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1. Forester Company provided the following assets in a forest plantation and farm:
3. During the current year Ewing Company exchanged an old packing machine which cost 1,200,000 and
was 50% depreciated for another used machine and paid cash difference of 160,000.
The fair value of the old packing machine was determined to be 700,000.
4. At the beginning of current year Sagada Company received a grant of 25,000,000 from the American
government in order to defray safety and environment cost within the area where the entity is located.
The safety and environment cost are expected to be incurred over four years respectively 2,000,000,
4,000,000, 6,000,000 and 8,000,000.
What amount of grant income should be recognized for the current year?
a. 25,000,000
b. 2,000,000
c. 2,500,000
d. 6,250,000
The entity razed an old building on the property to make room for the construction of new building and
sold the materials salvage from the demolition.
There was a small office building on the plot with fair value of 700,000 which the entity continue to use
with some modification and renovation.
The entity decided to construct a factory building and incurred the following costs:
8. On January 1, 2018 Hamlet Company borrowed 6,000,000 at an annual interest rate of 10% to finance
specifically the cost of building an electricity generating plant Construction commenced on January 1,
2018 with a cost 6,000,000.
Not all the cash borrowed was used immediately so interest income of 80,000 was generated by
temporarily investing some of the borrowed fund prior to use. The project was completed on November
30, 2018.
The machinery has a useful life of 10 years and residual value of 50,000. The entity used straight line
depreciation.
10. Frey Company purchased a machine for 4,500,000 on January 1, 2018. The machinery has an
estimated useful life of four years and a residual value of 500,000. The machine is being depreciated
using the sum of the year digits method.
11. Turtle Company purchased equipment on January 1, 2016 for 5,000,000. The equipment had an
estimated 5 year service life.
The depreciation policy for 5 year assets is to use the 200% double declining balance method for the 1 st
two years and then switch the straight line depreciation method.
On December 31, 2018 what amount should be reported as accumulated depreciation for the
equipment?
a. 3,000,000
b. 3,800,000
c. 3,920,000
d. 4,200,000
12. On January 1, 2018 Mankayan Company purchased land with valuable natural ore deposits for
10,000,000. The residual value of the land was 2,000,000. At the time of purchased a geological survey
estimated a recoverable output of 4,000,000 tons.
Early in 201 roads were constructed on the land to aid in the extraction and transportation of the mined
ore at a cost of 1,600,000. In 2018 500,000 tons were mined and sold.
A new survey at the end of 2019 estimated 4,200,000 tons of ore available for mining in 2019 800,000
tons were mined and sold.
13. On January 1, 2013 Raven Company acquired a building at cost of 5,000,000. The building has been
depreciated on the basis of a 20 year life.
On January 1, 2018 an appraisal of the building showed replacement cost at 8,000,000 with no change in
useful life.
1. Before income tax what amount should be credited to revaluation surplus on January 1, 2018?
a. 3,000,000
b. 2,250,000
c. 4,250,000
d. 6,000,000
3. What is the revaluation surplus that should be reported in the December 31, 2018 statement of
financial position?
a. 2,100,000
b. 2,250,000
c. 1,850,000
d. 2,800,000
14. Jacqueline Company had an equipment with carrying amount of 4,500,000 at year end:
15. Bronze Company operates a production line which is treated as a cash generating unit for impairment
review purposes. At year end the carrying amounts of the noncurrent assets are as follows:
Goodwill 1,100,000
Machinery 2,200,000
The value in use of the production line is estimated at 2,700,000 at this time
16. Lobo Company reported an impairment loss of 2,000,000 in 2017. This loss was related to an item of
property plant and equipment which was acquired on January 1, 2016 with cost of 10,000,000 useful life
of 10 years and no residual value. The straight line method is used in recording depreciation.
On December 31, 2017 the entity reported this asset at 6,000,000 which is the fair value on such date.
On December 31, 2018 the entity determined that the fair value of the impaired asset had increased to
7,500,000.
1. What is the carrying amount of the impaired asset on December 31, 2018?
a. 5,250,000
b. 6,000,000
c. 5,400,000
d. 8,000,000
2. What is the carrying amount of the asset on December 31, 2018 on the basis that it was not impaired?
a. 8,000,000
b. 7,000,000
c. 9,000,000
d. 6,000,000
3. What amount gain on reversal of impairment should be reported in the income statement for 2018?
a. 2,250,000
b. 1,750,000
c. 1,500,000
d. 0
Franchise 1,000,000
Computer software 1,500,000
Deferred charges 100,000
Patent 2,500,000
Customer list purchased 500,000
Copyright 700,000
Deposit with advertising agency to promote
Goodwill 400,000
Bond sinking fund 1,300,000
Goodwill 4,000,000
Trademark 900,000
Research and development cost 2,000,000
Mayer Company assessment o the fair value it obtained when it purchased Tara Company is as follows:
Cash 1,000,000
Inventory 500,000
In-process research and development 5,000,000
Assembled workforce 1,200,000
19. Star Company leased a building to be used as product showroom. The ten year non-renewable lease
will expire on December 31 2023.
In January 2018 the entity redecorated the showroom and made leasehold improvement of 480,000.
The estimated useful life of the improvement is 8 years. The straight line method of depreciation is used.
20. Jess Company incurred the following research and development costs during the current year:
21. During the current year Pitt Company incurred the following costs to develop and produce a
computer software product: