each year. In 2011, the customer paid a
P200,000 down payment, and will pay P50,000 per year in 2012 and 2013.
Collectability is reasonably assured.
 On June 1, 2011, Emco signs a contract for P200,000 for goods to be sold on
account. Payment is to be made in two installments of P100,000 each on
December 1, 2011 and December 1, 2012. The goods are delivered on October
1, 2011. Collection is reasonably assured and the goods may no be returned.
 Emco sells goods to a customer on July 1, 2011 for P500,000. If the customer
does not sell the goods to retail customers by December 31, 2012, the goods can
 be returned to Emco. The customer sells the goods to retail customers on
October 1, 2012.
What amount of sales revenue should be reported in the 2011 income statement?
a. 350,000
b. 850,000
c. 450,000
d. 550,000
Answer: A

40. On January 1, 2011, Alexis Company purchased marketable equity securities to be

hels as "trading" for P5,000,000. The entity also paid commission, taxes, and other
transaction costs amounting to P200,000.The securities had a market value of
P5,500,000 on December 31, 2011 and the transaction costs that would be incurred on
sale are estimated at P110,000. No securities were sold during 2011. What amount of
unrealized gain or loss on these securities should be reported in the 2011 income
statement?
a. 500,000 unrealized gain
b. 500,000 unrealized loss
c. 300,000 unrealized gain
d. 400,000 unrealized gain
Answer: A

41. Carmela Company acquired a financial instrument for P4,000,000 on March

31,2011. The financial instrument is classified as financial asset at fair value through
other comprehensive income. The direct acquisition costs incurred amounted to
P700,000. On December 31, 2011, the fair value of the instrument was P5,500,000 and
the transaction costs that would be incurred on the sale of the investment are
estimatedat P600,000. What gain should be realized in other comprehensive income for
the year ended December 31, 2011?
a. 200,000
b. 900,000
c. 800,000
d. 0
Answer: C

42. A portion of the adjusted trial balance for the G Company is shown below. Sales (net
of $8,000 sales discounts and 24,500 sales returns and allowances) 417,500 Cost of
goods sold $210,000 Salaries expense 38,000 Depreciation expense—building 40,000
Advertising expense 12,300 Office supplies expense 3,500 Gain on disposal of store
equipment 3,000 Interest expense 1,000. What is the total net income of the company?
a. 115,700
b. 117,500
c. 108,500
d. 105,800
Answer: A

43. The company KHB have a Service Revenue of 160,000 for the year 2019. On that
year KHB Company recorded the following:
Salaries Expense
40,000
Supplies Expense
26,100
Rent Expense
20,500
Utilities Expense 11,300

Depreciation Expense
5,000
Revaluation Surplus
20,000
Unrealized Translation Gain
10,200
How much is the total of other comprehensive income?
a. 102,900
b. 57,100
c. 30,200
d. 87,300
Answer: C

44. Hero Company had the following in their statement of comprehensive income for the
year ended December 31, 2020. Compute for their income before tax.
Revenue 734,000
Gain in the fair value of investment property
1,000
Changes in inventories of finished goods and work in progress
26,480
Raw material and consumables used 378,000
Employee benefits expense
78,000
Depreciation and amortisation expense 25,600
Advertising costs 3,000
Raw material freight costs 2,000
Operating lease expense 400
Finance costs
22,300
Share of associate’s losses
100
Income tax expense
49,780
Loss for the year from discontinued operations 24,780
 a. 199,120
b. 149,340
c. 124,560
d. 136,840
Answer: A

45. Company Ghie has income from continuing operations of 700 million. During the
year it disposed-off one of its segments Segment A for 120 million. The segment earned
revenue of 200 million and incurred costs of 150 million. Its book value was 100 million.
Tax rate applicable to the company overall and the segment is 35%. What is the net
income for the period for the company.
a. 430 million
b. 580 million
c. 739.5 million
d. 726.5 million
Answer: C

46. An entity operates two separate major lines of business—candle manufacturing and
clothing retailing. On 30 December 2020, in response to an unsolicited offer, an entity
disposed of its candle-making operation for 1,000,000 when the carrying amount of the
operation’s assets were—factory building 400,000, machinery 300,000 and trade mark
200,000. For simplicity it is assumed that the candle-making operation has no other
assets or liabilities. 20,000 income tax is payable on the gain on disposal of the plant.
The candle-making plant recognised a profit after tax of 150,000 for the year ended 31
December 2020.
What is the total post-tax profit from the discontinued operation?
a. 0
b. 230,000
c. 250,000
d. 100,000
Answer: B

47. DairyComapny provided the following balances for the year ended December
31,2011:
Cash 500,000
Trade and other receivables
1,500,000
Inventories 100,000
Dairy livestok - immature 50,000
Dairy livestock - mature 400,000
Property, plant and equipment, net
1,400,000
Trade and othe payables 520,000
Note payable - long term 1,500,000
Share capital 1,000,000
Retained earnings - January 1 800,000
Fair value of milk produced
600,000
Gain from change in fair value 50,000
Inventories used 140,000
Staff costs 120,000
Depreciation expense 15,000
Other operating expenses 190,000
Income tax Expense
55,000
What is the net income for 2011?
a. 650,000
b. 600,000
c. 130,000
d. 185,000
Answer: C

48. Cobb Company purchased 10,000 shares representing 2% ownership of Roe

Company on February 15, 2011. Cobb received a stock dividend of P2,000 shares on
March 31, 2011, when the carrying amount per share on Roe's books was P350 and the
market value per share was P400. Roe paid a cash dividend of P15 per share on
September 15, 2011. In the income statement for the year ended October 31, 2011,
what amount should Cobb reported as dividend income?
a. 980,000
b. 880,000
c. 180,000
d. 150,000
Answer: C