(SET A) NAME:_________________________________________SCHEDULE:_____________________

INSTRUCTION: WRITE THE LETTER OF YOUR CHOICE ON A YELLOW PAPER. NO

ANSWERS WILL BE RECOGNIZED OTHER THAN THE YELLOW PAPER.

1. The following are the scenarios that provides an analysis of the share based payments in
determining whether a transaction is within the scope of the standard. Classify properly the
following items:
I – BLOCK B grants 10 shares to its employees provided that they remain in service for the
next 12 months.
II – BLOCK A grants employees a cash bonus equal to A’s share price growth provided that
they remain in service over the next 12 months.
III – BLOCK F share price is P120. F awards a cash bonus of P120 to employees, payable in
one year to those who remain in service during the next 12 months.
IV – BLOCK G awards a cash bonus of P500 to employees, payable in one year to those who
remain in service if G’s share price exceeds a price of P10 per share during the next
12months.
a. Only one of the scenarios mentioned above is within the scope of the share based
standard
b. Only two of the scenarios mentioned above Is within the scope of the share based
standard
c. Only three of the scenarios mentioned above is within the scope of the share based
standard
d. All of the scenarios mentioned above is within the scope of the share based standard
e. None of the scenarios mentioned above is within the scope of the share based
standard

2. If an entity modified condition on which equity instruments are granted, and such
modification is beneficial to employees, the compensation expense is based on
a. Original condition only
b. Modification condition only
c. Both A and B
d. Neither A nor B

3. Share based payment transactions in which the employees of a subsidiary are granted rights
to the equity instrument of the parent shall be accounted for as
a. Equity settled c. Either A or B
b. Cash settled d. Neither A nor B

4. On January 1, 2020, to supplement salaries of executives, BLOCK K Company issued share

options to executives to purchase 60,000 ordinary shares of P100 par value at P125 per
share. On such date, the market value of ordinary shares is P150 per share. The fair value
of each share option is P30.
The share options are excercisable after four years and will expire one year after if
the grantee was still an employee of the entity. Options covering P52,500 shares are
excercised on January 1, 2024. Options covering the remaining shares expired.
a. The compensation expense on December 2021 will be P900,000
b. The balance of shares options outstanding on December 2022 will be P1,350,000
c. The balance of cash on January 1, 2024 upon exercise will be P7,500,000
d. The credit to share premium upon exercise on January 1, 2024 will be P3,300,000
e. Two or more statements above is correct

5. On January 1, 2020, JAMIE MARIE Company offered the top management share
appreciation rights with the following: Predetermined Price – P75 per share; Number of
shares – 20,000 shares; Service period – 3 years; Expiration date – December 31, 2022.
The share appreciation rights is to be paid upon exercise. The share appreciation
rights were exercised on December 31, 2022. The share prices are as follows:
 January 1, 2020 P75
December 31, 2020 84
December 31, 2021 102
December 31, 2022 106.50
a. The compensation expense on December 31, 2020 is P60,000
b. The balance of salaries payable on December 31, 2021 is P300,000
c. The balance of share warrants outstanding on December 31, 2022 is P270,000
d. Upon exercise, a credit to cash amounting to P630,000 in journal entry
e. Two or more statements above is correct

6. On January 1, 2020, KING JESSE Company granted to an employee the right to choose
either: Share Alternative – equal to 24,000 shares; Cash Alternative – equal to market value
of 20,000 phantom shares.
The grant is conditional upon the completion of three years of service. If the employee
chooses the share alternative, the shares must be held for three years after vesting period.
The par value of the share is P25 and at the grant date on January 1, 2020, the share price
is P51.
The share prices for the three year vesting period are P54 on December 31, 2020; P60
on December 31, 2021; and P65 on December 31, 2022. After taking the effects of post-
vesting restrictions, the entity has estimated that the fair value of the share alternative is
P48 per share.
a. The equity component of the financial instrument will be P1,152,000
b. The total compensation expense to be debited on December 31, 2020 will be P360,000
c. If the employee chooses the cash alternative, a credit to share premium will be
P132,000
d. If the employee chooses the equity alternative, a credit to share premium will be
P832,000
e. Two or more statements above is correct

7. DOMINADOR JOSE, a public limited company, has granted share options to its employees
with a fair value of P6 million. The options vest in three years time. The Monte-Carlo model
was used to value the options, and these estimates had been made:
 Grant date ( January 1, 2022): estimates of employees leaving the entity during the
vesting period – 5%.
 January 1, 2023: revision of estimate of employees leaving to be 6% before vesting
period.
 December 31, 2024: actual employee leaving 5%.
What would be the expense charged in the income statement in 2024?
a. P2,000,000 c. P1,940,000
b. P1,860,000 d. P1,900,000

8. On January 1, 2018, MAERI LYNELLE Company granted share options to the employees.
The total expense to the vesting date on December 31, 2021 had been calculated at
P20,000,000. The entity decided to settle the award early on December 31, 2020.
The expense charged since the date of grant was P5,000,000 for 2018 and P5,250,000 for
2019. The expense that would have been charged for 2020 is P5,050,000. What amount
should be recognized as compensation expense for 2020?
a. P5,000,000 c. P20,000,000
b. P9,750,000 d. P5,500,000

9. CHESTER COMPANY grants 2,000 share options to each of the five directors on July 1,
2018. The options vest on June 30, 2022. The fair value option on July 1, 2018 is P5, and it
is anticipated that all of the share options will vest on June 30, 2022. What will be the
accounting entry in the financial statements for the year ended December 31, 2019?
a. Increase in equity P50,000, increase in expense in income statement P50,000
b. Increase in equity P10,000, increase in expense in income statement P10,000
c. Increase in equity P12,500, increase in expense in income statement P12,500
d. Increase in equity P0, increase in expense in income statement P0.
10. At the beginning of year 1, the entity grants 100 shares each to 500 employees, conditional
upon the employees remaining in the entity’s employ during the vesting period. The shares
will vest at the end of year 1 if the entity’s earning increase by more than 18%, at the end
of year 2 if the entity’s earnings increase by more than an average of 13% per year over the
two year period; and at the end of year 3 if the entity’s earnings increased by more than an
average of 10% per year over the three year period. The shares have a fair value of P30 per
share at the start of year 1, which equals the share price at grant date. No dividends are
expected to be paid over the three year period.
By the end of year 1, the entity’s earnings have increased by 14% , and 30 employees
left. The entity expects that earnings will continue to increase at a similar rate in year 2,
and therefore expects that the shares will vest at the end of year 2. The entity expects, on
the basis of a weighted average probability, that a further 30 employees will leave during
year 2, and therefore expects that 440 employees will vest in 100 shares each at the end of
year 2.
By the end of year 2, the entity’s earnings have increased by only 10% and therefore
the shares do not vest at the end of year 2. 28 employees have left during the year. The
entity expects that a further 25 employees will leave during year 3, and that the entity’s
earnings will increase by at least 6%, thereby achieving the average of 10% per year.
By the end of year 3, 23 employees left and the entity’s earnings had increased by 8%,
resulting in an average increase of 10.67% per year. Therefore, 419 employees received 100
shares at the end of year 3. Compute the amount to be recognized as compensation expense
in year 3.
a. P423,000 b. P174,000 c. P660,000 d. P834,000

11. Which of the following is/are considered as inventory?

I – A special article, fabricated to order for a customer, was finished and in the shipping
room
II – An entity holds lubricants that are consumed by the entity’s machinery in producing
goods. (
III – A vintner processes grapes harvested from its vineyard into wine in a three year
production cycle.
IV – Materials in transit shipped FOB Shipping point.
a. I, II, III and IV c. III and IV
b. II, III and IV d. IV

12. Theoretically, cash discounts permitted on purchased raw materials should be

a. Added to other income, only if taken
b. Added to other income, whether taken or not
c. Deducted from inventory, only if taken
d. Deducted from inventory, whether taken or not

13. 1ST statement: Periodic inventory system is the method of accounting for inventory in which
the cost of goods sold is recorded each time a sale is made.
2nd statement: Goods received from another entity on consignment should be excluded in
inventory.
3rd statement: Cost of goods sold is the same under periodic system as under a perpetual
system when an entity uses FIFO.
a. TRUE, TRUE, TRUE
b. FALSE, TRUE, TRUE
c. FALSE, FALSE, TRUE
d. FALSE, FALSE, FALSE
e. NONE OF THE ABOVE

14. 1ST statement: Lower of cost and net realizable value gives the lowest valuation if applied
to the total inventory.
 2nd statement: The gross profit method is used to verify the accuracy of the perpetual
inventory record as it relates to inventory valuation.
3rd statement: Purchase returns would be included in the calculation of the goods available
for sale at both cost and retail inventory method.
a. TRUE, TRUE, TRUE
b. FALSE, TRUE, TRUE
c. FALSE, FALSE, TRUE
d. FALSE, FALSE, FALSE
e. NONE OF THE ABOVE

15. Which of the following account will affect the cost of goods sold
a. Purchase discount Lost
b. Loss on Purchase Commitment
c. Abnormal Inventory Shortage
d. Gain on reversal of Inventory writedown

16. RUHANNE Corporation’s inventory at December 31, 2019, was P325,000 based on physical
count priced at cost, and before any adjustment for the following:
 Merchandise costing P30,000, shipped FOB shipping point from a vendor on
December 30,2019 was received on January 5, 2020.
 Merchandise costing P22,000, shipped FOB destination from a vendor on
December 31, 2019, was received on January 3, 2020
 Merchandise costing P38,000 was shipped to a customer FOB destination on
December 28, arrived at the customer’s location on January 6, 2020
 Merchandise costing P12,000 was being held on consignment by TAN Company.
What amount should RUHANNE Corporation report as inventory in its December 31, 2019,
statement of financial position?
a. P367,000 c. P405,000
b. P427,000 d. P325,000

17. The following data were taken from the books of ELYZA JOY for the current year:
FROM CASH RECORDS:
Cash purchases - P30,000
Payment to trade creditors for credit purchases - 302,600
FROM BALANCE SHEETS:
Accounts Payable, Jan 1 - P37,500
Accounts Payable, Dec 31 - 43,300
Merchandise Inventory, Jan 1 - 12,800
FROM OTHER RECORDS
Purchase returns and allowances - 7,500
Cost of goods sold for the year - 335,000
The merchandise inventory at the end of the year is
a. P16,200 c. P12,800
b. P13,800 d. P23,700

18. JAMES TEODORO Company uses the average cost retail method to estimate its inventory:
Data relating to the inventory at December 31, 2019 are:
Cost Retail
Inventory, Jan 1 P2,000,000 P3,000,000
Purchases 10,600,000 14,000,000
Net markups 1,600,000
Net Markdowns 600,000
Sales 12,000,000
Estimated normal shoplifting losses 400,000
Estimated normal shrinkage of 5% of sales
JAMES TEODORO’S cost of goods sold for the year ended December 31, 2019 is:
a. P8,680,000 c. P7,700,000
b. P9,100,000 d. P8,400,000
An entity uses the periodic inventory system. Beginning Inventory listed 20,000 units at P6.10
each. Below are the following transactions during the current month in chronological order.
 Purchased 100,000 units at P5.50 each
 Sold 80,000 units at P12 each
 Purchased 60,000 units at P5 each
 Sold 70,000 units at P11 each
19. What is the cost of ending inventory using FIFO?
a. P166,000 c. P165,000
b. P177,000 d. P150,000
20. What is the cost of ending inventory using weighted average?
a. P166,000 c. P177,000
b. P162,000 d. P159,375

21. An entity provided the following inventory information for the current year:
Cost Retail
Beginning Inventory P350,000 P1,000,000
Net Purchases 550,000 1,100,000
Net Markups 150,000
Net markdowns 250,000
Net sales (including sales discount of P50,000 1,450,000
What is the cost of goods sold under the conventional retail method?
a. P700,000 c. P675,000
b. P680,000 d. P652,500

22. DADDDY Company purchase of merchandise at an invoice price of P7,125,000 excluding

freight. Terms are 10/10, n/30. Cash payment on purchases, P5,575,500, of which P2,425,500
was paid within the discount period. It is expected that all discounts on unpaid accounts
payable will be lost.
a. The total purchase discount availed is P269,500
b. The total discount lost is P443,000
c. The total accounts payable after the first payment using the gross method will be
P4,430,000
d. The total accounts payable after the first payment using the net method will be
P3,987,000
e. Two or more statements above is correct

The following information has been extracted from the records of Valuable Company about one of
its products.
Unit Unit
Cost
Jan 1 Beginning Inventory 4,000 P80.00
Jan 6 Purchase 1,500 P81.00
Jan 10 Sale 5,000
Jan 15 Purchase 5,500 P83.50
Jan 16 Purchase return on Jan 15 purchases 400
Jan 20 Sale 4,500
Jan 10 Sales Return on Jan 20 sales 300
23. Which of the following is correct?
a. The cost of ending inventory under the FIFO periodic will be P116,900
b. The average unit cost based on Weighted Average – Periodic will be P81.83 per unit.
c. The average unit cost based on Moving Average after Jan 16 purchase return will be
P83.21
d. Only two of the above statements is correct
e. A, B and C are correct
24. Which of the following is correct?
a. The cost of goods sold under the FIFO perpetual will be P755,350
b. The cost of goods sold under the FIFO periodic will be P750,400
c. The cost of goods sold under the Weighted Average Periodic will be P742,836
d. The cost of goods sold under the Moving Average will be P750,832
e. The unit average cost of goods sold under the Moving Average will be P83.21

25. On December 31, 2019, a fire broke out in the warehouse of REGATTA Company destroying
all inventories. The following data are available for the current year.
January 1 December 31
Inventory P500,000
Accounts Receivable 480,000 440,000
Accounts Payable 400,000 500,000
Collections on Accounts Receivable 2,640,000
Payments to Suppliers 1,600,000
Goods out on consignment at sales price 50,000
Salvage value of inventory 15,000
Gross Profit percentage 30%
a. If the GP rate is based on sales the cost of inventory fire loss will be P105,000
b. If the GP rate is based on cost the cost of inventory fire loss will be P235,000
c. Both A and B are correct
d. Both A and B are incorrect
e. Bahala na si Lord

26. REIBORN Company has provided you with inventory information for four years as follows:
Cost Net Realizable Value
2019 P3,000,000 P2,250,000
2020 2,850,000 2,400,000
2021 2,925,000 2,625,000
2022 2,700,000 2,850,000
a. If the company is using the Direct Method, the amount to be debited for Ending
inventory for 2020 will be P2,400,000.
b. If the company is using the Allowance Method, the amount to be reported as part of
Other Losses for 2020 will be P300,000
c. If the company is using the Allowance Method, the amount to be reported as a
deduction to Cost of Goods sold for 2021 will be P150,000
d. If the company is using the Allowance Method, the amount to be reported as an
addition to Cost of Goods sold for 2022 will be P300,000
e. Two or more statement above is correct.

27. On November 15, 2019, Diamond Company entered into a commitment to purchase 15,000
ounces of gold on February 15, 2020 at a price of P310 per ounce. On December 31, 2019,
the market price of gold is P270 per ounce. On February 15, 2020, the price of gold is P320
per ounce.
a. On November 15, 2019, there will be a debit of Purchases of P4,650,000
b. On December 31, 2019, there will be a credit to Loss on Purchase commitment
amounting to P400,000
c. On February 15, 2019, there will be a debit of Purchases amounting to P4,800,000
d. On December 31,2019, there will be a debit to Estimated liability for purchase
commitment amounting to P600,000.
e. Two or more statements above are correct

28. EXPRESS Company used the retail inventory method to approximate the ending inventory.
The following information is available for the current year.
Cost Retail
Beginning Inventory P975,000 P1,800,000
Purchases 13,500,000 22,050,000
Freight In 300,000
Purchase returns 450,000 750,000
 Purchase Allowances 225,000
Departmental transfer in 300,000 450,000
Net Markup 450,000
Net Markdown 1,500,000
Sales 14,250,000
Sales discount 150,000
Employee discount 750,000
Estimate normal shoplifting losses 900,000
Estimated normal shrinkage 600,000
a. The cost of ending inventory – conservative will be P3,840,000
b. The cost of ending inventory – average will be P 3,600,000
c. The cost of ending inventory – FIFO will be P3,891,305
d. Only two of the above statements are correct
e. A, B and C are correct

29. Which of the following is incorrect regarding PAS 41?

a. In all cases, an entity shall measure agricultural produce at fair value less cost of
disposal at the point of harvest.
b. The prevailing view is that the fair value of agricultural produce at the point of
harvest can always be measured reliably
c. The bearer plant and the related agricultural produce are accounted for as one asset.
d. The agricultural produce is usually presented as current asset unless it takes more
than one year to mature.
e. None of the above.

30. An entity has these balances in its financial records: Value of biological assets at cost;
12/31/16– P1,200,000; Fair value surplus on initial recognition at fair value , 12/31/16 –
P1,400,000; Change in fair value to 12/31/17 due to growth and price fluctuations –
P200,000; Decrease in fair value due to harvest – P180,000.How much should be recognized
in the income statement for the year ended December 31, 2016 related to these biological
assets?
a. P0 b. P200,000 c. P20,000 d. P1,420,000 e. None

31. The following pertains to the biological assets owned by ABC FARMS, Inc: Carrying amount
at January 1, 2013 – P459,750; Purchases – P26,250; Gain arising from changes in fair value
less costs to sell attributable to physical changes – P15,350; Gain arising from changes in
fair value less cost to sell attributable to price changes – P24,580; Sales – P100,700. The
carrying amount of the biological asset on December 31, 2013 is
a. P425,050 b. P499,500 c. P525,750 d. P451,300

32. Agricultural activity is

a. The processes of growth, degeneration, production and procreation that cause
qualitative or quantitative changes in a biological asset
b. Is the harvested product of the entity’s biological assets
c. Is the management by an entity of the biological transformation and harvest of
biological assets for sale or for conversion into agricultural produce or into
additional biological assets.

33. Which of the following is incorrect with regards the definition of Property, Plant and
Equipment. The property, plant and equipment are tangible items that are
a. Held for use in the production or supply of goods or services
b. For rental to others
c. For administrative purposes
 d. Are expected to be used during more than one period
e. None of the above

34. Spare parts, standby – equipment and servicing equipment are recognized as property,
plant and equipment if they meet the definition by the standard. Otherwise, they will be
treated as
a. Other current asset c. Inventory
b. Other noncurrent asset d. Expense immediately

35. In measuring the cost of property, plant and equipment.

a. Is the cash price equivalent at the recording date.
b. If payment is deferred beyond normal credit terms, the total payment made by the
entity over the payment period. (
c. The fair value of the asset if the exchange has commercial substance.
d. The carrying amount of the asset received in the absence of the fair value

36. The residual value and the useful life of an asset shall be reviewed at least at each
financial year, and if expectations differ from previous amount or life, the change shall be
accounted for as
a. Change in accounting policy
b. Change in accounting estimate
c. A prior period error
d. A mistake
e. A fraud

37. Depreciation of an assets and ceases when

a. Begins upon purchase of the assets and ceases when the asset becomes idle or is
retired from active use
b. Begins upon purchase of the assets and ceases when the asset is classified as held
for sale or derecognized whichever is earlier.
c. Begins when it is available for use and ceases when the becomes idle or is retired
from active use
d. Begins when it is available for use and ceases when the asset is classified as held
for sale or derecognized whichever is earlier.

38. JAYVISON COMPANY takes a full year’s depreciation expense in the year of an asset
acquisition and no depreciation expense in the year of disposition. Data relating to one of
JAYVISON’s depreciable assets at December 31, 2018, are as follows: Acquisition year –
2016; Cost – P110,000; Residual Value – P20,000; Accumulated Depreciation – P72,000;
Estimated useful life – 5 years. Using the same depreciation method as used in 2016, 2017
and 2018, how much depreciation expense should JAYVISON record in 2019 for this asset?
a. P12,000 c. P22,000
b. P18,000 d. P24,000

39. An entity purchased several machines for use in operations:

 The machine was purchased on account for P500,000. Credit terms were 2/10, n/30. The
entity paid the account within the discount period.
 The entity issued to the seller a noninterest bearing note to purchase a machine. The
note required a payment of P1,000,000 and has a 2 year term. The fair value of the
machine cannot be determined and the effective interest rate for similar notes was 10%.
(PV factor two decimal places).
 The entity traded in an old equipment with a cost of P280,000 and accumulated
depreciation of P16,000 for a new equipment. The entity paid cash of P440,000 and the
fair value of the old equipment was P50,000.
  The entity issued 20,000, P100 par value ordinary shares in exchange for equipment.
The equipment could have been purchased for P250,000 cash.
What is the total cost of the newly purchased PPEs?
a. P2,070,000 c. P2,230,000
b. P2,060,000 d. P2,010,000

40. The following information relates to a machine constructed by OKLAHOMA LTD.

Cost of material to construct machine, including VAT of P84,000 P78,400
Labor cost to construct machine 43,000
Allocated overhead – electricity, factory space, etc 22,000
Allocated interest cost of financing machine 10,000
Cost of installation 12,000
Insurance for the current year 2,000
Profit saved by self construction 15,000
Safety inspection costs prior to use 4,000
Determined the amount at which the machine should be recorded
a. P168,000 c. P153,000
b. P161,000 d. P146,000

41. The following expenditures were incurred by L.A. Enterprises Co. in 2018:
Purchase of Land P3,900,000
Land Survey 52,000
Fees for search of title for land 6,000
Building permit 35,000
Temporary quarters for construction crew 107,500
Excavating basement 100,000
Special assessment tax for street project 20,000
Damaged awarded for injuries sustained in construction (no insurance was carried) 84,000
Costs of construction 29,000,000
Cost of paving parking lot adjoining building 400,000
Cost of shrubs, trees and other landscaping 330,000
Determine the cost of the new building in accordance with PIC Q&A 2012-2.
a. P29,642,500 c. P29,242,500
b. P29,326,500 d. P29,135,000

42. ROUSEFF Co. purchased equipment on January 2, 2016 for P50,000 The equipment had
an estimated 5 year service life. ROUSEFF’s policy for 5 year assets is to use the 200%
double declining balance depreciation method for the first two years of the asset’s life and
then switch to the straight line depreciation method. In its December 31, 2018 statement of
financial position, what amount should ROUSEFF report as accumulated depreciation for
equipment?
a. P30,000 c. P39,200
b. P38,000 d. P42,000

43. On January 1, 2014, CARTER Inc purchased equipment having an estimated salvage value
equal to 20% of its original cost at the end of a ten year life. The equipment was sold
December 31, 2018, for 50% of its original cost. If the equipment disposition resulted in a
reported loss, which of the following depreciation methods did CARTER use?
a. Double declining c. Straight line
b. Sum of the year digit d. Composite

44. ROSALYN COMAPNY is preparing its 2016 draft financial statement reported LAND
(under Property, Plant and Equipment) at P12,500,000. Included were the following:
 Property#1 : P800,000 held for long term capital appreciation
 Property#2: P1,000,000 held for sale in the ordinary course of business
 Property#3: P500,000 in the process of construction/development for sale
 Property#4: P300,000 held for a currently undetermined future use
 Property#5: P700,000 currently being developed as an investment property
  Property#6: P500,000 currently being redeveloped for continued future use as
investment property
 Property#7: P400,000 grazing ground for cattle
The correct amount to be reported under Land as included in the Property, Plant and
Equipment section of the 2016 financial position is
a. P12,500,000 b. P8,300,000 c. P8,700,000 d. P9,000,000 e. None

45. ATLANTIC COMPANY acquired the following items as follows:

 A machine in exchange for a noninterest bearing note requiring ten payments of
P500,000. The first payment was made one year after December 31, 2016, and the
others are due annually on December 31. The prevailing interest rate is 12%.
 Acquired a press at an invoice price of P3,000,000 subject to a 5% cash discount which
was not taken. Cost of freight and insurance during shipment were P50,000 and
installation cost amounted to P200,000.
 Received a donation of land from a rich local philantrophist. The land originally cost
of P1,000,000. On the date of the donation, the land had a market value of P1,500,000
and an assessed value of P1,200,000.
 Exchange an old machine with a book value of P390,000 and a fair value of P350,000
and paid P100,000 cash for another used machine having a list price of P500,000.
How much is the total cost of Property Plant and Equipment?
a. P7,875,000 b. P8,025,000 c. P7,775,000 d. P7,825,000 e. None
46. KORECASE Company and GARAGE COMPANY are fuel oil distributors. To facilitate the
delivery of oil to their customers, KORECASE AND GARAGE exchanged ownership of 1,200
barrels of oil without physically moving the oil. KORECASE paid P300,000 to compensate
for a difference in the grade of oil. It is reliably determined that the exchange lacks
commercial substance. On the date of exchange, cost and market value of the oil were as
follows:
KORECASE COMPANY GARAGE COMPANY
Cost 1,000,000 1,400,000
Market Value 1,200,000 1,500,000
The cost of nventory received in exchange by KORECASE AND GARAGE COMPANY
respectively
a. P1,500,000 and P1,200,000 c. P1,300,000 and P1,100,000 e. None
b. P900,000 and P1,800,000 d. P700,0000 and P1,700,000

The following expenditures were incurred by LYON ENTERPRISES CO in 2016: Purchase of land
– P3,900,000; Land survey – P52,000; Fees for search of title for land – P6,000; Building permit –
P35,000; Temporary quarters for construction crews- P107,500; Payments to tenants of old
building for vacating premise – P46,000; Razing old building – P470,000; Excavating basements –
P100,000; Special assessment tax for street project – P20,000; Dividends – P50,000; Damaged
awarded for injuries sustained in construction – P84,000; Costs of construction – P29,000,000; Cost
of paving, parking lot adjoining building – P400,000; Cost of shrubs, trees and other landscaping
– P330,000.
47. How much is the cost of the land
a. P4,494,000 b. P4,474,000 c. P4,594,000 d. P5,224,000 e. P3,978,000
48. How much is the cost of the building
a. P29,288,500 b. P29,135,000 c. P29,326,500 d. P29,242,500 e. P29,758,500

49. On January 1, 2007, LANCE COMPANY acquired equipment for P1,000,000 with an
estimated 10 year useful life. LANCE estimated a P100,000 residual value and used the
straight line method of depreciation. During 2011, after its 2010 financial statements had
been issued. LANCE determined that, due to obsolescence, this equipment’s remaining
 useful life was only four more years and its residual value would be P40,000. In LANCE
December 31, 2011 balance sheet, what was the carrying amount of this asset?
a. P515,000 b. P490,000 c. P415,000 d. P390,000 e. None

50. On January 1, 2009, MILDRED COMPANY acquired equipment to be used in its

manufacturing operations. The equipment has an estimated useful life of 10 years and an
estimated residual value of P50,000. The depreciation applicable to this equipment was
P240,000 for 2011 computed under the sum of the year’s digits method. What was the
acquisition cost of the equipment?
a. P1,650,000 b. P1,700,000 c. P2,400,000 d. P2,450,000
(SET B) NAME:_________________________________________SCHEDULE:_____________________

INSTRUCTION: WRITE THE LETTER OF YOUR CHOICE ON A YELLOW PAPER. NO

ANSWERS WILL BE RECOGNIZED OTHER THAN THE YELLOW PAPER.

1. Which of the following is/are NOT considered as inventory?

I – A special article, fabricated to order for a customer, was finished and in the shipping
room
II – An entity holds lubricants that are consumed by the entity’s machinery in producing
goods.
III – A vintner processes grapes harvested from its vineyard into wine in a three year
production cycle.
IV – Materials in transit shipped FOB Shipping point.
b. Only one item above c. Only three items above
c. Only two items above d. All of the items above

2. Which of the following is incorrect regarding PAS 41?

a. In all cases, an entity shall measure agricultural produce at fair value less cost of
disposal at the point of harvest.
b. The agricultural produce is usually presented as current asset unless it takes more
than one year to mature.
c. The prevailing view is that the fair value of agricultural produce at the point of
harvest can always be measured reliably
d. The bearer plant and the related agricultural produce are accounted for as one asset.
e. None of the above.

3. Depreciation of an assets and ceases when

a. Begins when it is available for use and ceases when the becomes idle or is retired
from active use
b. Begins when it is available for use and ceases when the asset is classified as held
for sale or derecognized whichever is earlier.
c. Begins upon purchase of the assets and ceases when the asset becomes idle or is
retired from active use
d. Begins upon purchase of the assets and ceases when the asset is classified as held
for sale or derecognized whichever is earlier.

4. Theoretically, cash discounts permitted on purchased raw materials should be

a. Added to other income, only if taken
b. Deducted from inventory, only if taken
c. Deducted from inventory, whether taken or not
d. Added to other income, whether taken or not

5. 1ST statement: Periodic inventory system is the method of accounting for inventory in which
the cost of goods sold is recorded each time a sale is made.
2nd tatement: Lower of cost and net realizable value gives the lowest valuation if applied to
the total inventory.
3rd statement: Cost of goods sold is the same under periodic system as under a perpetual
system when an entity uses FIFO.
a. TRUE, TRUE, TRUE
b. FALSE, TRUE, TRUE
c. FALSE, FALSE, TRUE
d. FALSE, FALSE, FALSE
e. NONE OF THE ABOVE
6. 1st statement: The gross profit method is used to verify the accuracy of the perpetual
inventory record as it relates to inventory valuation.
2nd statement: Purchase returns would be included in the calculation of the goods available
for sale at both cost and retail inventory method.
3rd statement: Goods received from another entity on consignment should be excluded in
inventory.
a. TRUE, TRUE, TRUE
b. FALSE, TRUE, TRUE
c. FALSE, FALSE, TRUE
d. FALSE, FALSE, FALSE
e. NONE OF THE ABOVE

7. The residual value and the useful life of an asset shall be reviewed at least at each
financial year, and if expectations differ from previous amount or life, the change shall be
accounted for as
a. A prior period error
b. A mistake
c. A fraud
d. Change in accounting policy
e. Change in accounting estimate

8. Which of the following account will affect the cost of goods sold
a. Abnormal Inventory Shortage
b. Gain on reversal of Inventory writedown
c. Purchase discount Lost
d. Loss on Purchase Commitment

9. Agricultural activity is
a. The processes of growth, degeneration, production and procreation that cause
qualitative or quantitative changes in a biological asset
b. Is the harvested product of the entity’s biological assets
c. Is the management by an entity of the biological transformation and harvest of
biological assets for sale or for conversion into agricultural produce or into
additional biological assets.
d. I don’t know

10. Which of the following is incorrect with regards the definition of Property, Plant and
Equipment. The property, plant and equipment are tangible items that are
a. Held for use in the production or supply of goods or services
b. For rental to others
c. For administrative purposes
d. Are expected to be used during more than one period
e. None of the above

11. Spare parts, standby – equipment and servicing equipment are recognized as property,
plant and equipment if they meet the definition by the standard. Otherwise, they will be
treated as
a. Other current asset c. Inventory
b. Other noncurrent asset d. Expense immediately

12. In measuring the cost of property, plant and equipment, the cost of PPE
a. The fair value of the asset if the exchange has commercial substance.
b. The carrying amount of the asset received in the absence of the fair value
 c. Is the cash price equivalent at the recording date.
d. If payment is deferred beyond normal credit terms, the total payment made by the
entity over the payment period.

13. The following are the scenarios that provides an analysis of the share based payments in
determining whether a transaction is within the scope of the standard. Classify properly the
following items:
I – BLOCK B grants 10 shares to its employees provided that they remain in service for the
next 12 months.
II – BLOCK A grants employees a cash bonus equal to A’s share price growth provided that
they remain in service over the next 12 months.
III – BLOCK F share price is P120. F awards a cash bonus of P120 to employees, payable in
one year to those who remain in service during the next 12 months.
IV – BLOCK G awards a cash bonus of P500 to employees, payable in one year to those who
remain in service if G’s share price exceeds a price of P10 per share during the next
12months.
a. Only one of the scenarios mentioned above is BEYOND the scope of the share based
standard
b. Only two of the scenarios mentioned above is BEYOND the scope of the share based
standard
c. Only three of the scenarios mentioned above is BEYOND the scope of the share based
standard
d. All of the scenarios mentioned above is BEYOND the scope of the share based
standard
e. None of the scenarios mentioned above is BEYOND the scope of the share based
standard

14. If an entity modified condition on which equity instruments are granted, and such
modification is beneficial to employees, the compensation expense is based on
a. Original condition only
b. Modification condition only
c. Both A and B
d. Neither A nor B

15. Share based payment transactions in which the employees of a subsidiary are granted rights
to the equity instrument of the parent shall be accounted for as
a. Equity settled c. Either A or B
b. Cash settled d. Neither A nor B

16. On January 1, 2020, KING JESSE Company granted to an employee the right to choose
either: Share Alternative – equal to 24,000 shares; Cash Alternative – equal to market value
of 20,000 phantom shares.
The grant is conditional upon the completion of three years of service. If the employee
chooses the share alternative, the shares must be held for three years after vesting period.
The par value of the share is P25 and at the grant date on January 1, 2020, the share price
is P51.
The share prices for the three year vesting period are P54 on December 31, 2020; P60
on December 31, 2021; and P65 on December 31, 2022. After taking the effects of post-
vesting restrictions, the entity has estimated that the fair value of the share alternative is
P48 per share.
a. The equity component of the financial instrument will be P1,152,000
b. The total compensation expense to be debited on December 31, 2020 will be P360,000
c. If the employee chooses the cash alternative, a credit to share premium will be
P132,000
d. If the employee chooses the equity alternative, a credit to share premium will be
P832,000
e. Two or more statements above is INCORRECT
 17. On January 1, 2020, to supplement salaries of executives, BLOCK K Company issued share
options to executives to purchase 60,000 ordinary shares of P100 par value at P125 per
share. On such date, the market value of ordinary shares is P150 per share. The fair value
of each share option is P30.
The share options are excercisable after four years and will expire one year after if
the grantee was still an employee of the entity. Options covering P52,500 shares are
excercised on January 1, 2024. Options covering the remaining shares expired.
a. The compensation expense on December 2021 will be P900,000
b. The balance of cash on January 1, 2024 upon exercise will be P7,500,000
c. The credit to share premium upon exercise on January 1, 2024 will be P3,300,000
d. The balance of shares options outstanding on December 2022 will be P1,350,000
e. Two or more statements above is correct

18. On January 1, 2020, JAMIE MARIE Company offered the top management share
appreciation rights with the following: Predetermined Price – P75 per share; Number of
shares – 20,000 shares; Service period – 3 years; Expiration date – December 31, 2022.
The share appreciation rights is to be paid upon exercise. The share appreciation
rights were exercised on December 31, 2022. The share prices are as follows:
January 1, 2020 P75
December 31, 2020 84
December 31, 2021 102
December 31, 2022 106.50
a. The compensation expense on December 31, 2020 is P60,000
b. The balance of salaries payable on December 31, 2021 is P300,000
c. The balance of share warrants outstanding on December 31, 2022 is P270,000
d. Upon exercise, a credit to cash amounting to P630,000 in journal entry
e. Two or more statements above is INCORRECT

19. JOYCE ESTELLE Company purchase of merchandise at an invoice price of P7,125,000

excluding freight. Terms are 10/10, n/30. Cash payment on purchases, P5,575,500, of which
P2,425,500 was paid within the discount period. It is expected that all discounts on unpaid
accounts payable will be lost.
a. The total purchase discount availed is P269,500
b. The total discount lost is P443,000
c. The total accounts payable after the first payment using the gross method will be
P4,430,000
d. The total accounts payable after the first payment using the net method will be
P3,987,000
e. Two or more statements above is INCORRECT

The following information has been extracted from the records of SHEKINAH MAE Company
about one of its products.
Unit Unit
Cost
Jan 1 Beginning Inventory 4,000 P80.00
Jan 6 Purchase 1,500 P81.00
Jan 10 Sale 5,000
Jan 15 Purchase 5,500 P83.50
Jan 16 Purchase return on Jan 15 purchases 400
Jan 20 Sale 4,500
Jan 10 Sales Return on Jan 20 sales 300
20. Which of the following is/are incorrect?
a. The cost of ending inventory under the FIFO periodic will be P116,900
b. The average unit cost based on Weighted Average – Periodic will be P81.83 per unit.
c. The average unit cost based on Moving Average after Jan 16 purchase return will be
P83.21
d. Two or more statements above are incorrect
 e. No statements above are incorrect
21. Which of the following is correct?
a. The cost of goods sold under the Weighted Average Periodic will be P742,836
b. The cost of goods sold under the Moving Average will be P750,832
c. The unit average cost of goods sold under the Moving Average will be P83.21
d. The cost of goods sold under the FIFO perpetual will be P755,350
e. The cost of goods sold under the FIFO periodic will be P750,400

22. On December 31, 2019, a fire broke out in the warehouse of JOHN EPHRAIM Company
destroying all inventories. The following data are available for the current year.
January 1 December 31
Inventory P500,000
Accounts Receivable 480,000 440,000
Accounts Payable 400,000 500,000
Collections on Accounts Receivable 2,640,000
Payments to Suppliers 1,600,000
Goods out on consignment at sales price 50,000
Salvage value of inventory 15,000
Gross Profit percentage 30%
a. If the GP rate is based on sales the cost of inventory fire loss will be P105,000
b. If the GP rate is based on cost the cost of inventory fire loss will be P235,000
c. Both A and B are correct
d. Both A and B are incorrect
e. Bahala na si Lord

23. REIBORN Company has provided you with inventory information for four years as follows:
Cost Net Realizable Value
2019 P3,000,000 P2,250,000
2020 2,850,000 2,400,000
2021 2,925,000 2,625,000
2022 2,700,000 2,850,000
a. If the company is using the Allowance Method, the amount to be reported as a
deduction to Cost of Goods sold for 2021 will be P150,000
b. If the company is using the Allowance Method, the amount to be reported as an
addition to Cost of Goods sold for 2022 will be P300,000
c. If the company is using the Direct Method, the amount to be debited for Ending
inventory for 2020 will be P2,400,000.
d. If the company is using the Allowance Method, the amount to be reported as part of
Other Losses for 2020 will be P300,000
e. Two or more statement above is correct.

24. On November 15, 2019, JACINTA FATIMA Company entered into a commitment to
purchase 15,000 ounces of gold on February 15, 2020 at a price of P310 per ounce. On
December 31, 2019, the market price of gold is P270 per ounce. On February 15, 2020, the
price of gold is P320 per ounce.
a. On December 31, 2019, there will be a credit to Loss on Purchase commitment
amounting to P400,000
b. On February 15, 2019, there will be a debit of Purchases amounting to P4,800,000
c. On December 31,2019, there will be a debit to Estimated liability for purchase
commitment amounting to P600,000.
d. On November 15, 2019, there will be a debit of Purchases of P4,650,000
e. Two or more statements above are correct

25. JOHN MARC Company used the retail inventory method to approximate the ending
inventory. The following information is available for the current year.
Cost Retail
Beginning Inventory P975,000 P1,800,000
Purchases 13,500,000 22,050,000
Freight In 300,000
 Purchase returns 450,000 750,000
Purchase Allowances 225,000
Departmental transfer in 300,000 450,000
Net Markup 450,000
Net Markdown 1,500,000
Sales 14,250,000
Sales discount 150,000
Employee discount 750,000
Estimate normal shoplifting losses 900,000
Estimated normal shrinkage 600,000
a. The cost of ending inventory – FIFO will be P3,891,305
b. The cost of ending inventory – conservative will be P3,840,000
c. The cost of ending inventory – average will be P 3,600,000
d. Only two of the above statements are correct
e. A, B and C are correct

26. DOMINADOR JOSE, a public limited company, has granted share options to its employees
with a fair value of P6 million. The options vest in three years time. The Monte-Carlo model
was used to value the options, and these estimates had been made:
 Grant date ( January 1, 2022): estimates of employees leaving the entity during the
vesting period – 5%.
 January 1, 2023: revision of estimate of employees leaving to be 6% before vesting
period.
 December 31, 2024: actual employee leaving 5%.
What would be the expense charged in the income statement in 2024?
a. P2,000,000 c. P1,940,000
b. P1,860,000 d. P1,900,000

27. On January 1, 2018, MAERI LYNELLE Company granted share options to the employees.
The total expense to the vesting date on December 31, 2021 had been calculated at
P20,000,000. The entity decided to settle the award early on December 31, 2020.
The expense charged since the date of grant was P5,000,000 for 2018 and P5,250,000 for
2019. The expense that would have been charged for 2020 is P5,050,000. What amount
should be recognized as compensation expense for 2020?
a. P5,000,000 c. P20,000,000
b. P9,750,000 d. P5,500,000

28. CHESTER COMPANY grants 2,000 share options to each of the five directors on July 1,
2018. The options vest on June 30, 2022. The fair value option on July 1, 2018 is P5, and it
is anticipated that all of the share options will vest on June 30, 2022. What will be the
accounting entry in the financial statements for the year ended December 31, 2019?
a. Increase in equity P50,000, increase in expense in income statement P50,000
b. Increase in equity P10,000, increase in expense in income statement P10,000
c. Increase in equity P12,500, increase in expense in income statement P12,500
d. Increase in equity P0, increase in expense in income statement P0.

29. At the beginning of year 1, the entity grants 100 shares each to 500 employees, conditional
upon the employees remaining in the entity’s employ during the vesting period. The shares
will vest at the end of year 1 if the entity’s earning increase by more than 18%, at the end
of year 2 if the entity’s earnings increase by more than an average of 13% per year over the
two year period; and at the end of year 3 if the entity’s earnings increased by more than an
average of 10% per year over the three year period. The shares have a fair value of P30 per
share at the start of year 1, which equals the share price at grant date. No dividends are
expected to be paid over the three year period.
By the end of year 1, the entity’s earnings have increased by 14% , and 30 employees
left. The entity expects that earnings will continue to increase at a similar rate in year 2,
and therefore expects that the shares will vest at the end of year 2. The entity expects, on
the basis of a weighted average probability, that a further 30 employees will leave during
 year 2, and therefore expects that 440 employees will vest in 100 shares each at the end of
year 2.
By the end of year 2, the entity’s earnings have increased by only 10% and therefore
the shares do not vest at the end of year 2. 28 employees have left during the year. The
entity expects that a further 25 employees will leave during year 3, and that the entity’s
earnings will increase by at least 6%, thereby achieving the average of 10% per year.
By the end of year 3, 23 employees left and the entity’s earnings had increased by 8%,
resulting in an average increase of 10.67% per year. Therefore, 419 employees received 100
shares at the end of year 3. Compute the amount to be recognized as compensation expense
in year 3.
a. P834,000 c. P174,000 e. None of the above
b. P660,000 d. P423,000

30. RUHANNE Corporation’s inventory at December 31, 2019, was P325,000 based on physical
count priced at cost, and before any adjustment for the following:
 Merchandise costing P30,000, shipped FOB shipping point from a vendor on
December 30,2019 was received on January 5, 2020.
 Merchandise costing P22,000, shipped FOB destination from a vendor on
December 31, 2019, was received on January 3, 2020
 Merchandise costing P38,000 was shipped to a customer FOB destination on
December 28, arrived at the customer’s location on January 6, 2020
 Merchandise costing P12,000 was being held on consignment by TAN Company.
What amount should RUHANNE Corporation report as inventory in its December 31, 2019,
statement of financial position?
a. P405,000 c. P367,000
b. P325,000 d. P427,000

31. The following data were taken from the books of ELYZA JOY for the current year:
FROM CASH RECORDS:
Cash purchases - P30,000
Payment to trade creditors for credit purchases - 302,600
FROM BALANCE SHEETS:
Accounts Payable, Jan 1 - P37,500
Accounts Payable, Dec 31 - 43,300
Merchandise Inventory, Jan 1 - 12,800
FROM OTHER RECORDS
Purchase returns and allowances - 7,500
Cost of goods sold for the year - 335,000
The merchandise inventory at the end of the year is
a. P23,700 c. P13,800
b. P12,800 d. P16,200

32. JAMES TEODORO Company uses the average cost retail method to estimate its inventory:
Data relating to the inventory at December 31, 2019 are:
Cost Retail
Inventory, Jan 1 P2,000,000 P3,000,000
Purchases 10,600,000 14,000,000
Net markups 1,600,000
Net Markdowns 600,000
Sales 12,000,000
Estimated normal shoplifting losses 400,000
Estimated normal shrinkage of 5% of sales
JAMES TEODORO’S cost of goods sold for the year ended December 31, 2019 is:
a. P8,680,000 c. P7,700,000
b. P9,100,000 d. P8,400,000
An entity uses the periodic inventory system. Beginning Inventory listed 20,000 units at P6.10
each. Below are the following transactions during the current month in chronological order.
 Purchased 100,000 units at P5.50 each
 Sold 80,000 units at P12 each
 Purchased 60,000 units at P5 each
 Sold 70,000 units at P11 each
33. What is the cost of ending inventory using weighted average?
a. P166,000 c. P177,000
b. P162,000 d. P159,375
34. What is the cost of ending inventory using FIFO?
a. P166,000 c. P165,000
b. P177,000 d. P150,000

35. An entity provided the following inventory information for the current year:
Cost Retail
Beginning Inventory P350,000 P1,000,000
Net Purchases 550,000 1,100,000
Net Markups 150,000
Net markdowns 250,000
Net sales (including sales discount of P50,000 1,450,000
What is the cost of goods sold under the conventional retail method?
a. P700,000 c. P675,000
b. P680,000 d. P652,500

36. An entity has these balances in its financial records: Value of biological assets at cost;
12/31/16– P1,200,000; Fair value surplus on initial recognition at fair value , 12/31/16 –
P1,400,000; Change in fair value to 12/31/17 due to growth and price fluctuations –
P200,000; Decrease in fair value due to harvest – P180,000.How much should be recognized
in the income statement for the year ended December 31, 2016 related to these biological
assets?
a. P0 b. P200,000 c. P20,000 d. P1,420,000 e. None

37. The following pertains to the biological assets owned by DWIGHT STEPHEN FARMS, Inc:
Carrying amount at January 1, 2013 – P459,750; Purchases – P26,250; Gain arising from
changes in fair value less costs to sell attributable to physical changes – P15,350; Gain
arising from changes in fair value less cost to sell attributable to price changes – P24,580;
Sales – P100,700. The carrying amount of the biological asset on December 31, 2013 is
a. P425,050 b. P499,500 c. P525,750 d. P451,300

38. JAYVISON COMPANY takes a full year’s depreciation expense in the year of an asset
acquisition and no depreciation expense in the year of disposition. Data relating to one of
JAYVISON’s depreciable assets at December 31, 2018, are as follows: Acquisition year –
2016; Cost – P110,000; Residual Value – P20,000; Accumulated Depreciation – P72,000;
Estimated useful life – 5 years. Using the same depreciation method as used in 2016, 2017
and 2018, how much depreciation expense should JAYVISON record in 2019 for this asset?
a. P12,000 c. P22,000
b. P18,000 d. P24,000

39. An entity purchased several machines for use in operations:

 The machine was purchased on account for P500,000. Credit terms were 2/10, n/30. The
entity paid the account within the discount period.
 The entity issued to the seller a noninterest bearing note to purchase a machine. The
note required a payment of P1,000,000 and has a 2 year term. The fair value of the
machine cannot be determined and the effective interest rate for similar notes was 10%.
(PV factor two decimal places).
  The entity traded in an old equipment with a cost of P280,000 and accumulated
depreciation of P16,000 for a new equipment. The entity paid cash of P440,000 and the
fair value of the old equipment was P50,000.
 The entity issued 20,000, P100 par value ordinary shares in exchange for equipment.
The equipment could have been purchased for P250,000 cash.
What is the total cost of the newly purchased PPEs?
a. P2,070,000 c. P2,230,000
b. P2,060,000 d. P2,010,000

40. The following information relates to a machine constructed by ACE HULSEY LTD.
Cost of material to construct machine, including VAT of P84,000 P78,400
Labor cost to construct machine 43,000
Allocated overhead – electricity, factory space, etc 22,000
Allocated interest cost of financing machine 10,000
Cost of installation 12,000
Insurance for the current year 2,000
Profit saved by self construction 15,000
Safety inspection costs prior to use 4,000
Determined the amount at which the machine should be recorded
a. P168,000 c. P153,000
b. P161,000 d. P146,000

41. The following expenditures were incurred by PEARL MARGARET Enterprises Co. in 2018:
Purchase of Land P3,900,000
Land Survey 52,000
Fees for search of title for land 6,000
Building permit 35,000
Temporary quarters for construction crew 107,500
Excavating basement 100,000
Special assessment tax for street project 20,000
Damaged awarded for injuries sustained in construction (no insurance was 84,000
carried)
Costs of construction 29,000,000
Cost of paving parking lot adjoining building 400,000
Cost of shrubs, trees and other landscaping 330,000
Determine the cost of the new building in accordance with PIC Q&A 2012-2.
a. P29,642,500 c. P29,242,500
b. P29,326,500 d. P29,135,000

42. ALMIRA MAE Co. purchased equipment on January 2, 2016 for P50,000 The equipment
had an estimated 5 year service life. ALMIRA’s policy for 5 year assets is to use the 200%
double declining balance depreciation method for the first two years of the asset’s life and
then switch to the straight line depreciation method. In its December 31, 2018 statement of
financial position, what amount should ALMIRA report as accumulated depreciation for
equipment?
a. P30,000 c. P39,200
b. P38,000 d. P42,000

43. On January 1, 2014, CHARLES DALE Inc purchased equipment having an estimated
salvage value equal to 20% of its original cost at the end of a ten year life. The equipment
was sold December 31, 2018, for 50% of its original cost. If the equipment disposition
resulted in a reported loss, which of the following depreciation methods did CHARLES use?
a. Double declining c. Straight line
b. Sum of the year digit d. Composite

44. TREXCY MAE COMAPNY is preparing its 2016 draft financial statement reported LAND
(under Property, Plant and Equipment) at P12,500,000. Included were the following:
 Property#1 : P800,000 held for long term capital appreciation
  Property#2: P1,000,000 held for sale in the ordinary course of business
 Property#3: P500,000 in the process of construction/development for sale
 Property#4: P300,000 held for a currently undetermined future use
 Property#5: P700,000 currently being developed as an investment property
 Property#6: P500,000 currently being redeveloped for continued future use as
investment property
 Property#7: P400,000 grazing ground for cattle
The correct amount to be reported under Land as included in the Property, Plant and
Equipment section of the 2016 financial position is
a. P8,700,000 b. P12,500,000 e. None of the above
b. P9,000,000 c. P8,300,000

45. LEI KRISTINE COMPANY acquired the following items as follows:

 A machine in exchange for a noninterest bearing note requiring ten payments of
P500,000. The first payment was made one year after December 31, 2016, and the
others are due annually on December 31. The prevailing interest rate is 12%.
 Acquired a press at an invoice price of P3,000,000 subject to a 5% cash discount which
was not taken. Cost of freight and insurance during shipment were P50,000 and
installation cost amounted to P200,000.
 Received a donation of land from a rich local philantrophist. The land originally cost
of P1,000,000. On the date of the donation, the land had a market value of P1,500,000
and an assessed value of P1,200,000.
 Exchange an old machine with a book value of P390,000 and a fair value of P350,000
and paid P100,000 cash for another used machine having a list price of P500,000.
How much is the total cost of Property Plant and Equipment?
a. P8,025,000 c. P7,825,000 e. None
b. P7,875,000 d. P7,775,000

46. KORECASE Company and GARAGE COMPANY are fuel oil distributors. To facilitate the
delivery of oil to their customers, KORECASE AND GARAGE exchanged ownership of 1,200
barrels of oil without physically moving the oil. KORECASE paid P300,000 to compensate
for a difference in the grade of oil. It is reliably determined that the exchange lacks
commercial substance. On the date of exchange, cost and market value of the oil were as
follows:
KORECASE COMPANY GARAGE COMPANY
Cost 1,000,000 1,400,000
Market Value 1,200,000 1,500,000
The cost of nventory received in exchange by KORECASE AND GARAGE COMPANY
respectively
a. P1,500,000 and P1,200,000 c. P1,300,000 and P1,100,000 e. None
b. P900,000 and P1,800,000 d. P700,0000 and P1,700,000

47. The following expenditures were incurred by LYON ENTERPRISES CO in 2016: Purchase
of land – P3,900,000; Land survey – P52,000; Fees for search of title for land – P6,000;
Building permit – P35,000; Temporary quarters for construction crews- P107,500; Payments
to tenants of old building for vacating premise – P46,000; Razing old building – P470,000;
Excavating basements – P100,000; Special assessment tax for street project – P20,000;
Dividends – P50,000; Damaged awarded for injuries sustained in construction – P84,000;
Costs of construction – P29,000,000; Cost of paving, parking lot adjoining building –
P400,000; Cost of shrubs, trees and other landscaping – P330,000. How much is the cost of
the land
a. P4,494,000 c. P4,474,000 e. P5,224,000
b. P4,594,000 d. P3,978,000
48. How much is the cost of the building
a. P29,758,500 c. P29,326,500 e. P29,242,500
b. P29,288,500 d. P29,135,000

49. On January 1, 2007, LANCE COMPANY acquired equipment for P1,000,000 with an
estimated 10 year useful life. LANCE estimated a P100,000 residual value and used the
straight line method of depreciation. During 2011, after its 2010 financial statements had
been issued. LANCE determined that, due to obsolescence, this equipment’s remaining
useful life was only four more years and its residual value would be P40,000. In LANCE
December 31, 2011 balance sheet, what was the carrying amount of this asset?
a. P390,000 c. P490,000 e. None
b. P415,000 d. P515,000

50. On January 1, 2009, NATHANIEL JILSON COMPANY acquired equipment to be used in

its manufacturing operations. The equipment has an estimated useful life of 10 years and
an estimated residual value of P50,000. The depreciation applicable to this equipment was
P240,000 for 2011 computed under the sum of the year’s digits method. What was the
acquisition cost of the equipment?
a. P2,450,000 c. P1,700,000
b. P2,400,000 d. P1,650,000