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Loan From BDO Bank

The document contains 12 multiple choice questions related to accounting for property, plant and equipment. The questions cover topics such as calculating borrowing costs to be capitalized, depreciation of assets, asset disposals and exchanges, and determining which costs should be included in the capitalized cost of PP&E.

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91 views2 pages

Loan From BDO Bank

The document contains 12 multiple choice questions related to accounting for property, plant and equipment. The questions cover topics such as calculating borrowing costs to be capitalized, depreciation of assets, asset disposals and exchanges, and determining which costs should be included in the capitalized cost of PP&E.

Uploaded by

elsana philip
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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 Loan from BDO Bank; P 1 million at 6.

6% per annum; and


 Loan from Metro Bank; P 3 million at 7% per annum

The amount of borrowing costs to be capitalized in relation to the packaging plant is


a. Nil c. P 81,000
b. P 121,500 d. P 91,125

8. On January 1, 2016 Central Company purchased a plating machine with a 5-year useful life for P
135,000. Central received a grant of P 13,500 towards the capital cost. Company policy is to treat the
GRANT as a reduction in the cost of the asset. What should be the depreciation expense in respect of
this machine for the year ended December 31, 2016, assuming that depreciation is calculated on a
straight-line basis?
a. P 27,000 c. P 21,600
b. P 24,300 d. P 19,440

9. On March 31, 2017, Nathaniel Company traded in an old machine having a carrying amount of P
168,000, and paid a cash difference of P 60,000 for a new machine having a total cash price of P
205,000. The cash flows from the new machine are expected to be significantly different than the cash
flows from the old machine. On March 31, 2017, what amount of loss should Nathaniel recognize on this
exchange?
a. P 60,000 c. P 23,000
b. P 37,000 d. P 0

10. Utah 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 Utah’s depreciable assets at
December 31, 2016 are as follows:
Acquisition year 2014
Cost P 110,000
Residual value 20,000
Accumulated depreciation 72,000
Estimated useful life 5 years

Using the same depreciation method as used in 2014, 2015, and 2016, how much depreciation expense
should Utah record in 2017 for this asset?
a. P 12,000 c. P 22,000
b. P 18,000 d. P 24,000

11. Green Company acquired new manufacturing equipment on January 1, 2016 on installment basis.
The deferred payment contract provides for a down payment of P 300,000 and an 8-year note for P
3,104,160. The note is to be paid in 8 equal annual installment payments of P 388,020, including 10%
interest. The payments are to be made on December 31 of each year beginning December 31, 2016. The
equipment has a cash price equivalent of P 2,370,000. Green’s financial year-end is December 31. The
amount of interest expense to be recognized in 2017 is
a. P 310,416 c. P 207,000
b. P 188,898 d. P 0

12. According to PAS 16, PPE, which of the following items should be capitalized into the cost of
property, plant and equipment?
I. Cost of excess materials resulting from a purchasing error.
II. Cost of testing whether the assets work correctly.

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