WINDING UP

1. An analysis of Thrift Corp.’s unadjusted prepaid expense account at December 31, 2013, revealed the following:
• An opening balance of P1,500 for Thrift’s comprehensive insurance policy. Thrift had paid an annual premium of
P3,000 on July 1, 2012.
• A P3,200 annual insurance premium payment made July 1, 2013.
• A P2,000 advance rental payment for a warehouse Thrift leased for one year beginning January 1, 2014.
In its December 31, 2013 statement of financial position, what amount should Thrift report as prepaid expenses?
A. P5,200 B. P3,600 C. P2,000 D. P1,600
2. Roro, Inc. paid P7,200 to renew its only insurance policy for three years on March 1, 2013, the effective date of the policy.
At March 31, 2013, Roro’s unadjusted trial balance showed a balance of P300 for prepaid insurance and P7,200 for
insurance expense. What amounts should be reported for prepaid insurance and insurance expense in Roro’s financial
statements for the three months ended March 31, 2013?
Prepaid Insurance
insurance expense
A. P7,000 P300
B. P7,000 P500
C. P7,200 P300
D. P7,300 P200
3. Decker Company assigns some of its patents to other enterprises under a variety of licensing agreements. In some
instances advance royalties are received when the agreements are signed, and in others, royalties are remitted within
sixty days after each license year-end. The following data are included in Decker’s December 31 statement of financial
position:
2012 2013
Royalties receivable P90,000 P85,000
Unearned royalties 60,000 40,000
During 2013 Decker received royalty remittances of P200,000. In its income statement for the year ended December 31,
2013, Decker should report royalty income of
A. P195,000 B. P215,000 C. P220,000 D. P225,000
4. Mirr, Inc. was incorporated on January 1, 2013, with proceeds from the issuance of P750,000 in stock and borrowed funds
of P110,000. During the first year of operations, revenues from sales and consulting amounted to P82,000, and operating
costs and expenses totalled P64,000. On December 15, Mirr declared a P3,000 cash dividend, payable to stockholders
on January 15, 2014. No additional activities affected owners’ equity in 2013. Mirr’s liabilities increased to P120,000 by
December 31, 2013. On Mirr’s December 31, 2013 statement of financial position, total assets should be reported at
A. P885,000 B. P882,000 C. P878,000 D. P875,000
5. The controller for Goofy Company is attempting to determine the amount of cash to be reported on the December 31,
2013 statement of financial position. The following items are included in the Cash in Bank items of Goofy Company:
BDO special checking account used for payroll payments P 500,000
BPI special account used as a bond sinking fund 400,000
MBTC checking account (per ledger), checks of P80,000 are outstanding as of December 31,
2013 300,000
DBP, checking account (per bank statement) of P50,000 are outstanding as of December 31,
2013 600,000
EWB, includes a P100,000 compensating balance restricted as to withdrawal 1,000,000
PNB, includes a P200,000 compensating balance 1,000,000
Checking accounts in LBP
CA-000-111111 P 600,000
CA-000-111112 (250,000) 350,000
EBC, (bank under liquidation), realizable value was P0.75 of every P1 deposit 200,000
ILM, current account (50,000)
1-year Treasury note, maturity date January 31, 2014 600,000
1-year Treasury note, maturity date on January 31, 2014 (acquired November 28, 2013) 800,000
90-day, Central Bank Treasury bills 450,000
ABC, US-dollar denominated deposit (opened in October 17); exchange rate on October 17 was
P40; average (October 17 – December 31) was P50; December 31 was P45 $20,000
The amount to be reported as Cash and Cash Equivalents in Goofy Company’s December 31, 2013 balance sheet is
A. 5,450,000 B. 5,470,000 C. 5,750,000 D. 5,850,000

6. The information that follows is available from the general ledger and the bank statement of George Company
 Cash in bank, October 31, P939,000
 Deposit in transit, October 31, 35,000; Outstanding checks, October 31, 68,000
 Credit memo, October 60,000; Debit memo, October 20,000
 Included in the October bank receipts was a deposit of George Company for P25,000, erroneously recorded by the
bank to Georgia Company’s account
  Included in the October bank disbursements was a check issued by Georgy Company for P10,000, erroneously
recorded by the bank in George Company’s account
 Included in the book receipts was a deposit for P45,000 which was recorded as P54,000. No correction was made yet
by George Company
 Included in the book disbursements was a check issued by George Company for P42,000 was recorded as P24,000
The correct cash balance as of October 31, 2013 is
A. 970,000 B. 927,000 C. 952,000 D. 945,000
7. On January 1, 2013 Dolly Company reported Accounts Receivable of P1,300,000, net of allowance for bad debts of
P126,000. During the year, Sales (all on credit) amounted to P4,400,000. Collections from customers including recoveries
of P24,000 totaled P4,550,000 net of discounts amounting to P147,000. Likewise, P9,000 of receivables were written-off.
Dolly Company uses the aging method in determining bad debts, although Dolly Company provides interim bad debts
provision equal to 0.5% of net credit sales.
The following table shows the corresponding bad debt percentage of Dolly Company’s accounts receivable:
A/R Balance Age Percentage of
uncollectibility
45% 45 days or less 5%
30% 46 – 90 days 10%
25% over 90 days 15%

The required allowance for bad debts at December 31, 2013

A. 91,620 B. 102,960 C. 105,120 D. 116,190

8. On July 1, 2012, Ritchie Company sold a parcel of land to Maxine Company for P400,000 under an installment sale
contract. Maxine Company made a P120,000 cash down payment on July 1, 2012 and signed a four-year 10% note for
the P 280,000 balance. The equal annual payments of principal and interest on the note shall be P88,332 payable on
July 1 of each year from 2013 through 2016.
The fair value of the land at the date of sale was P400,000. The cost of the land to Ritchie Company was P300,000.
Collection of the remaining note installments is reasonably assured.
Interest income for 2013
A. 21,967 B. 24,983 C. 10,983 D. 28,000

9. On July 1, 2013 Gringots Bank granted a 5-year, P4,000,000 loan to a borrower. The interest rate on the loan is 10%. The
direct origination cost incurred was P61,500 while the origination fee collected from the borrowers was P350,000
The effective rate of the loan after considering the direct origination costs and origination fees is 12%.
The interest income for the period ending December 31, 2013 is
A. 200,000 B. 222,690 C. 400,000 D. 445,380

10. Scarbrough Corp. factored P600,000 of accounts receivable to Duff Corp. on October 1, 2013. Control was surrendered
by Scarbrough. Duff accepted the receivables subject to recourse for nonpayment. Duff assessed a fee of 3% and retains
a holdback equal to 5% of the accounts receivable. In addition, Duff charged 15% interest computed on a weighted-
average time to maturity of the receivables of fifty-four days. The fair value of the recourse obligation is P9,000. Scarbrough
will receive and record cash of
A. P529,685 B. P538,685 C. P547,685 D. P556,685

11. Synthia Corp. factored P750,000 of accounts receivable to Thomas Company on December 3, 2013. Control was
surrendered by Synthia. Thomas accepted the receivables subject to recourse for nonpayment. Thomas assessed a fee
of 2% and retains a holdback equal to 4% of the accounts receivable. In addition, Thomas charged 12% interest
computed on a weighted-average time to maturity of the receivables of fifty-one days. The fair value of the recourse
obligation is P15,000. Assuming all receivables are collected, Synthia’s cost of factoring the receivables would be
A. P12,575 B. P15,000 C. P27,575 D. P42,575

12. Herc Co.’s inventory at December 31, 2013, was 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 point from a vendor on December 30, 2013, was received and
recorded on January 5, 2014.
 Goods in the shipping area were excluded from inventory although shipment was not made until January 4, 2014.
The goods, billed to the customer FOB shipping point on December 30, 2013, had a cost of P120,000.
What amount should December 31, 2013 A. P1,500,000 D. P1,710,000
Herc report as statement of B. P1,590,000
inventory in its financial position? C. P1,620,000

13. Lewis Company’s usual sales terms are net sixty days, FOB shipping point. Sales, net of returns and allowances, totalled
P2,300,000 for the year ended December 31, 2013, before year-end adjustments. Additional data are as follows:
  On December 27, 2013, Lewis authorized a customer to return, for full credit, goods shipped and billed at P50,000 on
December 15, 2013. The returned goods were received by Lewis on January 4, 2014, and a P50,000 credit memo was
issued and recorded on the same date.
 Goods with an invoice amount of P80,000 were billed and recorded on January 3, 2014. The goods were shipped on
December 30, 2013.
 Goods with an invoice amount of P100,000 were billed and recorded on December 30, 2013. The goods were shipped
on January 3, 2014.
Lewis’ adjusted net sales for 2013 should be
A. P2,330,000 B. P2,280,000 C. P2,250,000 D. P2,230,000

14. Super Company had the following information in relation to its inventory accounts in 2013
Increase in Raw materials: P 14,000
Increase in Work in process: P 24,000
Decrease in Finished goods: P 33,500

Likewise the following costs & expenses were incurred in 2013:

Raw materials purchased P 150,000
Direct labor cost 60,000
Indirect factory labor 30,000
Taxes and depreciation on factory building 10,000
Taxes and depreciation on sales room and office 7,500
Freight-out 3,000
Freight-in 4,000
Sales salaries 20,000
Office salaries 12,000
Utilities (60% applicable to factory, 20% to sales room, and 20% to office) 25,000

Total manufacturing cost is

A. P283,000 B. P255,000 C. P251,000 D. P240,000

15. On February 20, 2013, a flood completely destroyed the goods in process inventory and half the raw materials inventory
of the Climb Company. There was no damage to the finished goods inventory. A physical inventory taken after the flood
indicated the following values:
Raw materials P35,000 Finished goods P 75,000
A review of the accounting records indicated the following:
Inventories, December 31, 2013
Raw materials P 65,000 Raw materials purchases P 20,000
Goods in process80,000 Direct labor cost 30,000
Finished goods 72,000 Manufacturing overhead cost 15,000
Sales (to February 20)40,000 Gross profit rate (on sales) 40%
The value of the inventory destroyed by flood is
A. 113,000 B. 148,000 C. 156,000 D. 183,000

16. On the night of September 30, 2013, a fire destroyed most of the merchandise inventory of AB Company. All goods were
completely destroyed except for partial damaged goods that normally sell for P100,000 and that had an estimated net
realizable value of P 25,000 and undamaged goods that normally sell for P 60,000. The following data are available:
Inventory, January 1 660,000
Net purchases, January 1 through September 30 4,240,000
Net sales, January 1 through September 30 5,600,000

Total 2012 2011 2010

Net sales 9,000,000 5,000,000 3,000,000 1,000,000
Cost of sales 6,750,000 3,840,000 2,200,000 710,000
Gross income 2,250,000 1,160,000 800,000 290,000

What is the estimated amount of fire loss on September 30, 2013?

A. 700,000 B. 615,000 C. 630,000 D. 580,000

17. The records of Polly Company show the following for the current year:
Cost Retail
Beginning inventory P120, 000 P180, 000
Purchases 320, 000 580, 000
Freight – In 40, 000 -
Purchase returns 10, 000 15,300
Purchase discounts and allowances 4, 000 -
 Departmental transfers in 40, 000 43,400
Departmental transfers out 20, 000 31,250
Additional mark-up 203,150
Mark-up cancellation 150, 000
Markdowns 250, 000
Markdown cancellation 199,375
Sales 600, 000
Sales discounts 30, 000
Sales returns 40, 000
Employee discounts 20, 000
Shrinkage, Spoilage 30, 000
Shoplifting losses 10, 000
The estimated cost of sales, under the FIFO retail inventory method is
A. P 227,955 B. P 346,625 C. P 397,955 D. P 440,000

18. Moore Company carries product A in inventory on December 3, 2013, at its unit cost of P7.50. Because of a sharp decline
in demand for the product, the selling price was reduced to P8.00 per unit. Moore’s normal profit margin on product A is
P1.60, disposal costs are P1.00 per unit, and the replacement cost is P5.30. Under the rule of lower cost and net realizable,
Moore’s December 31, 2013, inventory of product A should be valued at a unit cost of
A. P5.30 B. P5.40 C. P7.00 D. P7.50

Use the following information for numbers 29 - 32

Pumba Company has a herd of 8, 2 - year old animals as of January 1, 2013. On July 1, 2013 one animal was born and
one animal (age 2.5 years) was purchased for P18,500. No animals were sold or disposed during the year.
Per unit fair values less cost to sell were as follows:
January 1, 2013 December 31, 2013
2 - year old animal P 16,500 New born animal P 8,300
0.5 - year old animal 8,700
July 1, 2013 2 - year old animal 19,500
New born animal P 8,000 2.5 - year old 21,900
animal
2.5 year old animal 20,500 3 - year old animal 26,700

19. The amount reported under biological assets in the December 31, 2013 statement of financial position
A. 158,500 B. 186,200 C. 249,000 D. 267,000

20. The total effect to net income included in the 2013 income statement as a result of the above-mentioned transactions
A. 88,500 B. 90,500 C. 96,500 D. 98,500

21. The gain from change in fair value due to price change for 2013 is
A. 25,700 B. 27,700 C. 33,700 D. 35,700

22. The gain from change in fair value due to physical change
A. 72,800 B. 70,800 C. 64,800 D. 62,800

Use the following information for numbers 33 - 36

The following transactions occurred in December 2013:
 December 2, 2013: Texans Company acquired 10,000 Colts Company ordinary shares for a total consideration of
P38,000. This amount includes P1,000 for legal fees and taxes. Colt Company has 100,000 ordinary shares outstanding.
Texans Company’s principal intention with the Colts Company shares is to sell it in the near term.
 On December 8, 2013, Texans Company acquired 10,000 Patriots Company shares for a total consideration of
P52,000. This amount includes P1,500 for commissions, legal fees and taxes. Patriots Company has 100,000 ordinary
shares outstanding. Cowboys Company classified the security investment as financial asset at fair value through
other comprehensive income.

On December 31, 2013 Colts Company shares were quoted at P3.59. The estimated disposal cost was P500. Patriots
Company shares were quoted at P5.00. The estimated disposal cost was P1,200

In January 6, 2014 Texans Company sold all of its Colts Company shares for P37,500. On September 11, 2014 Texans
Company sold half of its investment in Patriots Company for P28,000. On December 31, 2014 the fair value of the
remaining investment in Patriots Company was P24,000

Under IFRS 9 and assuming Texans Company classified its investments in Colts Company as subsequently measured at FV
through P/L while designated its investment in Patriots Company as subsequently measured at FV through OCI.
23. The gain or loss in the P/L section in 2013 is
A. 1,100 B. 1,600 C. 2,100 D. 3,100

24. The loss in the OCI section in 2013 is

A. 500 B. 1,700 C. 2,000 D. 3,200

25. The gain in the P/L section in 2014 is

A. 4,600 B. 3,600 C. 2,500 D. 1,600

26. The net gain(loss) in the OCI section in 2014 is

A. 0 B. 1,000 C. (1,000) D. (2,000)

Use the following information for numbers 37 - 40

On January 1, 2015, Bark Company acquired a 30% interest in Chandler Company by paying P643,500. Chandler
Company has 1,000,000, P1 par value ordinary shares, as well as, 25,000, 8% P20 par value cumulative preference shares.
Chandler Company’s net assets at the time of the acquisition was P1,955,000.

The carrying amount of Chandler Company’s assets approximates its fair values except for its inventory, a piece of land
in Mactan and a unit of equipment. The inventory and land were understated by P150,000 and P300,000 while the
equipment was overstated by P200,000. The equipment was depreciated using straight-line method with a remaining
useful life of 4 years

In 2015, Chandler Company reported net income of P700,000 and declared dividends of P660,000 to its ordinary and
preference shareholders (no dividends were in arrears). All items of inventory at the beginning of 2015 were completely
sold by yearend. 30% of the land in Mactan was sold by Chandler Company and resulted in a loss of P120,000.

In 2016, Chandler Company reported an operating loss of P946,750. The remaining portion of the land was likewise sold
at yearend. No dividends were declared.

In 2017, Chandler Company reported an operating loss of P1,020,450.

In 2018 as the trade embargo on five of its trade routes has finally been lifted it reported a net income of P290,000
27. Investment income to be reported in 2015
A. 141,000 B. 153,000 C. 159,000 D. 171,000

28. Investment in associate – Chandler Company as of December 31, 2016

A. 254,475 B. 272,475 C. 281,475 D. 296,025

29. The amount of the investment loss for 2017 that was not reported in the 2017 financial statements in accordance with the
application of IAS 28 is
A. 21,660 B. 30,660 C. 36,660 D. 48,660

30. Investment income to be reported in 2018

A. 41,340 B. 59,340 C. 66,340 D. 68,340

Use the following information for numbers 41 - 43

On January 1, 2013, Creative Company purchased MLR Company’s 10%, 10-year P3,000,000 face value bonds which
pays interest every December 31. Creative Company’s total investment cost which includes commissions and taxes of
P84,555 would give Creative Company a yield rate of 12%. The securities were classified as FVTOCI.

The fair value of the debt instruments at December 31, 2013, 2014 and 2015 were P2,697,425, P2,740,466 and P2,794,954
respectively

On December 31, 2016, Creative Company sold the debt instruments for P2,890,000.

Adjusted Interest Interest Discount Adjusted

cost income received amortization cost
2,660,987
January 1, 2013 2,660,987 300,000 319,318 19,318 2,680,305
January 1, 2014 2,680,305 300,000 321,637 21,637 2,701,942
January 1, 2015 2,701,942 300,000 324,233 24,233 2,726,175
January 1, 2016 2,726,175 300,000 327,141 27,141 2,753,316
 January 1, 2017 2,753,316 300,000 330,398 30,398 2,783,714

31. The net unrealized gain/loss reported in the equity section of Creative Company’s December 31, 2013 statement of
financial position is
A. 4,517 loss B. 28,750 loss C. 17,120 gain D. 36,438 gain

32. The unrealized gain included under other comprehensive income in Creative Company’s 2015 statement of
comprehensive income is
A. 24,090 B. 30,255 C. 30,398 D. 54,488

33. The gain on the sale of the debt securities in 2016 is

A. 136,684 B. 106,286 C. 95,046 D. 72,240

34. Cardinals Company purchased a 2,000,000 life insurance policy for its chief executive officer. The policy year and
Cardinals Company’s accounting period coincide. Additional date are available for the year ended December 31, 2013
Cash surrender value, 01/01/13 50,000
Cash surrender value, 12/31/13 58,500
Annual advance premium paid on 01/01/13 30,000
Dividend received 07/01/13 2,000
Cardinals Company is the beneficiary under the life insurance policy
The amount reported as insurance expense in Cardinals Company’s 2013 income statement
A. 30,000 B. 28,000 C. 21,500 D. 19,500

35. Panthers Company insured the life of its chief financial officer for P5,000,000, the company being the beneficiary of the
life insurance policy. Annual premium was P100,000 wherein the policy date was January 1, 2010. Additional information
regarding the policy’s cash surrender values are as follows:
December 31, 2012 P30,000; December 31, 2013 P38,000
Panthers Company uses the calendar year as its fiscal period. On October 1, 2013 an unfortunate accident took the life
of Panthers Company’s chief financial officer. The policy was eventually settled by December 31, 2013
The gain arising from the settlement of the policy to be included in the 2013 comprehensive income statement is
A. 4,919,000 B. 4,939,000 C. 4,945,000 D. 4,969,000

36. On January 1, 2012 Broncos Company adopted a plan to accumulate a fund for a new warehouse building. The
warehouse would be constructed in July 1, 2017 at an estimated cost of P7,500,000. Broncos Company plans to make 5
annual deposits in the fund which will earn interest at 8% compounded annually starting on July 1, 2012.
The following factors at 10% were provided as follows:
Present value of P1 at 10% for five periods 0.621
Present value of an ordinary annuity of P1 @ 10% for five periods 3.791
Present value of an annuity of P1 in advance @ 10% for five periods 4.170
Future value of an ordinary annuity of P1 10% for five periods 6.105
Future value of an annuity of P1 in advance @ 10% for five periods 6.716
The annual deposit to the fund is
A. 1,116,736 B. 1,228,501 C. 1,798,561 D. 1,978370

37. The following items were being considered by Yellow Company in determining the amount to be classified under
Investment Property in accordance with IAS 40:
Land held for long-term capital appreciation 1,000,000
Land held for a currently undetermined future use 1,200,000
Land intended for sale in the ordinary course of business 1,500,000
Building leased out to Orange Company under an operating lease 900,000
Building leased out to Pink Company under a finance lease 1,400,000
Building held under a finance-lease and currently leased out under an operating lease 1,500,000
Building (currently vacant) but held to be leased out under an operating lease 1,000,000
The amount reported as Investment Property by Yellow Company in its consolidated financial statement is
A. 5,600,000 B. 4,600,000 C. 4,100,000 D. 3,100,000

38. The following items were being considered by Green Company in determining the amount to be classified under
Investment Property in accordance with IAS 40:
Building held under an operating lease (leasehold interest) and currently leased out
under an operating lease (Green Company intends to report the property interest at
fair value) 400,000
 Building under construction for future use as an investment property 600,000
Building occupied by (leased to) employees (rentals paid are below market rates) 300,000
Building being constructed in behalf of Blue Company 450,000
Building owned by Green Company leased to Red Company (a wholly owned
subsidiary) 350,000
Machinery leased out by Green to an unrelated company under an operating lease 100,000
The amount reported as Investment Property by Green Company in its consolidated financial statement is
A. 1,450,000 B. 1,350,000 C. 1,300,000 D. 1,000,000

39. On July 1, 2011 Maroon Company transferred a property classified as inventory to investment property (commencement
of an operating lease to another entity). The carrying amount of the property before the change in use was P2,400,000.

The corresponding fair value of the property at the time of transfer was P2,900,000.

The amount included in profit or loss as a result of the transfer under the cost model and fair value model are
Cost model Fair value model
A. 0 0
B. 0 500,000
C. 500,000 0
D. 500,000 500,000

Use the following information for numbers 40 - 42

On September 30, 2011, Jeep Company acquired a smelting machine for P270,000 paying a down payment of P90,000
and the balance to be paid in two equal annual installments on September 30, 2012 and September 30, 2013. There
was no stated interest provided in the note, however, an 8% interest rate is considered to be appropriate for a note of
this type. The PVF for an ordinary annuity of P1 @ 8% for 2 periods is 1.78. Additional costs for freight P5,000; installation
and testing for P10,000.
Jeep Company uses the straight-line method of depreciation. The smelting machine’s expected useful life is 5 years
with a salvage value of P20,000.
On January 1, 2014, it was determined that the smelting machine would be useful for at least 2 more years from this
date. The expected salvage value was reduced to P10,000.
40. The amount of depreciation expense to be included in Jeep Company’s 2011 income statement is
A. 12,260 B. 13,260 C. 49,040 D. 53,040

41. The amount of adjustment to the opening balance of retained earnings account in 2014 as a result of the change is
A. 0 B. 19,539 C. 21,060 D. 30,060

42. The amount of depreciation expense to be included in Jeep Company’s 2014 income statement is
A. 57,694 B. 60,047 C. 72,430 D. 77,430

Use the following information for numbers 43 -46

On October 1, 2011, Deed Company acquired land and building for a total consideration of P1,000,000. The fair value of
the land and building were P800,000 and P400,000 respectively. Immediately after acquisition, the building was
demolished at a cost of P25,000 of which P5,000 was recovered as salvage proceeds. Leveling and grading costs of
P115,000, as well as excavation costs of P110,000 were incurred during the last quarter of 2011.
On January 1, 2012, Deed Company borrowed P2,000,000 at 10% from JL Financing for its factory building construction.
Construction started immediately and was completed at December 31, 2012. Income from the temporary placement
of the construction loan amounted to P30,000.
The following expenditures for the building construction were as follows:
January 1, 2012 P 2,500,000
April 1, 2012 2,000,000
July 1, 2012 1,000,000
October 1, 2012 600,000
December 31, 2012 200,000
Total 6,300,000
Deed Company’s other borrowing aside from the construction loan was a 9%, P6,500,000 3-year loan maturing on
December 31, 2014.
The building was to be depreciated using the sum-of-the-years’ digits method. Expected useful life and salvage value
was 10 years and P54,950 respectively.
At the beginning of 2018, Deed Company decided to change its depreciation method to the straight-line method. There
were no changes in the expected life or on the estimated salvage value of the building.

43. The initial cost capitalized to the land account was

A. 781,666 B. 796,666 C. 935,000 D. 1,135,000
44. The amount of borrowing cost capitalized is
A. 378,500 B. 462,250 C. 420,200 D. 424,700

45. Depreciation expense reported in the 2013 income statement is

A. 1,235,500 B. 1,236,309 C. 1,229,500 D. 1,219,500

46. Depreciation expense reported in the 2018 income statement is

A. 370,650 B. 382,850 C. 363,850 D. 394,850

47. JM Company is contemplating on the appropriate depreciation pattern to apply on one of its manufacturing equipment.
Year Straight-line Sum-of-the-Years’ digit Double-declining balance
1 74,400 124,000 160,000
2 74,400 99,200 96,000
3 74,400 74,400 57,600
4 74,400 49,600 34,560
5 74,400 24,800 23,840
The cost of the machine is
A. 400,000 B. 380,000 C. 372,000 D. 360,000

Use the following information for numbers 48 - 50

Donnie Company bought a machine for P900,000 on January 1, 2012. The machine’s useful life is 10 years; estimated
residual value P0; and is depreciated using the straight-line method.

On January 1, 2014, Donnie Company adopted the revalued model in reporting its machinery and equipment. The
machine which was acquired in 2012 was determined to have a sound value of 960,000. Further analysis indicates that
the machine’s remaining useful life was 6 years from that date

At the end of 2016, Donnie Company conducted a recoverability test after receiving information that there was a
reduction in the performance of the machine as reported by the operations department. Analysis of the market for a
similar machine revealed to Donnie Company that the net selling price was at P270,000. The value in use of the machine
was determined at P288,000.
48. The revaluation surplus account balance at December 31, 2014
A. 240,000 B. 210,000 C. 200,000 D. 180,000

49. Impairment loss included in the December 31, 2016 income statement is
A. 210,000 B. 192,000 C. 90,000 D. 72,000

50. In the event that the machine’s net recoverable amount exceeds the carrying amount at December 31, 2018, what is
the maximum amount that Donnie Company may include as gain and reported in the income statement
A. 24,000 B. 30,000 C. 64,000 D. 70,000

51. In January 2013 Bell Company exchanged an old machine, with a book value of P39,000 and a fair value of P35,000, and
paid P10,000 cash for a similar used machine having a list price of P50,000. The transaction has commercial substance.
At what amount should the machine acquired in the exchange be recorded on the books of Bell?
A. P45,000 B. P46,000 C. P49,000 D. P50,000

52. Howard Co. incurred research and development costs in 2013 as follows:
Materials used in research and development projects P 400,000
Equipment acquired that will have alternate future uses in
future research and development projects 2,000,000
Depreciation for 2013 on above equipment 500,000
Personnel costs of persons involved in research and
development projects 1,000,000
Consulting fees paid to outsiders for research and development
projects 100,000
Indirect costs reasonably allocable to research and
development projects 200,000
P4,200,000
The amount of research and development costs charged to Howard’s 2013 income statement should be
A. P1,500,000 B. P1,700,000 C. P2,200,000 D. P3,500,000

Use the following information for numbers 53 - 55

 Yin-Yang Company is involved in the exploration for and extraction of mineral resources. The Company’s accounting
policy for recognition purpose for these types of activities is the “successful effort” method. On January 1, 2012 Yin-Yang
Company acquired two quarrying rights. A schedule of the expenditures made with respect to the quarrying sites is
provided as follows:
Site O Site X
Quarrying rights 2,300,000 1,000,000
Topographical studies 1,200,000 200,000
Exploratory drilling 1,100,000 300,000
Trenching and sampling 1,600,000 400,000
Development costs (road construction to access 1,400,000 100,000
site)
Depreciation of drilling rigs used for exploration 300,000 120,000

At the end of 2012 Yin-Yang Company had decided to continue exploration and extraction activities in site O (technically
and commercial viable). Unfortunately, further exploratory and development plans on site X would be abandoned (not
technically feasible and viable)
On January 1, 2013 Yin-Yang started extracting the mineral reserves from site O. It was expected that a total of 10,000,000
tons of mineral ore would be extracted from the site and it would be totally extracted within 8 years.
Yin-Yang Company acquired an extraction equipment for P600,000. The equipment which Yin-Yang Company intends
to use in another mining site was estimated to have a useful life of 12 years with salvage value of P5,000.
Fixed installations were likewise completed at the start of 2013. The total cost incurred was P800,000. The installations
expected useful life is 10 years with no expected salvage value. Yin-Yang Company uses the straight-line method as its
depreciation policy for its long-lived assets.
Total tons extracted in 2013 and 2014 were 1,200,000 and 1,600,000 respectively.
53. The exploration and evaluation assets to be reported in the 2012 statement of financial position is
A. 6,500,000 B. 7,900,000 C. 8,520,000 D. 8,620,000

54. Depletion for 2013

A. 780,000 B. 948,000 C. 876,000 D. 1,044,000

55. Depreciation for 2013

A. 145,583 B. 129,583 C. 167,400 D. 174,375

56. Wendy Company provided the following schedule for the current period
Wasting asset 40,000,000
Accumulated depletion 10,000,000
Capital liquidated 7,500,000
Retained earnings 5,000,000
Depletion based on 50,000 units extracted at P50 per unit 2,500,000
Inventory (10,000 units) 1,000,000
The maximum dividend that can be declared by Wendy Company at the end of the current period is
A. 5,000,000 B. 15,000,000 C. 14,500,000 D. 7,000,000

Use the following information for numbers 57 - 59

MRC Company has determined that its fine china division is a cash-generating unit. The carrying amounts of the assets
at December 31, 2013 are as follows:

Factory P 476,000
Land 204,000
Equipment 170,000
Goodwill 50,000
The value in use of the division was 710,000. The fair value less cost to sell the land is P180,000
57. The initial amount of the impairment loss initially to be allocated to the land account is
A. P31,733 B. P33,600 C. P43,067 D. P45,600
58. Carrying amount of the Factory account after the initial & subsequent allocation of the impairment loss
A. P388,000 B. P388,720 C. P390,526 D. P397,600
59. The total amount of impairment loss absorbed by the Equipment account is
A. P28,000 B. P30,526 C. P33,600 D. P35,104