Cpa Review School of The Philippines Manila

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CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila
FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/ESCALA/SANTOS/DELA CRUZ

REVALUATION

1. An entity acquired a building on January 1, 2018 at a cost of P20,000,000. The building had a useful
life of 6 years and residual value of P2,000,000. The building was revalued on January 1, 2021 and
the revaluation revealed replacement cost of P30,000,000, residual value of P4,000,000 and revised
useful life of 8 years from the date of acquisition. The income tax rate is 25%.
1. What is the revaluation surplus on December 31, 2021?
a. 6,000,000
b. 3,600,000
c. 4,500,000
d. 7,500,000
2. What amount should be reported as depreciation for 2021?
a. 2,600,000
b. 3,400,000
c. 3,000,000
d. 1,400,000
2. On January 1, 2016, an entity purchased a new building at a cost of P6,000,000. Depreciation was
computed on the straight line basis at 4% per year. On January 1, 2021, the building had a fair value
of P8,000,000.
1. What amount should be recorded as depreciation for 2021?
a. 320,000
b. 400,000
c. 100,000
d. 240,000
2. What is the pretax revaluation surplus on December 31, 2021?
a. 3,072,000
b. 1,900,000
c. 3,040,000
d. 1,920,000
3. On January 1, 2021, an entity showed land with carrying amount of P10,000,000 and building with
cost of P60,000,000 and accumulated depreciation of P18,000,000. The land and building were
revalued on same date and revealed the fair value of land at P17,000,000 and the building at
P70,000,000. The original useful life of the building is 20 years and depreciation is computed on the
straight line.
1. What is the pretax revaluation surplus on January 1, 2021?
a. 35,000,000
b. 45,000,000
c. 28,000,000
d. 47,000,000
2. What is the pretax revaluation surplus on December 31, 2021?
a. 32,500,000
b. 35,000,000
c. 28,000,000
d. 33,000,000
3. What amount should be reported as depreciation for 2021?
a. 5,000,000
b. 3,500,000
c. 4,500,000
d. 3,000,000

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4. On June 30, 2021, an entity reported the following information:


Equipment at cost 30,000,000
Accumulated depreciation 10,500,000
The equipment was measured using the cost model and depreciated on a straight line basis over
10-year period. On December 31, 2021, the management decided to change the basis of
measurement from the cost model to the revaluation model. The equipment was revalued at the fair
value of P27,000,000 with no change in useful life. The income tax rate is 25%.
1. What amount should be reported as depreciation for 2022?
a. 4,500,000
b. 2,700,000
c. 3,000,000
d. 1,500,000
2. What is the revaluation surplus on December 31, 2022?
a. 6,750.000
b. 9,000,000
c. 5,625,000
d. 7,500,000
5. An entity reported an impairment loss of P1,000,000 in 2018. This loss was related to an equipment
acquired on January 1, 2010 for P8,000,000 with no residual value. Straight line annual depreciation
was recorded at P320,000 until 2018. Depreciation for 2019 was computed based on the recoverable
amount on December 31, 2018. The entity decided to measure the asset using the revaluation model
on December 31, 2021. On such date, the asset had a fair value of P6,600,000.
1. What amount was recognized as gain on reversal of impairment in 2021?
a. 812,500
b. 772,500
c. 700,000
d. 0
2. What amount was recognized as revaluation surplus on December 31, 2021?
a. 2,440,000
b. 2,480,000
c. 1,480,000
d. 1,400,000
6. During the current year, an entity sold a piece of equipment used in production. The equipment had
been accounted for using the revaluation model and details of the accounts on the date of sale are:
Sale price 5,000,000
Carrying amount of equipment 4,500,000
Revaluation surplus 1,000,000
Which statement is correct about recording the sale?
a. The gain that should be recorded in profit and loss is P1,500,000.
b. The gain that should be recorded in other comprehensive income is P500,000.
c. The gain that should be recorded in other comprehensive income is P1,500,000.
d. The gain that should be recorded in profit and loss is P500,000 and the P1,000,000 revaluation
surplus should be transferred to retained earnings.

END
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