Cash and Cash Equivalents: Answer: C

CASH AND CASH EQUIVALENTS
1. San Agustin Corporation’s cash account as of December 31, 2012 consists

the following information:
Balance of deposit in current account with City Bank P

1,300,000
Deposit in Transit 785,000
A customer’s check marked “DAIF”
50,250
A check drawn by the President of the Corporation
dated January 15, 2013
17,000
A check drawn by a supplier dated December 28, 2012 for
goods returned by the entity 10,800
A check dated May 31,2012 drawn by the Corporation
against the Siti Bank in payment of customs duties.
The check was returned since the importation did not
Materialize. This check was considered an outstanding
check in the reconciliation of the Siti Bank account
895,750
Petty Cash fund of which P7,000 is in currency; P3,600 in
form of employees’ I.O.U. s; and P1,400 is supported by
approved petty cash vouchers for expenses all dated
prior to closing of the books on December 31, 2012
12,000
Total 3,070,800
Overdraft with Siti Bank secured by a mortgage
on the inventories
( 410,000)
Balance per book
P2,660,800
The “Cash” account that will appear on the December 31, 2012 statement
of financial position of San Agustin Corporation has an amount of
a. 2,015,000
b. 2,450,000
c. 2,588,550
d. 2,660,800
Answer: C
Solution:
Current account with City Bank P
1,300,000
Current account with Piggy Bank (895,750-410,000)
485750
Deposit in Transit 785,000
Supplier's check for goods returned
10,800
Petty cash 7,000
Total
P2,588,550
2. The books of Love Company provided the following information with

respect to the cash and cash equivalents on December 31, 2010:
Isa Bank’s checking account balance

( 200,000)
Dos Bank’s checking account balance
4,650,000
Payroll account 700,000
VAT (Value added tax) account
150,000
Foreign bank account – unrestricted (in pesos)
1,800,000
Money order
310,000
Traveler’s check
90,000
Not-sufficient-fund check
150,000
Postdated check from employee
300,000
Petty cash fund (with expense receipts for P30,000)
50,000
Credit memo from a vendor for a purchase return
80,000
IOU from president
750,000
Treasury bonds
1,000,000
Postage stamps
50,000
The amount to be reported as unrestricted cash on December 31, 2015 is
a. 7,520,000
b. 7,720,000
c. 7,750,000
d. 7,800,000
Answer: B
Solution:
Dos Bank’s checking account balance
4,650,000
Payroll account
700,000
VAT account
150,000
Foreign bank account – unrestricted
1,800,000
Traveler’s check
90,000
Petty cash fund
20,000
Money order
310,000
Total unrestricted cash
7,720,000
3. ENCHRISTMAS Company has a petty cash ledger account balance of
P70,000 and has reported the following information in relation to its imprest
cash fund at 12/31/13:
Coins and currencies
45,000
Petty cash vouchers :
Medical supplies
1,500
IOU from the president
3,500
Check drawn payable to the order of
petty cash custodian, representing his salary
15,000
Gasoline for the delivery truck
3,000
Weekly repairs and maintenance 2,500
Check of an employee returned by bank
3,000
Funds for a surprise party 5,000
What amount of petty cash should be reported at December 31, 2013?

a. 50,500
b. 55,000
c. 60,000
d. 65,000
Answer: B
Solution:
Coins and currencies P45,000
Check drawn to the order of petty cash custodian
15,000
P55,00
4. An analysis at year-end showed the following details in Somewhere

Company ‘s reported cash and cash equivalents of P3,500,000 .
Deposit in Transit P
750,000
Cash in bank – BDOO checking account
1,200,000
Cash in bank – NortSouth Bank (overdraft)
( 50,000)
Undeposited NSF check received from customer,
Dated November 30 at the same year
15,000
Undeposited check from a customer, dated
January 15 on the next year
25,000
Cash in bank – BDOO (fund for payroll)
300,000
Cash in bank – BDOO (saving deposit)
300,000
Cash in bank – BDOO (money market, 60 days)
1,000,000
Cash in foreign bank - restricted
100,000
IOUs from employees
60,000
Sinking fund
450,000
Total
4,150,000
What proper amount should be reported as “cash” at year-end?
a. 3,550,000
b. 4,150,000
c. 3,350,000
d. 2,850,000
Answer: A
Solution:
Undeposited collection
750,000
Cash in bank – BDOO checking account
1,200,000
Cash in bank – BDOO (fund for payroll)
300,000
Cash in bank – BDOO (saving deposit)
300,000
Cash in bank – BDOO (money market, 60 days) `
1,000,000
Total 3,550,000
5. MasMaganda Co. had the following account balances as of December 31,

2014:
Cash in bank – current account

8,000,000
Cash in bank – made for sinking fund
5,555000
Cash on hand
500,000
Cash in bank – restricted account for plant expansion in 2018
1,500,000
Petty cash fund
50,000
Treasury bills
1,000,000
The petty cash fund included unreplenished December 2014 petty cash
expense voucher of P10,000 and employee IOU of P5,000. The cash on hand
included a P100,000 check payable to Ganda dated September 1, 2015. In
exchange for a guaranteed line of credit, the entity has agreed to maintain a
minimum balance of P200,000 in its unrestricted current bank account. The
sinking fund is set aside to settle a bond payable that is due on March 30,
2016. What total amount should be reported as “cash and cash equivalents”
on December 31, 2014?
a. 13,435,000
b. 14,435,000
c. 12,990,000
d. 14,990,000
Answer: D
Solution:
Current account
8,000,000
Sinking fund
5,555,000
Cash on hand (500,000-100,000)
400,000
Petty cash fund (50,000-15,000)
35,000
Treasury bills
1,000,000
Total cash and cash equivalents
14,990,000
6. In connection with an audit of Calocohan Corporation for the year ended
December 31, 2009, you gathered the following:
Current account - PNB (500,000)
Current account - Everfirst 3,000,000
Payroll account 500,000
Foreign bank account – restricted (in equivalent pesos)
1,000,000
Treasury bills, due 3/31/07 (purchased 12/31/06) 200,000
Treasury bills, due 1/31/07 (purchased 1/1/06) 300,000
Employee’s post dated check 4,000
IOU from controller’s sister 10,000
Credit memo from a vendor for a purchase return 20,000
Traveler’s check 50,000
Not-sufficient-funds check 15,000
Money order 30,000
Petty cash fund (P2,000 in currency and expense
receipts for P8,000) 10,000
Postage stamps 1,000
Based on the above information and the result of your audit, compute for the
cash and cash
equivalents that would be reported on the December 31, 2009 balance
sheet.
a. 3,782,000
b. 3,790,000
c. 3,698,000
d. 3,278,000
Answer: A
Solution:
Current account - Everfirst
P3,000,000
Payroll account
500,000
Traveler’s check
50,000
Money order
30,000
Petty cash fund (P4,000 in currency)
2,000
Treasury bills, due 3/31/07 (purchased 12/31/06)
200,000
Total
P3,782,000
7. Duterte Corp.reported that the cash account per ledger had a balance on
December 31, 2015 of P4,415,000 which consisted of the following:
Cash in Socio Bank, per bank statement
(with an outstanding check for P40,000) P
2,245,000
Petty cash fund
24,000
Undeposited checks, (including a customer check
for P70,000 that is postdated)
1,220,000
Bond sinking fund
850,000
Vouchers paid out of collections (not yet recorded)
43,000
IOUs signed by employees (from collections)
33,000
4,415,000
What amount should be reported as cash on December 31, 2015?

a. 3,419,000
b. 3,489,000
c. 3,379,000
d. 3,449,000
Answer: C
Solution:
Petty cash fund
24,000
Undeposited receipts (1,220,000-70,000)
1,150,000
Cash in Socio bank (2,245,000-40,000)
2,205,000
3,379,000
8. At December 31,Y3 , Akala Co. had the following balances in the accounts
it maintains at First State Bank:
First checking account P 155,000

Second checking account (80,000)
90-day certificate of deposit (due 3-1-Y4 ) 50,000
180-day certificate of deposit (due 4-15-Y4) 80,000
Money market account 25,000
If Akala classifies investments with original maturities of three months or less
as cash equivalents. In December 31, Y3 statement of financial position,
what amount should Akala report as cash and cash equivalents?
a. 200,000
b. 240,000
c. 250,000
d. 320,000
Answer: B
Solution:
First checking account P 155,000
Second checking account (80,000)
75,000
Money market account 25,000
90-day certificate of deposit (due 2-28-94) 50,000
Total Cash and Cash Equivalents P 240,000
9. At the beginning of 2010, the allowance account of RELAX Co. had a credit
balance of P18,000. RELAX ZIAlso accrues a bad debt expense during the
year at an amount equal to 3% of credit sales. During 2006, credit sales
totaled P480,000 and receivables of P14,000 were written off. The year-end
aging indicated that a P21,000 allowance for uncollectible accounts was
required. A journal entry adjusts the allowance for uncollectible accounts to
a desired amount based on an aging of accounts receivable. RELAX's bad
debt expense for 2010 would be
a. 21,000
b. 14,400
c. 11,000
d. 23,600
Answer: A
Solution:
Balance 18,000
Write off (14,000)
4,000
Squeeze 17,000
Ending P21,000
10. Silento Corporation established a petty cash fund on February 3 in order

to ensure internal control over its small expenditures. It has an amount of
P8,000. The following are the transactions affecting the petty cash fund for
the month of February, 2014:
 The following were paid by the petty cash custodian from February 3
through 25:
Freight on merchandise sold P 3,500
Freight on merchandise purchases 2,000
Office supplies purchased 800
IOUs from employees 1,200
 The employees paid their IOUs on February 19 as indicated above (the
advances were granted on February 10; the proceeds from such
collection were returned to the petty cash fund).
 On February 25, the fund was replenished
 Payments from petty cash fund from February 25 through February 28
are as follows:
Freight on merchandise sold P1,250
Transportation of messenger 200
Supplies expense 320
IOUs from employees 500
 A count of the fund on February 28 revealed bills and coins in the petty
cash amounting to P5,700.

How much is the cash shortage?
a. 100
b. 110
c. 120
d. 130
Answer: D
Solution:
Per count
Bills and coins P5,700
Paid petty cash vouchers
(1,250 + 200 + 320 + 500) 2,170
Total P7,870
Petty cash fund, imprest balance 8,000
Cash shortage P 130
BANK RECONCILIATION
1. CHILL Company collected the following information to prepare its
September bank reconciliation:
Deposits in transit P 790

Notes receivable with interest collected by bank 380
Bank service charges 80
Outstanding checks 1,800
NSF checks 100
Cash balance per books, September 30 7,500
The adjusted cash balance per books on September 30 is:

a. 7,700
b. 8,760
c. 5,660
d. 7,790
Answer: A
Solution:
Cash balance per books P7,500

Notes receivable with interest collected by bank 380
Bank service charges (80)
NSF checks (100)
Adjusted cash balance P7,700
2. The following information was taken from the SMILE Company cash budget
for the month of May:
Beginning cash balance P40,000

Cash disbursements
46,000
Cash receipts
27,000
SMILE Company has a policy of maintaining a minimum cash balance of

P37,000, the amount the company would have to borrow is:
a. 12,000
b. 18,000
c. 14,000
d. 16,000
Answer: D
Solution:
Beginning cash balance P40,000
Cash receipts 27,000
Cash disbursements (46,000)
21,000
Amount the company should borrow - Squeeze
16,000
Cash balance P37,000
3. ZIA's bank statement dated Dec 31, Y5 shows a balance of P24,594.72.

The company's cash records on the same date show a balance of
P23,196.79. Following additional information is available:
 A deposit of P400.00 made on Dec 31 does not appear on bank

statement.
 An NSF check of P850 was returned by the bank with the bank
statement.
 The bank charged P50 as service fee.
 Following checks issued by the company to its customers are still
outstanding:
No. 46 issued on P
Nov 29 320.00
No. 75 issued on
49.21
Dec 26
No. 78 issued on
275.00
Dec 29
No. 81 issued on
186.50
Dec 31
 The bank collected a note receivable on behalf of the company. Amount
received by the bank on the note was P550. This includes P50 interest
income. The bank charged a collection fee of P10.
 A deposit of P430 was incorrectly entered as P340 in the company's
cash records.
 Interest income earned on the company's average cash balance at
bank was P1,237.22.
What is the Adjusted Balance per bank statement?

a. 24,164.01
b. 25,994.72
c. 23,196.30
d. 24,640.00
Answer: A
Solution:
ZIA
Bank Reconciliation
December 31, Y5
P
Balance as per Bank, Dec 31 24,594.7
2
Add: Deposit in Transit
400.00
P
24,994.7
2
Less: Outstanding Checks:
No. 46 issued on Nov 29 P 320.00
No. 75 issued on Dec 26 49.21
830.71
P24,164.0
Adjusted Bank Balance
1
P
Balance as per Books, Dec 31 23,196.7
9
Add:
P
Interest Income from Bank
1,237.22
Note Receivable Collected by
500.00
Bank
Interest Income from Note
50.00
Receivable
Deposit Understated 90.00
1,877.22
P
25,074.0
1
Less:
NSF Check 850.00
Bank Service Fee 50.00
Bank Collection Fee 10.00
910.00
P
Adjusted Book Balance 24,164.0
1
4. On September 30, Pink Inc.'s bank statement showed a cash balance of
P1,350. The company's Cash account in its YOUReral ledger showed a P995
debit balance. The following information was also available as of September
30.
 A customer's check for P100 marked NSF was returned to Pink Inc. by
the bank. The bank charged the company's account a P25 processing
fee.
 A customer's note for P900 was collected by the bank. a collection fee
of P25 was deducted by the bank.
 Included with the canceled checks was a check for P275, drawn on
another company, Punk, Inc.
 The September 30 cash receipts, P1,250 were placed in the bank's
night depository after banking hours on that date and this amount did
not appear on the September 30 bank statement.
 A P15 debit memorandum for checks printed by the bank was included
with the cancelled checks.
 Outstanding checks amounted to P1,145.
What is the Adjusted Balance per bank statement?

a. 2,730
b. 3,710
c. 1,307
d. 1,730
Answer: D
Solution:
PINK INC.
Bank Reconciliation
September 30
Bank Statement Balance P1,350 Book Cash Balance P995

Add: Add:
Proceeds of note less collection
Deposit of 9/30 1,250 875
fee
Bank error 275
P2,875 P1,870
Deduct: Deduct:
Outstanding checks 1,145 NSF check processing fee 125
Bank service charge 15
Adjusted Bank Balance P1,730 Adjusted Book Balance P1,730
5. Gutom na Co. collected the following information to prepare its October

bank reconciliation: Cash balance per bank, October 30 P21,000 Deposits in
transit 5,400Bank service charges 85 NSF check 2,100 Interest earned
collected 9,000 Outstanding checks 6,000 . The cash balance per books,
before adjustments to the book balance, is:
a. 18,900
b. 9,515
c. 20,400
d. 18,400
Answer: C
Solution:
GUTOM NA CO.
Bank Reconciliation
October 30
Bank Statement P Book Cash Balance - P

Balance 21,000 squeeze 13,585
Add: Add:
Deposits in Transit 5,4 Interest earned 9,000
00 collected
P26,4 P
00 22,585
Deduct: Deduct:
Outstanding 6,0 NSF check 2,1
checks 00 00
Bank service charges
85
Adjusted Bank P20,4 Adjusted Book Balance P20,4
Balance 00 00
6. The information below was given in relation with Sexy Corp.’s books. Sexy
has an existing balance of P12000 on his cash book on January. At the end of
the year, the entity reconciled the amount with the bank balance.
Outstanding checks 100
Deposit In transit 500
NSF check 500
Interest earned by note collected by bank 500
What is Sexy’s correct cash balance on the end of the year?

a. 12000
b. 12500
c. 12400
d. 11900
Answer: A
Solution:
Balance 12,000
NSF check (500)
Interest earned by note collected by bank 500
Adjusted cash balance P12,000
7. The following adjustments were given in relation with IKON’s reconciliation

of his cash book balance to the bank on December 31, 2014. He has P5,700
balance on January 1, 2014. Deposit in Transit 2,500 NSF checks 2,080
Interest earned by note collected by bank 3,000 Outstanding checks 1000.
What is iKON’s correct cash book balance?

a. 6,400
b. 6,620
c. 7,800
d. 6,140
Answer: B
Solution:
Balance 5700
NSF checks (2,080)
Interest earned by note collected by bank 3,000
Adjusted cash book balance P 6,620
8. Sehun has received his bank pass sheets for the year to 31st October
2007. At the date, his balance at the bank amounted to P14,130 whereas his
own cash book showed a balance of P47,330. His accountant, Beverlene,
investigated the matter, and discovered the following discrepancies:
 Checks drawn by Sehun and totaling P450 had not yet been presented
to the bank.
 Sehun had not entered receipts of P530 in his cash book.
 The bank had not credited Sehun with receipts of P1,970 paid into the
bank on 31st October 2007.
 Bank charges of P60 had not been entered in the cash book.
 Standing order payments amounting to P1,240 had not been entered in
the cash book.
 Sehun had entered a payment of P560 in his cash book as P650.
 A check received for P300 from a debtor had been returned by the bank
marked “refer to drawer”, but this had not been written back in the
cash book.
 Sehun had brought down his opening cash book balance of P6,585 as a
debit balance instead of as a credit balance.
 An old check payment amounting to P880 had been written back in the
cash book, but the bank had already honored it.
 Some of Sehun’s customers had paid to settle their debts by direct
debit. Unfortunately, the bank had credited some direct debits
amounting to P16,650 to another customer’s account.
At October 31, 2007, Sehun’s adjusted cash balance is

a. 33,300
b. 42,000
c. 32,300
d. 21,230
Answer: C
Solution:
Balance per cash book P 47,330

Add: Receipts not entered 530
Error of original entry in cash book 90 620
(650-560)
47,950
Less: Standing order payments 1,240
Bank charges 60
Dishonored check 300
Error in balance b/d (6,585 x 2) 13,170
Old check written back being 880 15,650
honoured
Corrected cash balance P 32,300
9. Bebang’s Cash Book at September 30, 2012 showed an overdrawn

position of P3,630 although her bank statement showed only P2,118
overdrawn. Detailed examination of the two records revealed the following:
 The debit side of the cash book had been undercast by P300.
 A check for P1,560 in favor of Z Suppliers Ltd., had been omitted by the
bank from its statement, the check having been debited to another
customer’s account.
 A check for P182 drawn in payment of the telephone account had been
entered in the cash book as P128 but was shown correctly on the bank
statement.
 A check for P210 from A. brooks having been paid into the bank was
dishonoured and shown as such on the bank statement although no
entry relating to the dishonour had been made in the cash book.
 The bank had debited a check for P126 to Kay’s account in error; it
should have been debited by them to Ray Kogan’s account.
 A dividend of P90 on Kay’s holding of Ordinary Shares has been paid
direct to her bank account and no entry made in the cash book.
 Checks totaling P1260 drawn on 29th November had not been
presented for payment
 A lodgement of P1080 on 30th November had not been credited by the
bank.
 Interest amounting to P228 had been debited by the bank but not
entered in the cash book.

At September 30, 2012, what is Bebang’s corrected cash book balance?
a. 2,732
b. 3,723
c. 2,732
d. 3,732
Answer: D
Solution:
Balance as per bank statement P (2,118)

Add: Error by the bank 126
Uncredited deposit 1,080 1,206
(912)
Add: Check omitted - Z Suppliers 1,560
UnpresentedCheck 1,260 2,820
Balance per adjusted / corrected cash P (3,732)
book
10. In reconciling the book and bank balances of the Cash account of Bebang
Co., you discover the following for the month of September 2015:
 Balance per books P 387,000

 Balance per bank statement 400,000
 Customer’s check returned by bank marked ”DAIF” 22,000
 Bank service charges for September 1,000
 A paid check for P40,000 was recorded in the cash book as
4,000
 Receipts of 9/30/15 not yet deposited 100,000
Assuming no other errors except as noted above, what is the amount of the
outstanding checks at December 31, 2025?
a. 127,000
b. 172,000
c. 328,000
d. 500,000
Answer: B
Solution:
Balance per bank statement

P400,000
Add receipts of 12/31/15 not yet deposited
100,000
Balance per bank statement before outstanding checks
P500,000
Balance per books P387,000

Bank service charge for December ( 1,000)
Paid check for P40,000 recorded as P4,000 ( 36,000)
Customer’s check returned by bank marked DAIF ( 22,000)
328,000
Outstanding checks at December 31, 2015
P172,000
ACCOUNTS RECEIVABLE
1. CHOCOLATE provided the report that the current receivables consisted of
the following on March 31:
 Trade accounts receivable

P1,030,000
 Bad debts (80,000)
 Security deposit lease of warehouse
 used for storing some inventories

300,000
 Selling price of unsold goods sent by CHOCOLATE

on consignment at 130% of cost (not included in
CHOCOLATE’s ending inventory)

260,000
 Claim against shipper for goods lost in transit

50,000
What total amount should be reported as trade and other receivables under
current assets on March 31?
a. 1,000,000
b. 980,000
c. 1,140,000
d. 1,020,000
Answer: A
Solution:
Trade accounts receivable P1,030,000

Allowance for uncollectible accounts (80,000)
Claim receivable 50,000
Total trade and other receivables P1,000,000
2. The following amounts are shown on the 2013 and 2014 financial
statements of MAHAL Co.:
2013 2014
Accounts Receivable ? P
470,000
Allowance for bad debts 20,000
10,000
Net sales 2,600,000 2,400,000
Cost of goods sold 1,900,000 1,752,000
MAHAL Co’s accounts receivable turnover is 2016 is 5 times.
What is the accounts receivable balance as December 31, 2014?

a. 752,000
b. 222,000
c. 422,000
d. 580,000
Answer: B
Solution:
A/R turnover = Net Sales / Ave. net receivables
5 = P2,600,000 / P460,000 + X
2
P2,990,000 / 5X = P2,600,000
P2,990,000 + 5X = P5,200,000
5X = P2,210,000
X = P442,000
Net Receivables, Dec. 31, 2014 P442,000

Add: Allowance for bad debts, Dec 31, 20164 20,000
Accounts Receivable P422,000
3. STAY CORP. had an account receivable with balance of P3,540,000 at

December 31, 2015. An allowance of bad debts occur with a balance of
P60,000. Net sales in 2015 were P6,704,000 with a net sales discounts of
P56,000. An aging schedule shows that P130,000 of the outstanding
accounts receivable are doubtful. What amount is the adjusting entry for
estimated bad debt expense?
a. 80,000
b. 50,000
c. 65,000
d. 70,000
Answer: B
Solution:
Required allowance P130,000

Less: Allowance balance 60,000
Increase in allowance P 70,000
4. The following information is from RORO CORP’s first year of operations:
Purchases P 900,000
Ending Merchandise 175,000
Collections from customers 25,000
What is the accounts receivable balance at the end of the company’s first
year of operation if all sales on account and goods sell at 20% above cost?
a. 978,100
b. 986,450
c. 961,150
d. 917,500
Answer: D
Solution:
Purchases P900,000
Less: Merchandise Inventory 175,000
Cost of Goods Sold 725,000
Multiply by sales ratio x 130%
Sales 942,500
Less: Collections from customers 25,000
Accounts Receivable, Ending P 917,500
5. B2ST Inc. has a business of exporting variety of local products. By selling

on credit, B2ST cannot expect 100% of its accounts receivable. At December
31, 2015, B2ST reported the following in its statement of financial position:
Accounts Receivable 2,197,000 Allowance for bad debts 133,500. During
the year ended December 31, 2016, B2ST earned sales revenue of
P37,702,500 and collected cash of P28,070,000 from customers. Assume bad
debt expense for the year was 10% of sales revenue and that B2ST wrote of
uncollectible accounts receivable totaling P2,439,500. What is the December
31, 2016, balance of the Allowance for Bad debts account and Accounts
Receivable respectively?
a. 1,464,250 ; 6,390,000
b. 1,171,025 ; 6,390,000
c. 1,827,025 ; 5,420,000
d. 1,700,250 ; 4,670,000
Answer: A
Solution:
Accounts Receivable, January 2016 P
2,197,000
Sales 37,702,500
Collections (28,070,000)
Accounts written off (5,439,500)
Accounts Receivable, December 2016
P6,390,000
Allowance for bad debts, January 1, 2016 P

133,500
Bad debt expense (P37,702,500 x 10%) 3,
377,025
Accounts written off
(2,439,500)
Allowance for bad debts, December 31, 2016 P
1,464,250
6. SISTAR, INC. is to debit bad debt expense for 3% of all new sales. The
following are the company’s sales and allowance for bad debts for the past
four years.
Year Sales Allow. For Bad debts

Year-End Balance
2011 P3,000,000 P45,000
2012 2,950,000 56,000
2013 3,120,000 60,000
2014 2,420,000 75,000
What are the amounts of accounts written off in 2012, 2013 and 2014?
a. 77,500 ; 98,660; 57,750

b. 77,500 ; 89,600; 57,600
c. 67,400 ; 80,600; 76,600
d. 98,300 ; 89,500; 67,500
Answer: B
Solution:
2012 2013 2014
Allowance balance, beginning P 45,000 P 56,000 P 60,000
Ad: Estimated uncollectibles 88,000 93,600 72,600
Total allowance before write offs 133,500 149,600
132,600
Less: Allowance balance, ending 56,000 60,000
75,000
Accounts written off 3% sales P 77,500 P 89,600 P 57,600
7. AOA Corporation has the following selected transactions occurred during

the year ended December 31, 2015: Gross sales (cash and credit) 750,000
Collections from credit customers (2% cash discount) 245,000 Cash sales
150,000 Uncollectible Accounts 16,000 Credit memos issued to credit
customers for sales returns and allowances 8,400 Cash Refunds given to
cash customers for sales returns and allowances 12,640 Recoveries on
accounts receivable written off in prior years (not included in cash received
stated above) 5,421 . At year-end, the company provides for estimated bad
debt losses by crediting the Allowance for Bad Debts account for 2% of its
net credit sales for the year.
What is the company’s net credit sales?
What is the bad debt expense for 2014?
a. 574,600 ; 11,492
b. 689,420 ; 13,788
c. 586,600 ; 11,732
d. 756,500 ; 15,130
Answer: C
Solution:
Gross credit sales (P750,000 – P150,000) P 600,000
Less: Sales discount
(P245,000 / 98% = P250,000 x 2%) P5,000
Sales returns and allowances 8,400 13,400
Net credit sales P 586,600
Bad debt expense (P586,600 x 2%) P 11,732
8. During 2015, AKMU Co. had a credit sales of P4,450,000. In the prior
periods P170,000 are collections of accounts that are written off. But during
the period P191,000 were considered worthless account written off. During
the year an amount of P155,000 was the balance for allowance for doubtful
accounts. AKMU Co. provides for doubtful accounts based on 1 ½% of credit
sales. What is the balance of the allowance for doubtful accounts at
December 31, 2015?
a. 551,000
b. 200,750
c. 630,750
d. 434,200
Answer: B
Solution:
Balance, January 1, 2015 P155,000
Bad debt expense for 2014 (P4,450,000 x 1 ½%) 66,750
Less: Accounts written off (191,000)

30,750
Add: Recovery of accounts written off 170,000
Balance, December 31, 2015 200,750
9. An analysis and aging of its accounts receivable at December 31, 2015 in

Yes Co., revealed the following statements:
Accounts Receivable P745,000
Accounts estimated to be uncollectible as per aging 126,000
Allowance for bad debts was allocated to be P107,000. What is the net
realizable value of Yes’s receivable at year end?
a. 619,000
b. 890,000
c. 512,000
d. 674,000
Answer: A
Solution:
Accounts Receivable P 745,000
Less: Accounting estimated to be uncollectible (per aging) 126,000
Net realizable value P 619,000
10. GIVE LOVE Inc. provided the following information relating to its current
operations: Account Receivable, January 1 4,800,000 Accounts Receivable
collected 6,400,000 Cash Sales 2,000,000 Inventory, January 1
4,500,000 Inventory, December 31 3,400,000 Purchases 7,000,000 Gross
Margin on sales 4,200,000. What is the balance of accounts receivable on
December 31?
a. 3,200,000
b. 9,400,000
c. 1,500,000
d. 8,900,000
Answer: D
Solution:
Inventory – Jan 1 P4,500,000
Purchases 7,000,000
Goods available for sale 11,500,000
Inventory – Dec 31 (3,400,000)
Cost of good sold 8,100,000
Gross margin on sale 4,200,000
Gross sales 12,300,000
Cash sales (2,000,000)
Credit sales 10,300,000
Accounts Receivable 4,000,000
Total 14,300,000
Accounts Receivable collected (6,400,000)
Accounts Receivable – Dec. 31 P8,900,000

NOTES RECEIVABLE
1. Eyes,Nose,Lips Co. sold for P3,000,000 an old equipment having an
original cost of P5,400,000 and carrying amount of P2,400,000 on December
31, 2015,. The terms of the sale were P600,000 down payment and
P1,200,000 payable each year on December 31 of the next two years. The
sale agreement made no mention of interest. However, 9% would be a fair
rate for this type of transaction. The present value of an ordinary annuity of 1
at 9% for two years is 1.76.
What is the carrying amount of the note receivable on December 31, 2016?
a. 1,009,920
b. 1,300,000
c. 2,302,080
d. 1,102,080
Answer: D
Solution:
Note receivable – December 31, 2015
2,400,000
Present value (1,200,000 x 1.76)
(2,112,000)
Unearned interest income
288,000
Interest income for 2016 (9% x 2,112,000)

190,080
Note Receivable – December 31, 2016

1,200,000
Unearned interest income – 12/31/2016 (288,000 – 190,080)
( 97,920)
Carrying amount – December 31, 2016
1,102,080
2. A building was sold by STAR Company on January 1, 2015, and received

as consideration P1,000,000 cash and a P4,000,000 noninterest bearing note
due on January 1, 2018. There was no established exchange price for the
building, and the note had no ready market. The prevailing rate of interest
for a note of this type on January 1, 2015 was 10%. The present value of 1 at
10% for three periods is 0.75. What amount of interest revenue should be
included in the 2016 income statement?
a. 330,000
b. 340,000
c. 430,000
d. 100,000
Answer: A
Solution:
Note receivable 4,000,000

Less: Present value (4,000,000x .75) 3,000,000
Unearned interest income 1,000,000
Present value, January 1, 2015 3,000,000

Interest income for 2015 (10% x 3,000,000) 300,000
Present value, December 31, 2015 3,300,000

Interest income for 2016 (10%x 3,300,000) 330,000

Interest income for 2017 ( 1,000,000 – 630,000) 370,000
Interest income for 2015 300,000

Interest income for 2016 330,000
Interest income for 2017 (simply the remainder) 370,000
Total interest income 1,000,000
3. Robinhood Company discounted its own P7,000,000 one-year note at a

discount rate of 12%, when the prime rate was 10%. In reporting the note
prior to maturity, what rate should be used for the recording of interest
expense?
a. 12.63%
b. 13.63%
c. 14.7%
d. 10%
Answer: B
Solution:
Note payable
7,000,000
Discount (5,000,000 x 12%) ( 840,000)
Net proceeds
6,160,000
Effective interest rate = Discount / Net proceeds

= 840,000 / 6,160,000
= 13.63%
4. Dope Company received from a customer a one-year, P500,000 note

bearing annual interest of 8%. After holding the note for 9 months, the entity
discounted then ote without recourse at 10%. What amount of cash was
received from the bank?
a. 675,500
b. 400.000
c. 523,810
d. 499,500
Answer: D
Solution:
Principal 500,000
Interest (500,000 x 8%) 40,000
Maturity value 540,000
Less: discount (540,000 x 10% x 9/12) 40,500
Net proceeds 499,500
5-6. METH Company accepted from a customer a P4,000,000, 90-day, 12%

interest-bearing note dated August 31, 2014. On September 30, 2014, the
entity discounted the note with recourse at the Bottom State Bank at 15%.
However, the proceeds were not received until October 1, 2014. The
discounting with recourse is accounted for as a conditional sale with
recognition of a continYOURt liability.
i. What is the amount received from the discounting of note receivable?

a. 4,017,000
a. 4,104,000
b. 4,123,000
c. 4,965,500
ii. What is the loss on note receivable discounting?

a. 23,000
b. 25,000
c. 17,000
d. 4,000
Answer: (i) A (ii) A
Solution:
(i)
Principal 4,000,000
Interest (4,000,000 x 12% x 90/360) 120,000
Maturity value 4,120,000

Less: Discount (4,120,000 x 15% x 60/360) 103,000
Net proceeds 4,017,000
(ii)
Principal 4,000,000
Interest (4,000,000 x 12% x 30/360) 40,000
Carrying amount of note receivable 4,040,000

Net proceeds (4,040,000)
Loss on note receivable discounting (23,000)
7. On January 1, 2013, SNSD Inc. sold land with carrying amount of

P1,500,000 in exchange for a 9-month, 10% note with face value of
P2,000,000. The 10% rate properly reflects the time value of money for this
type of note.
o On April 1, 2013, the entity discounted the note with recourse. The
bank discount rate is 12%. The discounting transaction is accounted
for as a secured borrowing.
o On October 1, 2013, the maker dishonoured the note receivable. The

entity paid the bank the maturity value of the note plus protest fee
of P10,000.
o On December 31, 2013, the entity collected the dishonoured note in

full plus 12% annual interest on the total amount due.
What is the amount received from the discounting of note receivable?

a. 2,720,000
b. 2,150,000
c. 2,021,000
d. 2,050,000
Answer: C
Solution:
Principal 2,000,000
Interest (2,000,000 x 10%x 9/12) 150,000

Discount (2,150,000 x 12% x 6/12) ( 129,000)
8. YEAH Company discounted with recourse a note at the bank at discount

rate of 15% omn August 31, 2015,. The note was received from the customer
on August 1, 2015, is for 90 days, has a face value of P5,000,000 and carries
an interest reate of 12%. The customer paid the note to the bank on October
30, 2014, the date of maturity. If the discounting is accounted for as a
secured borrowing, what is the interest expense to be recognized on August
31, 2015?
a. 23,000
b. 50,000
c. 21,500
d. 28,750
Answer: D
Solution:
Principal 5,000,000
Interest (5,000,000 x 12% x 90/360) 150,000
Discount (5,150,000 x 15% x 60/360)
128,750
Net proceeds
5,021,250
Principal 5,000,000
Accrued interest receivable (5,000,000,000 x 12% x 30/360)
50,000
Carrying amount of note receivable 5,050,000

Carrying amount of note receivable (5,050,000)
Interest expense ( 28,750)
9-10. PARTY TIME Company reported the following balances on 1/1/15 : Note
receivable from sale of building 7,500,000 Note receivable from an
employee 2,000,000
 The P7,500,000 note receivable is dated May 1, 2014, bears interest at

9%. Principal payments of P2,500,000 plus interest are due annually
beginning May 1, 2015.
 The P2,000,000 note receivable is dated December 31, 2012, bears
interest at 8% and is due on December 31, 2017. Interest is payable
annually on December 31, and all interest payments were made
through December 31, 2015.
 On July 1, 2015, Ryan Company sold a parcel of land to Barr Company

for P4,000,000 under an instalment sale contract. Barr Company made
a P1,200,000 cash down payment on July 1, 2015, and signed a 4-year
10% note for the P2,800,000 balance. The equal annual payments of
principal and interest on the note totalled P880,000, payable on July 1
of each year from 2016 through 2019.
i. What is the total amount of notes receivable including accrued interest

that should be classified as current assets on December 31, 2015?
a. 3,540,000
b. 3,080,000
c. 2,940,000
d. 3,820,000
ii. What is the total amount of notes receivable that should be classified as
noncurrent assets on December 31, 2015?
a. 7,300,000
b. 6,700,000
c. 6,420,000
d. 4,500,000
Answer: (i) A (ii) B
Solution:
(i)
Note receivable from sale of building due 5/1/2016
2,500,000
Accrued interest on note receivable from sale of building
from 5/1/2015 to 12/31/2015 (5,000,000 x 9% x 8/12)
300,000
Principal payment of note receivable from sale of land due
on 7/1/2016:
Annual Interest 880,000
Interest from 7/1/2015 to 7/1/2016 (280,000)
600,000
Accrued interest on NR from sale of land from
7/1/2015 to 12/31/2015 (1/2 x 280,000)
140,000
Total current receivable – December 31, 2015
3,540,000
(ii)
NR from sale of building due May 1, 2017
2,500,000
NR from officer due December 31, 2017
2,000,000
NR from sale of land – noncurrent portion:
Principal 2,800,000
Due July 1, 2016 – current portion ( 600,000)
2,200,000
Total noncurrent notes receivable – December 31, 2015
6,700,000
LOAN RECEIVABLE
1. On December 31, 2015, SUNSHINCE Bank has a 5-year loan receivable
with a face value of P5,000,000 dated January 1, 2014 that is due on
December 31, 2018. Interest on the loan is payable at 9% every December
31.
The borrower paid the interest that was due on December 31, 2014 but
informed the bank that interest accrued in 2015 will be paid at maturity date.
There is a high probability that the remaining interest payments will not be
paid because of financial difficulty.
The prevailing market rate of interest on December 31, 2015 is 10%.

The PV of 1 for three periods is .772 at 9%, and .751 at 10%.
What is the loan impairment loss to be recognized on December 31, 2015?
a. 1,695,000
b. 1,590,000
c. 1,242,000
d. 1,357,050
Answer: C
Solution:
Loan receivable 5,000,000

Accrued interest receivable (9% x 5,000,000) 450,000
Carrying amount – December 31, 2015 5,450,000
Present value of cash inflows (5,450,000 x .772) 4,207,400
Impairment loss 1,242,600
2. CHI Co. gave PEN Inc. company a P200,000, 12% loan on December 1,
2014,. CHI Company paid proceeds of P194,000 after the deduction of a
P6,000 nonrefundable loan origination fee. Principal and interest are due in
sixty monthly instalments of P4,450, beginning January 1, 2015. The
repayments yield an effective interest rate of 12% at a present value of
P200,000 and 13.4% at a present value of P194,000.
What amount of interest income should be reported in 2014?
a. 2,166
b. 1,940
c. 2,233
d. 2,000
Answer: A
Solution:
Interest income for 2014 (194,000 x 13.4% x 1/12) 2,166
3-6. On January 1, 2015, BANKIE Bank granted a loan to a borrower. The

interest on the loan is 8% payable annually starting December 31, 2015
with a principal of three million pesos. The loan matures in three years on
December 31, 2016. The data related to the loan are:
Origination fee charged against the borrower
100,000
Direct origination cost incurred 260,300
After considering the origination fee charged to the borrower and the direct
origination cost incurred, the effective rate on the loan is 6%.
i. What is the carrying amount of the loan receivable on January 1, 2015?

a. 2,900,000
b. 2,360,000
c. 3,160,300
d. 3,000,000
ii. What is the interest income for 2015?

a. 189,618
b. 180,000
c. 240,000
d. 252,824
iii. What is the carrying amount of the loan receivable on December 31,
2015?
a. 3,000,000
b. 3,210,682
c. 3,109,918
d. 3,160,300
iv. What is the interest income for 2016?

a. 248,793
b. 186,595
c. 240,000
d. 180,000
Answer: (i) C (ii) A (iii) C (iv) B
Solution:
(i)
Direct origination cost incurred 260,300
Origination fee received (100,000)
Net direct origination cost 160,300
Carrying amount of loan receivable – January 1, 2015 3,160,300
(ii)
Interest received for 2015 (8% x 3,000,000) 240,000
Amortization of direct origination cost 50,382
(iii)
Direct origination cost – 12/31/2015 (160,300 – 50,382) 109,918
(iv)
7-8. Got7 Bank granted a 10-year loan to More Company in the amount of
P1,500,000 with a stated interest rate of 6%. Payments are due monthly and
are computed to be P16,650. Got7 Bank incurred P40,000 of direct loan
origination cost and P20,000 of indirect loan origination cost. In addition,
Got7 Bank charged More Company a 4-point non-refundable loan origination
fee.
i. What is the initial carrying amount of the loan receivable on the part of
Got7 Bank?
a. 1,520,000
b. 1,500,000
c. 1,480,000
d. 1,580,000
ii. What is the initial carrying amount of the loan payable on the part of More
Company?
a. 1,520,000
b. 1,500,000
c. 1,480,000
d. 1,440,000
Answer: (i) C (ii) D
Solution:
(i)

Direct origination cost 40,000
Total 1,540,000
Origination fee received from borrower (1,500,000 x 4%) ( 60,000)
Carrying amount 1,480,000
(ii)
Loan payable 1,500,000
Origination fee charged by the bank ( 60,000)
9-10. It was January 1, 2013 when OTWOL Bank loaned P5,000,000 to

Pangako Sa’yo Company. The terms of the loan require principal payments of
P1,000,000 each year for 5 years plus interest at 8%. The first principal and
interest payment is due on January 1, 2014. Pangako Sa’yo Company made
the required payments during 2014 and 2015. However, during 2015
Pangako Sa’yo company began to experience financial difficulties, requiring
OTWOL Bank to reassess the collectability of the loan. On December 31,
2015, OTWOL Bank has determined that the remaining principal payment will
be collected but the collection of the interest is unlikely. OTWOL Bank did not
accrue the interest on December 31, 2015. The present value of 1 at 8% is
as follows: For one period 0.926, For two periods 0.857, For three periods
0.794.
i. What is the interest income for 2016?
a. 126,160
b. 240,000
c. 142,640
d. 0
ii. What is the loan impairment loss on December 31, 2015?

a. 217,000
b. 222,000
c. 423,000
d. 0
Answer: (i) C (ii) A
Solution:
(i)
Collection on January 1, 2016 (1,000,000)
Loan receivable – January 1, 2016 2,000,000

Allowance for loan impairment ( 217,000)
Carrying amount – January 1, 2016 1,783,000
Interest income for 2016 (1,783,000 x 8%) 142,640
(ii)
January 1, 2016 (1,000,000 x 1.000) 1,000,000
January 1, 2017 (1,000,000 x .926) 926,000
January 1, 2018 (1,000,000 x .857) 857,000
Total present value of loan 2,783,000

Present value of loan 2,783,000
Impairment loss 217,000
RECEIVABLE FINANCING
1-2. A factoring of P 7.980,000 accounts receivable to a finance entity was
done by MEOW Company on August 1, 2015.The factor was assessed a fee of
5% and reserve a holdback of 6% of the accounts receivable. MEOW
Company also did surrender the control. In line with this, the factor charged
10% interest on a weighted average time to maturity of the accounts
receivable of 69 days.
i. What is the cost of factoring of the accounts receivable if all accounts are
collected?
a. 400, 000
b. 3,798, 000
c. 1, 027, 855
d. 549, 855
ii. What is the amount of cash initially received from the factoring?
a. 6, 952, 145
b. 7, 805, 000
c. 9, 704, 000
d. 7, 980, 000
Answer: (i) D (ii) A
Solution:
(i)
Factoring Fee P399, 000
Interest 150,855
P549, 855
Total cost of factoring
(ii)
Accounts Receivable P7, 980, 000
Factor’s Holdback (7, 980, x6%) (478,
Factoring Fee 000 800)
Interest (7, 980, x5%) (399,
000 000)
Cash initially (7, 980, x 10% x69/365) (150,855)
received from factoring 000
P 6, 952, 145
3-5. AWW Company assigned specific accounts receivable totaling P3, 100,
000 as collateral on a P2, 500, 000, 12% note from a certain bank on
December 1, 2014,. The entity will continue to collect the assigned accounts
receivable. In addition to the interest on the note, the bank also charged a
5% finance charge deducted in advance on the P2, 500, 000 value of the
note. The December collections of assigned accounts receivable amounted
to P1, 000, 000 less cash discounts of P50, 000. On December 31, 2014, the
entity remitted the collections to the bank in payment for the interest
accrued on December 31, 2014 and the note payable.
i. What is the carrying amount of note on December 31, 2014?

a. 1, 550, 000
b. 1, 575, 000
c. 1, 600, 000
d. 1, 757, 000
ii. What amount should be disclosed as the equity of AWW Company in

assigned accounts on December 31, 2014?
a. 425, 000
b. 475, 000
c. 495, 000
d. 525, 000
iii. What amount of cash was received from the assignment of accounts
receivable on December 1, 2014?
a. 2, 000, 000
b. 2, 150, 0000
c. 2, 375, 0000
d. 3, 100, 000
Answer: (i) B (ii) A (iii) C
Solution:
(i)
Note Payable P2, 500, 000
Principal Payment:
Remittances 950,000
Interest (2,500, 000 x 12% x
1/12) 25, 000 925, 000
Note Payable- P1, 575, 000
12/31/14
(ii)
Accounts Receivable- assigned(3, 000, 000- 1, P2, 000,000

000, 000)
Note Payable 1, 575, 000
Equity of AWW Company in assigned accounts P 425,000

(iii)
Note Payable P2, 500, 000
Finance Fee (5% x 2, 500, 000) (125, 000)
Cash received on December 1 P2, 375, 0000
6. A factoring without recourse P 3,500, 000 of accounts receivable was done

by Xiumin Company with a bank. The finance charge is 3%, and 5% was
restrained to cover sales discounts, sales returns and sales allowances. What
amount of cash was received on the sales of accounts receivables?
a. 2, 000, 000
b. 2, 300, 000
c. 2, 620, 000
d. 3, 220, 000
Answer: D
Solution:
Accounts Receivable P3,500,000
Finance Charge (3% x 3, 500, 000) (105, 000)
Factor’s Holdback (5% x 3, 500, 000) (175, 000)
Cash Received from P3, 220, 000
factoring
7. Chen factored accounts receivable of P450, 000 with credit terms of 3/10,
n/15 instantly after the delivery of the goods to the costumer. The factor is
charged with 4% commission which is based on the gross amount of the
factored accounts receivables.
In addition the factor withheld 16% of the receivables factored in order to
cover the sales return and allowances. What is the cash received from
factoring?
a. 351, 000
b. 369, 000
c. 387, 000
d. 450, 000
Answer: A
Solution:
Gross amount P450, 000
Less:
Sales Discount (450,000 x 2%) 9,000
Commission (450, 000 x 4%) 18,000
Factor’s Holdback (450,000 x 16%) 72,000 (99,000)
Cash Received from factoring P351, 000
8. The entity, Doll Corp., was assessed by the bank for a finance charge of
6% on the transaction and is paid up front when they assigned P 4, 000, 000
of accounts receivables as collateral for a P1, 500, 000 5% loan with a bank..
What amount should be recorded as a gain or loss on the transfer of
accounts receivables?
a. 150, 000 gain
b. 100, 000 gain
c. 240, 000 loss
d. 0
Answer: D
Solution:
No gain or loss is recognized.
9. An allowance for bad debts of P500, 000 had previously been established
by the JULIAN Corp. to allow adjustments and possible costumer returns the
factor withheld 10% of the cash proceeds when they sold P 5, 750, 000 in
accounts receivable for cash payment of P 4, 950,000. What is the loss on
factoring that should be recognise?
a. 498, 875
b. 750, 000
c. 900, 000
d. 300, 000
Answer: D
Solution:
Sale price P4, 950, 000
Carrying amount of accounts 5, 250, 000
receivable
(5, 750, 000 – 500, 000)
Loss on Factoring (P 300, 000)
10. CHICOLO Co. factored P 4,900, 000 of accounts receivable without

guarantee for a finance charge of 3%. The finance entity retained an amount
equal to 8% of the accounts receivable for possible adjustments. What
should be recorded as gain or loss on the transfer of accounts receivable?
a. 100, 000
b. 392, 000
c. 147, 000
d. 845, 000
Answer: C
Solution:
Loss in Factoring- Equal to finance fee( 3% x 4, 900 ,00) P 147, 000
INVENTORIES
1. YOUR Company recorded purchases at net amount. On December 10,
2015 the entity purchased merchandise on account, P2,500,000, terms 4/10,
n/30. The entity returned P150,000 of the December 10 purchase and
received credit on account. The account had not been paid on December 31.
What amount should the account payable be adjusted on December 31?
a. 150,000
b. 147,000
c. 103,000
d. 47,000
Answer: D
Solution:
Gross invoice 2,500,000
Purchase return (150,000)
Balance 2,350,000
Purchase discount loss (2% x 2,350,000) 47,000
2. MY store 101 jeans on consignment from YOU. YOU’s cost for the jeans
was P950 each, and they were priced to sell at P1,200 on December 1,
2015,. MY’s commission on consigned goods is 10%. On December 31, 2015,
1 jeans remained. In the December 31, 2015 statement of financial position,
what amount should be reported as payable for consigned goods?
a. 120,000
b. 108,000
c. 121,200
d. 109,080
Answer: B
Solution:
Consigned goods sold 120,000
Commission (12,000)
Payable for consigned goods 108,000
3-4. The following account balances are presented by OUR Company:

2014 2015
Merchandise Inventory 150,000 90,000
Cash 180,000 ?
Accounts Receivable 240,000 180,000
Accounts payable 405,000 200,00
Assuming all sales and purchases are on account. The amount of cost of
goods sold is P360,000 during the current year. The gross profit margin on
sales is 20%.
i. What is the 2015 cash balance?

a. 105,000
b. 35,000
c. 55,000
d. 185,000
ii. What is the amount of purchases?

a. 300,000
b. 210,000
c. 240,000
d. 310,000
Answer: (i) B (ii) A
Solution:
(i)
Sales (100%) 450,000
Cost of goods sold (80%) 360,000
Gross profit (20%) 90,000
Cash – 12/31/14 180,000

Add: Collections 510,000
Balance 690,000
Less: Disbursement 150,000
Payment to suppliers 505,000 (655,000)
Cash – 12/31/15 35,000
Accounts Receivable – 12/31/14 240,000

Sales 450,000
Collections (510,000)
Accounts Receivable – 12/31/15 180,000
Accounts Payable – 12/31/14 405,000

Purchases 300,000
Payment to suppliers (505,000)
Accounts Payable – 12/31/15 200,000
(ii)
Merchandise Inventory – 12/31/14 150,000
Purchases - Squeeze 300,000
Total goods available for sale 450,000
Cost of goods sold
(360,000)
Merchandise Inventory – 12/31/15 90,000
5. Santos Company has the following data during the year: Merchandise
inventory - 1/1/15 685,000 Cost of goods sold 500,000 Merchandise
inventory –12/31/15435,000
What is the amount of purchases during the year?
a. 895,000
b. 565,000
c. 25,000
d. 250,000
Answer: D
Solution
Merchandise inventory – beginning 685,000
Purchases - Squeeze 250,000
Total goods available for sale 935,000
Cost of goods sold (500,000)
Merchandise inventory – ending 435,000
6. At the end of 2013, Maria Company ‘s inventory account was P420,000

and P40,000 of those goods included in ending inventory were purchased
FOB shipping point and did not arrive until 2014. Purchases in 2014 were
P4,000,000. The perpetual inventory records showed an ending inventory of
P500,000 for 2014. A physical count at the end of 2014 showed an inventory
of P480,000. Inventory shortages are included in cost of goods sold.
What amount should be reported as cost of goods sold for 2014?
a. 4,480,000
b. 4,420,000
c. 3,940,000
d. 4,000,000
Answer: C
Solution:
Inventory – December 31, 2013 420,000
Purchases – 2014 4,000,000
Goods available for sale 4,420,000
Inventory – December 31, 2014 (480,000)
Cost of goods sold
3,940,000
7. CHRISTMAS Company purchased goods costing P500,000 on December

25, 2015,. The terms were FOB shipping point. The goods were received on
December 28, 2015. Costs incurred by the entity in connection with the
purchase and delivery of the goods were normal freight charge P15,000,
handling cost P10,000, insurance on shipment P2,000 and abnormal freight
charge for express shipping P18,000.
What is the total cost of the inventory?
a. 445,000
b. 615,000
c. 527,000
d. 580,000
Answer: C
Solution:
Purchased goods 500,000
Normal freight charge 15,000
Handling cost 10,000
Insurance 2,000
Inventory 527,000
8. On January 1, 2013, BLUE Company borrowed P10,000,000 at an annual

interest rate of 9% to finance specifically the cost of building a plant. The
entity invested its idle funds and earned interest income of P100,000. The
project was completed on October 31, 2013.
What is the carrying amount of the plant?
a. 10,900,000
b. 9,000,000
c. 8,100,000
d. 10,650,000
Answer: D
Solution:
Construction cost 10,000,000
Interest (10,000,000 x 9% x 10/12) 750,000
Interest income (100,000)
Total cost of plant 10,650,000
9. JOEY Company borrowed P6,000,000 on a 15% note payable to finance a

new factory which the entity is constructing for own use. The only other debt
of the entity is a P8,000,000, 10% mortgage payable on an office building. At
the end of the current year, average accumulated expenditure on the new
factory totaled P7,850,000.
What amount should be capitalized as interest for the current year?
a. 1,850,000
b. 1,700,000
c. 1,085,000
d. 1,075,000
Answer: C
Solution:
Accumulated Average Expenditure 7,850,000
Applicable to specific loan 6,000,000
Applicable to YOUReral loan 1,850,000
10. J3J3 Inc. regularly buys sweaters from Hasht5 Company and is allowed
trade discounts of 18% and 8% from the list price. J3J3 made a purchase
during the year, and received an invoice with a list price of P780,000 , a
freight charge of P22,000 and payment terms of 2/10, n/30. What is the cost
of purchase?
a. 100,000
b. 435,888
c. 583,248
d. 566,432
Answer: D
Solution:
List price 780,000
Trade discount (18% x 780,000) 140,400
Balance 639,600
Trade discount 51,168
Invoice price 588,432
Freight charge 22,000
Total cost of purchase 566,432
BIOLOGICAL ASSETS
1-3. A herd of ten 2 yr-old animals was held at January 1, 2015. One animal
aged (2.5 years old) was purchased on July 1, 2015 for P10,800 and one
animal was born on July 1, 2015. Two 3-yr old animals were sold at 12/31/15
for P13,500 each, the company incurring P1,500 sale of each.
Per unit fair vale less cost of disposal were as follows:

1/1/15
2-yr old animal P 10,000
7/1/15
New born animal 7,000
2.5-yr old animal 10,800
12/31/15
New born animal 7,200
0.5-yr old animal 8,000
3-yr old animal 10,500
2.5 yr old animal 11,100
3-yr old animal 12,000
i. Compute for the change in fair value less cost to sell of the biological
asset due to price change and physical change respectively.
a. 5,000; 27,300
b. 5,500; 23,700
c. 5,500; 27300
d. 5,000; 23700
ii. Which of the following entries in 2015 is false regarding the record for
the transactions in the biological assets?
a. 7/31/15 debit entry to Biological Assets 10,800
b. 12/31/15 credit entry to Increase in FV less CTS due to Physical Change
16,700
c. 12/31/15 credit entry to Increase in FV less CTS due to Physical Change
23,700
d. 12/31/15 debit entry to Cash 24,000
iii. The balance of Biological Assets account at December 31, 2015 is

a. 116,000
b. 126,000
c. 136,000
d. 146,000
Answer: (i) B (ii) C (iii) A
Solution:
(i)
Price Change
2 year-old animals on Jan. 1 10 x (P10,500 – P10,000)
P5,000
2.5 year-old animal on July 1 1 x (P11,100 – P10,800)
300
Animal born on July 1 1 x (P7,200 – P7,000)
200
Change in FV less CTS due to Price Change
P5,500
Physical Change
3 year-old animals on 12/31 10 x (P12,000 – P10,500)
P15,000
3 year old animal on 12/31 1 x (P12,000 – P11,100)
900
Born on July 1 (upon birth)
7,000
On December 31 P8,000 – P7,200
800
Change in FV less CTS due to Physical Change
P23,700
(ii) Entries for the Year 2015

July 1 Biological Assets 10,800
Cash 10,800
Purchased one animal.
1 Biological Assets 7,000

Increase in FV less CTS due to Physical Change
7,000
Dec 31 Biological Assets 22,200

Increase in FV less CTS due to Price Change
5,500
Increase in FV less CTS due to Physical Change
(23,700 – 7,000) 16,700
31 Cash {2 x (13,500 – 1,500) 24,000

Biological Assets 24,000
(iii) The balance at December 31, 2013 is composed of the following:

3 year old animals 9 animals x P12,000 P108,000
1 year old animal 1 animal x P8,000
8,000
Total P116,000
4. Showtime Farm has the following balances in its financial records:
• Carrying value of biological assets(FV less cost to sell), at 12/31/14, P

5,650,000.
• Decrease in fair value due to harvest, P750,000.
• Fair value loss on initial recognition at FV less cost to sell, P500,000
• Increase in fair value due to biological transformation and price
fluctuations during the period, P 4,300,000.
• Biological assets purchased during 2015, at cost, P2,200,000.
What is the amount at which biological assets would be presented in the

statement of financial position at December 31,2015?
a. 6,750,000
b. 6,850,000
c. 6,950.000
d. 6,590,000
Answer: D
Solution:
Carrying value of Biological Assets, 12/31/14 P5,650,000

Decrease in fair value due to harvest
(750,000)
Fair valuation loss on initial recognition
(500,000)
Change in fair value due to biological transformation and
price fluctuations
4,300,000
Cost of biological assets purchased during 2015
2,200,000
Biological Assets, 12/31/13
P6,850,000
5-6. Kalyeserye Corporation produces milk on its farms located in Batangas.

At December 31, 2013, the herds of cows are as follows :
1,750 cows (3 yrs old) all purchased in prior years
400 heifers (1.5 yrs old when purchased 6/31/13)
825 heifers (2 yrs old) purchased on December31,2013
No animals were born or sold during the year 2014.
The unit values less estimated cost to sell were as follows:

1 yr old animal at 12/31/13 P 20,000
1.5 yr old animal at 12/31/13 P 24,000
2 yr old animal at 12/31/13 P 28,000
3 yr old animal at 12/31/13 P 30,000
1 yr old animal at 6/31/13 P 21,750
1.5 yr old animal at 6/31/13 P 26,000
2 yr old animal at 12/31/13 P 30,000
3 yr old animal at 12/31/13 P 35,000
4 yr old animal at 12/31/13 P 42,000
i. Compute for the change in fair value less cost to sell of the biological
asset due to physical change and price change respectively.
a. 18,375,000 ; 11,300,000
b. 18,735,000 ; 13,100,000
c. 18,573,000 ; 11,300,000
d. 11,300,000; 18,375,000
ii. Which of the following entries is true regarding the record in biological
assets for the year 2014?
a. A credit to Biological Assets 29,675,000

b. A debit to Loss– Decrease in FV less CTS due to Price Change
13,100,000
c. A credit to Gain – Increase in FV less CTS due to Physical Change
18,375,000
d. A debit to Biological Assets 31,835,000
Answer : (i) A (ii) C
Solution:
(i)
Physical Change
4 year old cows 1,750 x (P42,000 – P35,000)
P12,250,000
3 year old cows 1,225 x (35,000 – P30,000)
6,125,000
Increase in FV due to Physical Change
P18,375,000
Price Change :
3 year old cows 1,750 x (P35,000 – P30,000)
P8,750,000
2 year old heifers 1,225 x (P30,000 – P28,000)
2,550,000
Increase in FV due to Price Change
P11,300,000
(ii)
Entry at year-end:
Biological Assets 29,675,000
Gain – Increase in FV less CTS due to Price Change
11,300,000
Gain – Increase in FV less CTS due to Physical Change
18,375,000
7-8. Bebe Co. provided the following data:

Value of biological asset at acquisition cost on 12/31/14
550,000
Fair valuation surplus on initial recognition
at fair value on 12/31/14 700,000
Change in fair value to 12/31/15 due to growth
and price fluctuation 100,000
Decrease in fair vale due to harvest 75,000
i. What is the gain from change in fair value of the biological asset that
should be reported in the 2015 income statement?
a. 50,000
b. 250,000
c. 25,000
d. 5,000
ii. What is the carrying amount of the biological asset on December

31,2015?
a. 1,250,000
b. 1,275,000
c. 1,257,000
d. 1,300,000
Answer: (i) C (ii) B
Solution:
(i)
Change in FV in 2015 100,000
Decrease in FV due to harvest (75,000)
Net gain from change in FV in 2015 25,000
(ii)
Acquisition cost – 12/31/14 550,000
Increase in fair value on initial recognition 700,000
Change in FV in 2015 100,000
Carrying Amount – 12/31/15 1,275,000
9-10. Yowyow Dairy Inc. produces milk for export. The entity began its
operations on January 1, 2013 by purchasing 500 milk cows for P9,000,000.
The entity had the following data available at year-end relating to the cows:
Acquisition cost, 1/1/13 9,000,0000
Decrease in FV due to harvest 700,000
Change in FV due to growth and price fluctuations 1,200,000
Milk harvested during 2013but not yet sold 350,000
i. What amount of gain on change in FV should be reported for the

agricultural produce in 2013?
a. 350,000
b. 1,200,000
c. 850,000
d. No gain
ii. What amount of gain on change in FV should be recognized for

biological asset in 2013?
a. 250,000
b. 500,000
c. 750,000
d. 1,2000,000
Answer: (i) A (ii) B
Solution:
(i)
Inventory 350,000
Gain on agricultural produce 350,000
(ii)
Change in FV due to growth and price changes 1,200,000
Net gain from biological asset 500,000
GROSS PROFIT METHOD
1. A trading business has the following record in January 2014 2,000 in

beginning inventory, made purchases of 5,000 throughout the period, made
sales of 8,000 and has a gross profit margin of 20 percent. What will be the
ending inventory on December 2014?
a. 5,400
b. 7,000
c. 1,400
d. 600
Answer: D
Solution:
Beginning inventory 2,000
Purchases 5,000
TGAS 7,000
Cost of goods sold:
Sales 8,000
Gross profit (120%) 6400
600
2. Linux company has the following information:

Purchases at cost 482,000
Cost on purchases 530,000
Ending inventory 14,000
What is the estimated cost of goods sold?

a. 330,000
b. 543,000
c. 491,000
d. 516,000
Answer: D
Solution:
Purchases at cost 482,000
TGAS 530,000
Cost of goods sold 516,000
2. Company A's inventory on January 1 was 175,000. Additions during the

first quarter of the year were 72,500. Company A's revenues in the first
quarter were 125,000 and the historical gross profit margin for this product is
40%. The inventory at the end of the first quarter would be?
a. 172,500
b. 197,500
c. 322,500
d. 100,000
Answer: A
Solution:
Beginning Inventory 175,000
Net Additions 72,500
Cost of Goods Available for Sale 247,500
Less: Estimated COGS (60% of 125,000) 75,000
Ending Inventory 172,500
3. Cetus Corp. has a beginning inventory of €60,000 and purchases of

€200,000, both at cost. Sales at selling price amount to €280,000. The gross
profit on selling price is 30 percent. What is the approximate ending
inventory?
a. 148,000
b. 64,000
c. 232,000
d. 624,000
Answer: B
Solution:
Inventory – beginning P60,000
Purchases 200,000
TGAS 260,000
Less: Cost of Goods Sold
Sale 280,000
Gross profit on sale (30%) 84,000 196,000
Inventory – ending 64,000
4. Matrix is interested in estimating its ending inventory at May 31 using the
gross profit method. The controller has provided us with certain information :
Net sales for May P1,213,000 Net purchases for May P728,300
Inventory at May 1 P237,400 Estimated gross profit ratio 43% of
sales
What is the ending inventory?
a. 36,890
b. 1,657,110
c. 274,290
d. 36,890
Answer: C
Solution:
Inventory – beginning P 237.400
Net Purchases 728,300
TGAS 965,700
Sales 1,213,000
5. Potter Company provided the following information:

June
Sales on account 9,500,000
Cash sales 520,000
All merchandise is marked up to sell at invoice cost plus 20%. What is the
cost of goods sold for june?
a. 2,004,000
b. 8,350,000
c. 8,016,000
d. 12,525,000
Answer: B
Solution:
Cost of goods sold for June ( 9,500,000 + 520,000 = 10,020,000/120%) 8,

350,000
6. A fire destroyed ASA company's inventor on October 31. On January 1, the

inventory had a cost of 3,500,000. During the period January 32 to October
31, the entity had net purchases of 8,500,000 and net sales of 17,000,000.
Undamaged inventory at the date of fire had a cost of 170,000. The mark up
on cost is 66 2/3%. What was the cost of inventory destroyed by fire?
a. 1,630,000
b. 1,970,000
c. 1,550,000
d. 5,170,000
Answer: A
Solution:
Goods available for sale (3,500,000 + 8,500,000) 12,000,000
Cost of goods sold ( 17,000,000/166 2/3%) (10,200,000)
Inventory-October 31 1,800,000
Undamaged inventory (170,000)
Inventory destroyed by fire 1,630,000
7. Aster Company provided the following information for the current year:
Net sales 5,600,000
Freight in 100,000
Purchase discounts 60,000
The gross margin is 40% of sales. What is the cost of goods available for
sale?
a. 2,380,000
b. 2,620,000
c. 3,100,000
d. 3,140,000
Answer: C
Solution:
Cost of goods sold (60% x 5,600,000) 3,360,000
Cost of goods available for sale 3,100,000
8. Silfredo Company began operations in 2014. For the year ended December
31,2014, the entity provided the following information:
Total merchandise purchases for the year 8,000,000
Merchandise inventory o December 31 2,400,000
Collections from customers 5,000,000
All merchandise was marked to sell at 40% above cost. All sales are on credit
basis and all receivables are collectible. What is the balance of accounts
receivable on December 31,2014?
a. 4,240,000
b. 14,240,000
c. 4,960,000
d. 9,240,000
Answer: A
Solution:
Purchases 7,000,000
Inventory-December 31 (2,400,000)
Cost of goods sold 6,600,000
Markup on cost (40% x 6,600,000) 2,640,000
Sales (140% x 6,600,000) 9,240,000
Collections from customers (5,000,000)
Accounts receivable - December31 4,240,000
9-10. Astaire Company uses the gross profit method to estimate inventory
for monthly reporting purposes. Presented below is information for the month
of May.
i. Compute the estimated inventory assuming gross profit is 25% of cost.

a. 74,000
b. 4,000
c. 86,000
d. 44,000
ii. Compute the estimated inventory at May 31, assuming that the gross
profit is 25% of sales.
a. 50,500
b. 90,500
c. 132,500
d. 120,500
Answer: (i) A (ii) D
Solution:
(i)
Inventory – beginning P 160,000
Purchases 640,000
Less Purchase discounts 12,000 628,000
Freight-In 30,000
TGAS 818,000
Sales 1,000,000
Less Sales return 70,000
Net Sales 930,000
Gross profit on cost (125%) 186,000 744,000
(ii)
Inventory – beginning P 160,000
Purchases 640,000
Less Purchase discounts 12,000 628,000
Freight-In 30,000
TGAS 818,000
Sales 1,000,000
Less Sales return 70,000
Net Sales 930,000
FINANCIAL ASSET AT FAIR VALUE

1-2. During 2014, Ever Company purchased marketable equity securities
held as trading investment. The entity also paid commission and taxes
amounting P400,000. For the year ended December 31,2014, the entity
recognized unrealized loss of P200,000.
There were no security transactions during 2015. The securities had the
following fair value at year-end:
Security December 31,2014 December 31,2015
A 1,500 shares 300,000 350,000
B 2,000 shares 500,000 450,000
i. What amount of unrealized gain or loss should be recognized in inome

statement for the year ended December 31,2015?
a. 50,000 gain
b. 100,000 gain
c. 150,000 gain
d. 50,000 loss
ii. At what amount should the financial asset initially be recognized?

a. 800,000
b. 900,000
c. c 1,000,000
d. 1,100,000
Answer: (i) B (ii) C
Solution:
(i)
Fair Value- 12/31/15
900,000
800,000
Unrealized gain in 2015
100,000
(ii)
800,000
Unrealized loss
200,000
Aquisition Cost
1,000,000
3-6. On Septmber 21,2013, Ja Lo Company purchased 35,000 shares for P50

per share The investment was classified as trading investment On December
31,2013, the market price per share is P42. During 2014, the entity sold
15,000 shares for P65 per share. On December 31,2014, the market price
per share had declined to P38.
i. What is the carrying amount of the investment for the year ended
December 31,2014?
a. 760,000
b. 840,000
c. 670,000
d. 1,000,000
ii. What is the carrying amount of the investment for the year ended
December 31,2013?
a. 1,750,000
b. 1,570,000
c. 1,470,000
d. 1,330,000
iii. What net amount of gain or loss should be recognized for 2014?
a. 345,000 gain
b. 265,000 gain
c. 80,000 loss
d. 105,000 gain
iv. What amount of unrealized gain or loss should be reported in the income
statement for 2013?
a. 280,000 loss
b. 525,000 gain
c. 420,000 loss
d. 280,000 gain
Answers: (i) B (ii) C (iii)B (iv) A
Solution:
(i)
Carrying amount- 12/31/14 (20,000 × 42)
840,000
(ii)
Carrying Amount- 12/31/13 ( 35,000 × 42 )
1,470,000
(iii)
Question 3 Answer b
Sale price ( 15,000 × 65 )
975,000
Cost of shares sold ( 15,000 × 42)
630,000
Gain on sale
345,000
Market value of remaining shares (20,000 × 38)
760,000
Carrying amount (20,000 × 42)
840,000
Loss from change in fair value
(80,000)
Net gain ( 345,000 - 80,000 )
265,000
(iv)
Market Value- 12/31/13
1,470,000
Acquisition Cost
1,750,000
Unrealized gain in 2013
(280,000)
7. On October 7, 2014, Reno Company acquired a financial asset for
P3,000,00. The entity also paid commission and taxes amounting to
P300,000. The financial asset had a market value of P2,900,000 on
December 31, 2014. At what amount should the financial asset initially be
recognized if it is classified as fair value through profit or loss?
a. 3,000,000
b. 2,900,000
c. 3,300,000
d. 2,700,000
Answer: C
Solution:
Financial Asset at Fair Value
P3,300,000
8-9. Dora Company acquired financial instrument for P4,000,000, on July

17,2014. The entity also paid commission, taxes and other costs amounting
P300,000. The financial instrument is classified as financial asset at fair value
through other comprehensive income. On December 31,2014 the fair value
of the instrument was P4,500,000 and the transaction costs that would be
incurred on the sale of investment are estimated at P700,000. On December
31 2015, the issuer of th instrument was in severe financial difficulty and the
fair value of the instrument had fallen to P2,800,000.
i. What amount of unrealized gain or loss should be reported in the 2014

income statement?
a. 500,000 gain
b. 200,000 gain
c. 200,000 loss
d. 0
ii. What amount of loss should be reported as component of other
comprehensive income in the statement of changes in equity on
December 31,2015?
a. 1,000,000
b. 1,200,000
c. 1,500,000
d. 1,700,000
Answer: (i) D (ii) C
Solution:
(i)
When financial instrument classified as at fair value through other
comprehensive income, any unrealized gain or loss is reported as component
of other comprehensive income.
(ii)
2,800,000
Historical Cost
4,300,000
Cumulative unrealized loss
(1,500,000)
10. On October 24,2014, Tiu Tan Company purchased P2,000,000 face value
10% bonds for P1,875,000 plus accrued interest to yield 12%. The bonds
mature on October 24,2010, pay interest semiannually on Jan. 1 and July 1.
On December 31,2014,the bonds had a market value of P1,925,000. On
March 12,2015,the entity sold the bonds for P1,900,000. On December
31,2014, what amount should be reported for short-term investments in
trading debt securities?
a. 1,925,000
b. 1,875,000
c. 1,900,000
d. 2,000,000
Answer : A
Solution
Financial Asset at fair value
1,925,000
INVESTMENT IN EQUITY SECURITIES

1. Wray Company provided the following data for 2015:
 On September 1, Wray received a P500,000 cash dividend from Seco

Company in which Wray owns a 30% interest.
 On October 1, Wray received a P60,000 liquidating dividend from King
Company. Wray owns a 5% interest in King.
 Wray owns a 2% interest in Bow Company, which declared a P2,000,000
cash dividend on November 15, 2015 payable on January 15, 2016.
What amount should be reported as dividend income for 2015?

a. 600,000
b. 560,000
c. 100,000
d. 40,000
Answer: D
Solution:
Cash dividend from Bow Company (2% x 2,000,000)
40,000
2. On January 1, 2015, ABC Company purchased 40,000 shares of RST at

P100 per share. The investment is measured at fair value through other
comprehensive income. Brokerage fees amounted to P120,000. A P5
dividend per share of RST had been declared on December 15, 2013, to be
paid on March 31, 2015 to shareholders of record on January 31, 2015. No
other transactions occurred in 2015 affecting the investment in RST shares.
What is the initial measurement of the investment?
a. 4,120,000
b. 3,920,000
c. 4,000,000
d. 3,800,000
Answer: B
Solution:
Purchase price (40,000 x 100)
4,000,000
Brokerage 120,000
Total 4,120,000
Less: Purchased dividend (40,000 x 5)
200,000
Cost of investment 3,920,000
3. On January 1, 2015, Hostile Company purchased 4,000 shares of another

entity at P100 per share. Transaction costs amounted to P12,000. The
investment is measured at fair value through other comprehensive income.
A P5 dividend per share had been declared on December 15, 2013, to be paid on
March 31, 2015 to shareholders of record on January 31, 2015. No other transaction
occurred in 2015 affecting the investment. What is the initial measurement of the
investment on January 1, 2015?
a. 392,000
b. 400,000
c. 412,000
d. 380,000
Answer: A
Solution:
Fair Value (4,000 x 100) 400,000
Transaction Cost 12,000

Carrying Amount 412,000
Dividends (4,000 x 5) ( 20,000)
Investment in Stocks 392,000
4. Cobb Company purchased 10,000 shares representing 2% ownership of

Roe Company on February 15, 2015. Cobb Company received a stock
dividend of 2,000 shares on March 31, 2015, when the carrying amount per
share was P350 and the market value per share was P400. Roe Company
paid a cash dividend of P15 per share on September 15, 2015. In the income
statement for the year ended October 31, 2015, what amount should be
reported as dividend income?
a. 150,000
b. 980,000
c. 180,000
d. 880,000
Answer: C
Solution:
Original shares 10,000
Stock Dividend 2,000
Total shares 12,000
Dividend income (12,000 x P15) 180,000
5. During 2015, Neil Company held 30,000 shares of Brock company’s

100,000 outstanding shares and 6,000 shares of Amal Company’s 300,000
outstanding shares. During the year, Neil received P300,000 cash dividend
from Brock, P15,000 cash dividend and 3% stock dividend from Amal. The
closing price of Amal share is P150.
What amount should be reported as dividend revenue for 2015?
a. 342,000
b. 315,000
c. 442,000
d. 15,000
Answer: D
Solution:
Cash dividend from Amal (6,000/300,000 = 2% interest) 15,000
6. On January 1, 2015, Mylene Company purchased 50,000 shares of another

entity for P3,600,000. On October 1. 2015, the entity received 50,000 stock
rights from the investee. Each right entitled the shareholder to acquire one
share of P85. The market price of the investee’s share was P100 immediately
before the rights were issued and P90 immediately after the rights were
issued. On December 31, 2015, the entity sold 25,000 shares at P90 per
share. The stock rights are not accounted for separately. The FIFO approach
is used.
What is the gain on sale of investment that should be recognized in 2015?

a. 700,000
b. 450,000
c. 287,500
d. 125,000
Answer: B
Solution:
Shares Cost
Original investment 50,000
3,600,000
New investment acquired through stock rights (50,000 x 85) 50,000
4,250,000
Total 100,000
7,850,000
FIFO approach
Sale price (25,000 x 90)
2,250,000
Cost of shares sold (25,000/50,000 x 3,600,000)
(1,800,000)
Gain on sale
450,000
7. Valedictory Company issued rights to subscribe to its stock, the ownership

of 4 shares entitling the shareholders to subscribe for 1 share at P100. Vast
Company owned 50,000 shares of Valedictory Company with total cost of
P5,000,000. The share is quoted right-on at 125. The stock rights are
accounted for separately. What is the cost of the new investment if all of the
stock rights are exercised by Vast Company?
a. 1,250,000
b. 1,562,000
c. 1,500,000
d. 1,450,000
Answer: C
Solution:
Theoretical value of right (125-100 / 4+1)= P5
Initial cost of rights (50,000 x 5) 250,000
Cash paid for new shares (50,000/4 = 12,500 x 100) 1,250,000
Cost of new investment
1,500,000
8-9. On January 1, 2012, Christopher Company purchased 20,000 shares of Bay

Company, P100 par, at P110 per share. On March 1, 2012, Bay Company issued
rights to Christopher Company, each permitting the purchase of ¼ share at par. No
entry was made. The bid price of the share was 140 and there was no quoted price
for the rights. On April 1, 2012, Christopher Company paid for the new shares
charging the payment to the investment account. Since Christopher Company felt
that it had been assessed by Bay Company, the dividends received from Bay
Company in 2012 and 2013 (10% on December 31 of each year) are credited to the
investment account until the debit was fully offset. Bay Company declared annual
dividend of P2,500,000 for the year ended December 31, 2012 and 2013. On
January 1, 2014, Christopher Company received 50% stock dividend from Bay
Company. On same date, the shares received as stock dividend were sold at P160
per share and the proceeds were credited to income. On December 31, 2014, the
shares of Bay Company were split 2 for 1. Christopher Company found that each
new share was worth P5 more than the P110 paid for the original shares.
Accordingly, Christopher Company debited the investment account with the
additional shares received at P110 per share and credited income. On June 30,
2015, Christopher Company sold one-half of the investment at P92 per share and
credited the proceeds to the investment account.
i. What is the balance of the investment on December 31, 2015 as it was

kept by Christopher Company?
a. 3,150,000
b. 2,650,000
c. 2,200,000
d. 4,950,000
ii. Using the average method, what is the correct balance of the investment
a. 2,200,000
b. 1,800,000
c. 900,000
d. 0
Answer: (i) B (ii) C
Solution:
(i)
Shares Cost
1/1/2012 (20,000 x 110) 20,000
2,200,000
4/1/2012 (5,000 x 100) 5,000
500,000
12/31/2012 (10% x 2,500,000) - (250,000)
12/31/2013 (10% x 2,500,000) - (250,000)
12/31/2014 (25,000 x 110) 25,000
2,750,000
6/30/2015 (25,000 x 92) (25,000) (2,300,000)
Investment account per book 25,000
2,650,000
(ii)
Shares Cost
1/1/2012 (20,000 x 110) 20,000
2,200,000
4/1/2012 (5,000 x 100) 5,000 500,000
1/1/2014 (50% x 25,000) 12,500 -
Balance 37,500 2,700,000

1/1/2014 (12,500/37,500 X 2,700,000) (12,500) ( 900,000)
Balance 25,000 1,800,000

12/31/2014 (2 for 1 split) 25,000 -
Balance 50,000 1,800,000

6/30/2015 (1/2 x 1,800,000) (25,000) (900,000)
Balance December 31, 2015 25,000
900,000
10. Rice company owned 30,000 ordinary shares of Wood Company acquired
on July 31, 2015, at a total coast of P1,100,000. ON December 1, 2015, Rice
received 30,000 stock rights rom Wood. Each right entitles the holder to
acquire one share at P45. The market price of each right was P10. Rice sold
its rights on December 31, 2015 for P450,000 less a P10,000 commission.
What amount should be reported as gain from the sale of the rights?
a. 150,000
b. 140,000
c. 250,000
d. 240,000
Answer: B
Solution:
Net sale price (450,000-10,000)
440,000
Initial cost of rights sold (30,000 x 10) ( 300,000)
Gain on sale of rights
140,000
INVESTMENT IN ASSOCIATE
1-4 Lenlen Company acquired 30% of Jesse Company's voting share capital
for P2,000,000 on January 1,2013. Lenlen's 30% interest in Jesse gave Lenlen
the ability to exercise significant influence over Jesse's operating and
financial policies. During 2013, Jesse earned P1,200,000 and paid dividend of
P800,000. Jesse reported earnings of P900,000 for the 6 months ended June
30,2014, and P1,700,000 for the year ended December 31,2014. On July
1,2014 Lenlen sold half of the investment in Jesse for P1,900,000 cash. Jesse
paid dividend of P400,000 September 31,2014. The fair value of the retained
investment is P1,400,000 on July 1,2014 and P1,650,000 on December
31,2014. The retained investment ia to be held as financial asset at fair value
through other comprehensive income.
i. In the December 31,2013 statement of financial position, what is the

carrying amount of the investment in associate?
a. 2,000,000
b. 2,360,000
c. 2,120,000
d. 2,600,000
ii. In the 2014 income statement,what amount should be reported as gain

from the sale of investment?
a. 900,000
b. 600,000
c. 705,000
d. 720,000
iii. In the 2014 income statement,what amount should be reported as gain

from remeasurement of the retained investment?
a. 220,000
b. 205,000
c. 400,000
d. 100,000
e.
iv. Before income tax,what amount should be included in the 2014 income
statement as a result of the investment?
a. 360,000
b. 180,000
c. 252,000
d. 1,200,000
Answer: (i) C (ii) C (iii) B (iv) A
Solution:
(i)
Aquisition cost, Januar 1,2013
2,000,000
Add: Share in 2013 net income
360,000
Total
2,360,000
Less: Share in 2013 dividend (30% × 800,000)
240,000
Carrying amount of investment, December 31,2013
2,120,000
(ii)
Carrying amount of investment, December 31,2013
2,120,000
Add: Share in net income from January 1 to June 30,2014 (30% × 900,000 )
270,000
Carrying amount of investment, June 30,2014
2,390,000
Sale price
1,900,000
Cost of investment sold (2,390,000/2)
(1,195,000)
Gain from sale of investment
705,000
(iii)
Fair value - July 1,2014
1,400,000
Carrying amount of retained investment
1,195,000
Gain from remeasurement
205,000
Fair value - December 31,2014
1,650,000
Fair value - July 1,2014
1,400,000
Unrealized gain of financial asset
250,000
(iv)
Share in 2013 net income (30% × 1,200,000)
360,000
5. On March 31,2014, Qua Lee Company acquired 40% of the outstanding

ordinary shares of an investee for P8,000,000. The carrying amount of the
net assets of the investee equaled P15,000,000. Any excess of cost over
carrying amount is attributable to goodwill. During the year, the investee
reported net loss of P4,500,000 and paid dividends of P3,300,000. What is
the carrying amount of the investment on December 31,2014?
a. 5,330,000
b. 5,660,000
c. 8,000,000
d. 6,650,000
Answer: A
Solution:
Aquisition cost
8,000,000
Share in net loss (4,500,000 × 9/12 × 40%)
(1,350,000)
Share in cash dividend (40% × 3,300,000)
(1,320,000)
Carrying amount- December 31,2014
5,330,000
6. Aldub Company owned 20% of Liz Quen Company's preference share

capital and 80% of the ordinary share capital on December 31,2014.
10% cumulative preference share capital 3,600,000
Ordinary share capital 6,000,000
The investee reported net income P3,000,000 for the year ended December
31, 2014. What is the equity in earnings of the investee for 2014?
a. 2,400,000
b. 1,824,000
c. 1,842,000
d. 2,112,000
Answer: D
Solution:
Net income
3,000,000
Preference dividend (10% × 3,600,000)
(360,000)
Net income to ordinary shares
2,640,000
Share in net income - ordinary shares (80% × 2,640,000)
2,112,000
7-8. On January 1,2014, Coco Company purchased 25% of Nata Company for
P 2,500,000. The carrying amount of Nata's net assets was P9,000,000.Fair
values and carrying amounts were the same for all items except for land
whose fair value exceeded it's carrying amount by P900,000. For the year
ended December 31,2014, Nata Company reported net income of
P1,800,000 and declared and paid cash dividends of P1,200,000.
i. What amount of revenue from the investment should be reported for
2014?
a. 300,000
b. 750,000
c. 450,000
d. 475,000
ii. On December 31,2014, what is the amount of the investment in Nata

Company?
a. 2,950,000
b. 2,800,000
c. 3,200,000
d. 2,925,000
Answer: (i) C (ii) A
Solution:
(i)
Share in net income (25% × 1,800,000)
450,000
(ii)
Acquisition cost
2,500,000
Net assets acquired (25% × 9,000,000)
2,250,000
Excess of cost over carrying amount
250,000
Less: Amount attributable to undervaluation of land (25% × 900,000)
225,000
Goodwill- not amortized
25,000
Aquisition cost, January 1
2,500,000
Add: Share in net income (25% × 1,800,000)
450,000
Carrying amount of investment
2,950,000
9. On June 30,2014, Clark Company purchased 20% of Leah Company's

outstanding ordunary shares and no goodwill resulted from the puchase Leah
appropriately carried tis investment at equity and the balance in Leah's
investment account was P2,700,000 at December 31,2014. Leah Company
reported net income of P1,600,000 for the year ended December
31,2014,and paid dividend totaling 220,000. How much did Clark pay for the
interest in Leah?
a. 2,744,000
b. 2,854,000
c. 2,584,000
d. 2,700,000
Answer: C
Solution:
Acquisition cost, June 31 (SQUEEZE)
2,584,000
Add: Share in net income (1,600,000 × 6/12 × 20%)
160,000
Total
2,744,000
Less: Share in cash dividend (20% × 220,000)
44,000
Investment balance, December 31
2,700,000
10. On January 1,2013, YOUReth Company purchased 20% of Janeth

Company's ordinary shares outstanding for P7,000,000. The acquisition cost
is equal to the carrying amount of the net assets acquired. During 2013, the
investee reported net income of P8,900,000 and paid cash dividend of
P3,200,000. What amount should be reported as investment in associate on
December 31,2013?
a. 8,780,000
b. 8,140,000
c. 9,420,000
d. 7,640,000
Answer: B
Solution:
Acquisition cost- January 1
7,000,000
Add: Share in net income (20% × 8,900,000)
1,780,000
Total
8,780,000
Less: Cash divided received (20% × 3,200,000)
640,000
Carrying amount of investment
8,140,00
FINANCIAL ASSET AT AMORTIZED COST

1-2. On January 1, 2015, Russia Company purchased 5-year bonds with face
value of P8,000,000 and stated interest of 10% per year payable
semiannually January 1 and July 1. The bonds were acquired to yield 8%.
Present value factors are:
Present value of an annuity of 1 for 10 periods at 5% 7.72
Present value of an annuity of 1 for 10 periods at 4% 8.11
Present value of 1 for 10 periods at 4% 0.6756
i. What is the carrying amount of the bond investment on December 31,

2015?
a. 8,538,542
b. 8,302,848
c. 8,594,752
d. 8,540,704
ii. What is the purchase price of the bonds?

a. 7,732,400
b. 7,351,200
c. 8,648,800
d. 8,617,600
Answer: (i) A (ii) C
Solution:
(i)
Acquisition cost – January 1, 2015 8,648,800
Amortization of premium – 1/1/2015 to 6/30/2015:
Interest received (5% x 8,000,000) 400,000
Interest income (4% x 8,648,800) 345,952 54,048
Carrying amount – June 30, 2015 8,594,752

Amortization of premium – 7/1/2015 to 12/31/2015:
Interest received 400,000
Interest income (4% x 8,594,752) 343,790 56,210
(ii)
Semiannual nominal interest (8,000,000 x 5%) 400,000
Semiannual effective interest (8,000,000 x 4%) 320,000
Difference 80,000
Multiply by PV of annuity of 1 for 10 periods at 4% 8.11
Premium 648,800
Face value 8,000,000
Purchase price 8,648,800
3. On January 1, 2015, Queen Company purchased bonds with face value of

P5,000,000 for P5,400,000. The stated interest rate is 8% payable annually
every December 31. The bonds are acquired to yield an effective rate of 6%.
The entity has elected the fair value option for the bond investment. On
December 31, 2015, the bonds had a fair value of P5,600,000. What total
income should be reported for 2015?
a. 200,000
b. 400,000
c. 500,000
d. 600,000
Answer: D
Solution:
Gain from change in fair value (5,600,000-5,400,000) 200,000

Interest income (5,000,000 x 8%)
400,000
Total income 600,000
4. On October 1, 2015, DaLenlen Company purchased P2,000,000 face value

12% bonds for 98 plus accrued interest and brokerage fee. Interest is paid
semiannually on January 1 and July 1. Brokerage fee for this transaction was
P50,000. At what amount should this acquisition of bonds be recorded?
a. 1,960,000
b. 2,010,000
c. 2,020,000
d. 2,070,000
Answer: B
Solution:
Purchase price (2,000,000 x .98) 1,960,000
Brokerage fee 50,000
Total acquisition cost 2,010,000
5. On January 1, 2015, Portugal Company purchased bonds with face value of

P8,000,000 for P7,679,000 as a long-term investment. The stated rate on the
bonds is 10% but the bonds are acquired to yield 12%. The bonds mature at
the rate of P2,000,000 annually every December 31 and the interest is
payable annually also every December 31. The entity used the effective
interest method of amortizing discount. What is the carrying amount of the
investment in bonds on December 31, 2015?
a. 5,729,250
b. 7,759,250
c. 7,800,480
d. 5,800,480
Answer: D
Solution:
Interest income (7,679,000 x 12%) 921,480
Interest received (8,000,000 x 10%) 800,000
Discount amortization 121,480
Cost 7,679,000
Discount amortization 121,480
Annual installment (2,000,000)
5,800,480
6. On January 1, 2015, Purl Company purchased as a long-term investment

P5,000,000 face value of Shaw Company’s 8% bonds for P4,562,000. The
bonds were purchased to yield 10% interest. The bonds mature on January 1,
2020 and pay interest annually on December 31. The interest method of
amortization is used. What is the carrying amount of the investment on
December 31, 2016?
a. 4,662,000
b. 4,680,020
c. 4,562,000
d. 4,618,200
Answer: B
Solution:
Amortization of discount for 2015
Interest received (5,000,000 x 8%) 400,000 56,200
Amortization of discount for 2016
Interest received (5,000,000 x 8%) 400,000 61,820
7. On July 1, 2015, York Company purchased as a long-term investment

P1,000,000 of Park Company’s 8% bonds for P946,000, including accrued
interest of P40,000. The bonds were purchased to yield 10% interest. The
bonds mature on January 1, 2021, and pay interest annually on January 1.
York Company used the effective interest method of amortization. On
December 31, 2015, what carrying amount of the investment in bonds?
a. 916,600
b. 911,300
c. 953,300
d. 960,600
Answer: B
Solution:
Purchase price
946,000
Less: Accrued interest
( 40,000)
Cost of investment 906,000
Amortization of discount from July 1 to December 31, 2015:

Interest income (906,000 x 10% x 6/12) 45,300
Interest received (1,000,000 x 8% x 6/12) 40,000
5,300

911,300
8. Tiger Company purchased P5.000,000 of bonds at par. The entity has

elected the fair value model for this investment. At year-end, the entity
received annual interest of P200,000 and the fair value of the bonds was
P4,705,000.
What amount should be reported for the bond investment as total income or
loss in the income statement?
a. 200,000 income
b. 295,000 loss
c. 495,000 income
d. 95,000 loss
Answer: D
Solution:
Interest income 200,000
Loss from change in fair value (5,000,000 – 4,705,000)
(295,000)
Total Loss ( 95,000)
9. On October 1, 2015, Park Company purchased 6,000 of the P1,000 face

amount, 10% bonds of Ott Company for P6,600,000 including accrued
interest of P150,000. The bonds, which mature on January 1, 2022, pay
interest semiannuallyon January 1 and July 1. Park used the straight line
method of amortization and appropriately recorded the bonds as financial
asset at amortized cost. On December 31, 2015, the bond investment should
be reported at what amount?
a. 6,450,000
b. 6,432,000
c. 6,426,000
d. 6,360,000
Answer: B
Solution:
October 1, 2015 to January 1, 2022 = 75 months
Cost (6,600,000-150,000) 6,450,000

Face Value 6,000,000
Premium 450,000
Monthly amortization (450,000 / 75) 6,000
Cost 6,450,000
Amortization of premium from October 1
to December 31, 2015 (4,000 x 3) ( 18,000)
Carrying Amount – December 41, 2015 6,432,000
10. On January 1, 2015, Venus company purchased 10% bonds with face
value of P5,000,000 plus transaction cost of P101,500 with a yield of rate of
8%. The bonds mature on December 31, 2019 and pay interest annually on
December 31. The carrying amount of the investment on December 31, 2015
using the effective interest method is P5,333,620. What is the initial
acquisition cost of the bond investment?
a. 5,401,500
b. 5,300,000
c. 5,198,500
d. 5,398,500
Answer: A
Solution:
Carrying amount – December 31. 2015 5,333,620

Nominal interest (5,000,000 x 10%) 500,000
Total 5,333,620
Divide by (100% + 8%) 108%
EFFECTIVE INTEREST METHOD

1. Wrightway Corporation issues 100,000 of 10%, 5-year bonds on January 1,
2007, with interest payable each January 1. The bonds sell for P92,790 which
results in bond discount of P7,210 (P100,000 - P92,790) and an effective-
interest rate of 12%.
What is the carrying amount of bonds on December 31,2007?
a. 93,925
b. 92,790
c. 98,865
d. 91,656
Answer: A
Solution:
Bond interest expense (P92,790 x 12%) 11,135

Bond interest paid (P100,000 x 10%) 10,000
Bond discount amortization 1,135
Carrying amount (92,790 + 1,135) = 93,935
2. On January 2014 Linux Company purchased bonds with face value of

4,000,000 for 4,700,000. The stated interest rate is 12% payable annually
every December 31. The bonds are acquired to yield an effective rate of 8%.
The entity has elected the fair value option for the bond investment. On
December 31,2014 the bonds had a fair value of 5,300,000. What total
income should be reported for 2014?
a. 1,080,000
b. 920,000
c. 1,620,000
d. 280,000
Answer: B
Solution:
Gain from change in fair value (5,300,000-4,700,000)
600,000
Interest Income (4,000,000 x 12%)
320,000
Total Income
920,000
3. Company DS intended to issue a bond with face value of 100,000 having a

maturity of 5 years and annual coupon of 8%. At the time of issue however,
the market interest rate rose to 10% and the bond could fetch a price of
92,420 only. What is the amortization on the first year?
a. 9,242
b. 8,000
c. 1,242
d. 2,606
Answer: C
Solution:
Interest Income (92,420 x 10%) 9,242
Interest Receivable (100,000x8%) 8,000
Amortization 1,242
4. HydroYOUR company purchased bonds at a discount of 200,000.

Subsequently, the entity sold these bonds at a premium of 230,000. During
the period that the entity held this investment, amortization of the discount
amounted to 30,000. What amount should be reported as gain on sale of
bonds?
a. 460,000
b. 360,000
c. 480,000
d. 500,000
Answer: A
Solution:
Carrying amount (1,000,000-200,000) 800,000
Amortization to date 30,000
Carrying amount 770,000
Selling price (1,000,000 + 230,000) 1,230,000

Less: Carrying amount
770,000
Gain on sale
460,000
5. On July 1, 2014 Xenon company purchased a long term investment

4,500,000 face amount, 5% bonds of Xion Company for 3,150,000 to yield
10% per year .The bonds pay interest semiannually on January 1 and July 1.
On December 31,2014, what amount should be reported as interest
receivable?
a. 112,500
b. 225,000
c. 450,000
d. 115,375
Answer: A
Solution:
Accrued interest receivable from July 1 to December 31,2014

(4,500,000 x 5% x 6/12)
112,500
6. On January 1,2014 Arci company purchased bonds with face value of

2,500,000. The bonds are dated January 1,2014 and mature on January
1,2018. The interest on bonds is 10% payable semiannually every June 30
and December 31. The prevailing market rate of interest on the bonds is
12%. What is the present value of the bonds on January1,2014?
a. 806,750
b. 798,750
c. 1,575,000
d. 776,250
Answer: B
Solution:
PV of principal (2,500,000 x .63) 1,575,000
PV of semiannual interest payments 776,250
(125,000x6.21)
Present value 798,750
7. On January 1, 2011, Company A issues long-terms bonds which are due on

January 1, 2016. Interest is paid semiannually on January 1 and July 1 each
year. Face amount of bonds is 500,000 with stated interest rate (coupon
rate) of 10%. At the time of issuance, market interest rate is 12%. What will
be the price of bonds issued by Company A?
a. 463,202
b. 279,200
c. 500,000
d. 184,002
Answer: A
Solution:
Present value of principal = 500,000 x Present value factor for a
single payment (6%, 10 periods)
= 500,000 x 0.5584
= 279,200
Present value of interest payments = 500,000 x Present value
factor for an ordinary annuity (6%, 10 periods)
= (500,000 x 5%) x 7.3601
= 184,002
Price of bonds
= Present value of principal + Present value of interest
payments
= 279,200 + 184,002
= 463,202
8. On January 1,2014 Tungsten Company purchased 15% bonds with face

value of 4,000,000 plus transaction cost of 54,000 with a yield ate of13%.
The bonds mature on December 31,2018. And pay interest annually on
December 31. The carrying amount of the investment on December 31,2014
using the effective interest method is 4 ,146,000. What is the initial cost of
the bond investment?
a. 4,244,000
b. 3,138,000
c. 4,200,000
d. 4,126,000
Answer: C
Solution:
Carrying amount - December 31,2014 4,146,000
Add: Nominal interest (4,000,000x15%) 600,000
Total 4,746,000
Divide by (100 + 13%) 113%
9. Bismuth Company purchased 3,500,000 of bonds at par. The entity has

elected the fair value model for this investment. At year end, the entity
received annual interest of 140,000 and the fair valur of bonds was
3,205,000. What amount should be reported for the bond investment as total
income or loss in the income statement?
a. 295,000loss
b. 155,000loss
c. 140,000 income
d. 435,000 loss
Answer: B
Solution:
Interest income
140,000
Loss from change in fair value (3,500,000 -3,205,000)
(295,000)
Total loss
(155,000)
10. Helium Corporation issues 100,000, 10%, 5-year bonds on January 1, with
interest payable on January 1. In this case, the bonds sell for 107,985, which
results in bond premium of 7,985 and an effective-interest rate of 8%. What
is the amortization premium for the year?
a. 7,985
b. 2,159.5
c. 1,361
d. 2, 798.5
Answer: C
Solution:
Bond interest paid (100,000 x 10%) 10,000

Bond interest expense (107,985 x 8%) 8,639
Bond premium amortization 1,361
INVESTMENT PROPERTY
1-2. George Company acquired a building on January 1, 2013 for P10, 000,
000. At the date, the building had a useful life of 35 years. On December 31,
2013, the fair value of the building was P10, 500, 000 and on December 31,
2014, the fair value was P10, 900, 000. The building was classified as an
investment property and accounted for under the cost model.
i. What is the carrying amount of the investment property on December 31,

2014?
a. 9, 428, 571
b. 10, 000, 000
c. 9, 714, 286
d. 10, 285, 714
ii. What is the depreciation of the investment property for 2014?

a. 300, 000
b. 241, 500
c. 285, 714
d. 298, 417
Answer: (i)A (ii) C
Solution:
(i)
Cost- January 1, 2013 P10, 000, 000
Accumulated Depreciation (10, 000, 000/ 35x2) ( 571,
429)
Carrying Amount- December 31, 2014 P 9, 428, 571
(ii)
Depreciation for 2013 (10, 000, 000/ 35) P285, 714.
3. Lenidya Company’s accounting policy with respect to investment

properties is to measure them at fair value at the end of each reporting
period.
One of the investment properties was measured at 7,950,000 and on

December 31, 2014.
The property had been acquired on January 1, 2014 for a total of P 7,

600, 000, made up of P 6,900, 000 paid to the vendor, P300, 000 paid to the
local authority as a property transfer tax and P400, 000 paid to professional
advisers. The useful life of the property is 50 years.
What is the amount of gain to be recognized in profit or loss for the year
ended December 31, 2014 in respect of the investment property?
a. 350, 000
b. 400, 000
c. 450, 000
d. 500, 000
Answer: A
Solution:
Fair Value P 7,950,000

Acquisition Cost 7, 600, 000
Gain from change in Fair Value P350, 000
4-5. Howard Company owned an investment property which had an original

cost of P6, 500,000 on January 1, 2012. On December 31, 2013, the fair
value was P 7, 000, 000 and on December 31, 2014 the fair value was 6,
900, 000 .On acquisition, the property had a useful life of 45 years.
i. Under the cost model, what is the expense to be recognized for the year
ended December 31, 2014?
a. 156, 000
b. 153, 333
c. 195,667
d. 144, 444
ii. Under the fair value model, what is the expense to be recognized for the
year ended December 31, 2014?
a. 50, 000
b. 100, 000
c. 250, 000
d. 500, 000
Answer: (i)D (ii) B
Solution:
(i)
COST MODEL
Initial cost Fair Value Fair Value
12/31/14 12/31/15
Property 1 2, 500, 000 3, 150, 000 3, 200, 000
Property 2 3, 250, 000 3, 050, 000 2, 950, 000
Property 3 3, 450, 000 3, 750, 000 3, 500, 000
Depreciation Expense (2014)

(6, 500, 000/ 45) P144, 444
(ii)
FAIR VALUE MODEL
Fair value- December 31, 2013 P 6, 900, 000

Fair Value- December 31, 2014 7, 000, 000
Loss from change in Fair Value (P 100, 000)
6. Clayton Company owned three properties which are classified as

investment properties. Details of the properties are as follows:
Fair Value Fair Value

12/31/14 12/31/15
Property 1 3, 150, 000 3, 200,
000
Property 2 3, 050, 000 2, 950,
000
Property 3 3, 750, 000 3, 500,
000
Each property was acquired in 2011 with a useful life of 30 years. The
accounting policy is to use the fair value model for investment properties.
What is the gain or loss to be recognized for the year ended December 31,
2015?
a. 250, 000
b. 300, 000
c. 450, 000
d. 500, 000
Answer: D
Solution:
Fair Value Fair Value Gain
12/31/14 12/31/15 (loss)
Property 1 3, 150, 000 3, 200, 50, 000
000
Property 2 3, 050, 000 2, 950, (100, 000)
000
Property 3 3, 750, 000 3, 500, (250, 000)
000
Net loss from change in fair (300, 000)
value
7. Azalea Company and its subsidiaries own the following properties that are
accounted for in accordance with PAS 40:
 Land held for future factory site 4, 000, 000

 Machinery leased out by Azalea to an unrelated
party under an operating lease 1, 500, 000
 Land held by Azalea for undetermined use 5, 000, 000
 A vacant building owned by Azalea and to be
leased out under an operating lease 3, 250, 000
 Land leased by Azalea to a subsidiary under an
operating lease 2, 000, 000
 Property held by a subsidiary of Azalea, a real
estate firm, in the ordinary course of business 2, 610, 000
 Property held by Azalea for use in production 3, 950, 000
 Building owned by a subsidiary of Azalea and for
which the subsidiary provides security and
maintenance services to the lessees 1, 750, 000
 Property under construction for use in 5, 550, 000
investment property
What is the total investment property that should be reported in the

consolidated statement of financial position of the parent and its
subsidiaries?
a. 15, 550, 000

b. 15, 550, 000
c. 17, 170, 000
d. 21, 660, 000
Answer: D
Solution:
Land held by Azalea for undetermined use P 5, 000, 000
A vacant building owned by Azalea and to be leased 3, 250, 000
out under an operating lease
Building owned by a subsidiary of Azalea and for 1, 750, 000
which the subsidiary provides security and
maintenance services to the lessees
Property under construction for use in investment 5, 550,
property 000
Total investment property P15, 550 ,000
8. Amaya Company purchased an investment property in January 1, 2012 for

P3, 450, 000. The property had a useful life of 35 years and on December 31,
2014 had a fair value of P4, 000, 000. On December 31, 2014, the property
was sold for net proceeds of P3, 900, 000. The entity used the cost model to
account the investment property.
What is the gain or loss to be recognized for the year ended December 31,
2014 regarding the disposal of the property?
a. 645, 315
b. 735, 451
c. 745, 715
d. 815, 669
Answer: C
Solution:
Cost- January 1, 2012 P 3, 450,
000
Accumulated Depreciation (3, 450, 295, 714
000/35x3)
Carrying Amount December 31, 2014 P 3, 154,
286
Selling Price P 3, 900,

000
Carrying Amount-December 31, 2014 3, 154,286
Gain on Disposal of Property P745, 715
9-10. Aslan Company has a building with a carrying amount of P25, 000, 000
on December 31, 2014. The building is used as offices of the entity’s
administrative staff.
 On December 31, 2014, the entity intended to rent out the building to
independent third parties. The staff will be moved to a new building
purchased early in 2014
 On December 31, 2014, the original building had a fair value of P35,
000, 000
 On December 31, 2014, the entity also had land that was held in the
ordinary course of the business
 The land had a carrying amount of P15, 000, 000 and fair value of P20,
000, 000 on December 31, 2014. On such date, the entity decided to
hold the land for capital appreciation.
The accounting policy is to carry all investment property at fair value.
i. On December 31, 2014, what amount should be recognized as revaluation

surplus as a result of transfer of the building to investment property?
a. 10, 000,
000
b. 15, 000,
000
c. 20, 000,
000
d 25, 000,
000
ii. On the same date, what amount should be recognized on profit or loss as
a result of the transfer of the land to investment property?
a. 5, 000, 000
b. 10, 000,
000
c. 20, 000,
000
Answer: (i) A d 15, 000, (ii) D
000
Solution:
(i)
Fair value of Building- December 31, 2014 P 35, 000, 000

Carrying amount of building- December 31, 25, 000, 000
2014
Revaluation Surplus P10, 000, 000
(ii)
Fair value of land-December 31, 2014 P 20, 000, 000
Carrying amount of land- December 31, (15, 000, 000)
2014
Gain on Reclassification P 5, 000, 000
PROPERTY,PLANT AND EQUIPMENT
1-3. EXO COMPANY acquires a new manufacturing equipment on January 1,
2015, on installment basis. The deferred payment contract provides for a
down payment of P400,000 and an 8-year note for P3,204,160. The note is to
be paid in 8 equal annual installment payments of P400,520, including 10%
interest. The payments are to be made on December 31 of each year,
beginning December 31, 2015. The equipment has a cash price equivalent of
P2,470,000. Exo's financial year-end is December 31.
i. The amount to be recognized on January 1, 2015, as discount on note

payable is
a. 410,416
b. 0
c. 1,134,160
d. D.P927,160
ii. What is the acquisition cost of the equipment?

a. 3,504,160
b. 2,904,160
c. 2,470,000
d. 3,204,160
iii. The amount of interest expense to be recognized in 2016 is

a. 410,416
b. 207,000
c. 0
d. 187,648
Answer: (i) C (ii) C (iii) D
Solution:
(i)
Cost of equipment (cash price equivalent) P2,470,000
Less: Down payment 400,000
Amount assigned to note payable 2,070,000
Face value of note 3,204,160
Discount on note payable, January 1, 2015 1,134,160
(ii)
Acquisition cost of equipment
(cash price equivalent) P2,470,000
(iii) Interest expense for 2016:

Note payable, Jan. 1, 2015 P3,204,160
Less: Payment made on Dec. 31, 2015 400,520
Note payable, Dec. 31, 2015 2,803,640
Discount on note payable, Dec. 31, 2015
( P1,134,160 - P207,000) (927,160)
Carrying value of note, Dec. 31, 2015 1,876,480
Interest rate x 10%
Discount amortization (interest expense) for 2016P 187,648
4-5. Various equipment used by RICHARD CO. in its operations are either
purchased from dealers or self-constructed. The following items for two
different types of equipment were recorded during the calendar year 2015.
Store equipment (purchased):

Cash paid for equipment P275,000
Freight and insurance cost while in transit 4,500
Cost of moving equipment into place at store 2,200
Wage cost for technicians to test equipment 8,000
Insurance premium paid during first year of operation
on this equipment 6,200
Special plumbing fixtures required for this equipment 9,200
Repair cost incurred in first year of operations related
to this equipment 2,450
Manufacturing equipment (self-constructed):

Materials and purchased parts at gross invoice price
(Richard failed to take the 2% cash discount) P550,000
Imputed interest on funds used during construction
(Stock financing) 46,000
Labor costs 285,000
Overhead costs (fixed - P50,000; variable - P70,000) 120,000
Gain on self-construction 84,000
Installation cost 9,600
i. What is the total cost of the store equipment purchased?

a. 293,400
b. 295,700
c. 300,100
d. 298,900
e.
ii. What is the total cost of the self-constructed equipment?
a. 953,600
b. 874,600
c. 970,600
d. 935,600
Answer: (i) D (ii) A
Solution:
(i)
Store equipment (purchased):
Cash paid for equipment
P275,000
Freight and insurance cost while in transit 4,500
Cost of moving equipment into place at store
2,200
Wage cost for technicians to test equipment
8,000
Special plumbing fixtures required for this equipment
9,200
Total cost P298,900
(ii)
Manufacturing equipment (self-constructed):
Materials and parts (P550,000 x 98%)
P539,000
Labor costs 285,000
Overhead costs 120,000
Installation cost 9,600
Total cost P953,600
6. HELLO COMPANY is a major supplier of computer parts and accessories. To

improve delivery services to customers, the company acquired four new
trucks on July 1, 2015. Described below are the terms of acquisition for each
truck.
Truck List Price Terms

No. 1 P700,000 Acquired for a cash payment of
P656,000.
No. 2 P900,000 Acquired for a down payment of P90,000

cash and a 1-year, non-interest
bearing note with a face amount of
P820,000. There was no established
cash price for the equipment. The
prevailing interest rate for this type
of note is 10%.
No. 3 P740,000 Acquired in exchange for a computer

package that the company carries in
inventory. The computer package cost
P580,000 and is normally sold by Hello Co.
for P708,000.
No. 4 P660,000 Acquired by issuing 50,000 of Hello Co.'s

ordinary shares. The shares
have a par value per share of P10 and a
market value per share of P13.
What is the total cost of the trucks purchased on July 1, 2015?

a. P2,524,000
b. P2,454,000
c. P2,889,454
d. P2,849,454
Answer: D
Solution
Truck No. 1 P656,000

Truck No. 2
Down payment P 90,000
Present value of note issued
(P820,000 x 0.90909) 745,454 835,454
Truck No. 3 708,000
Truck No. 4 (P13 x 50,000 shares) 650,000
Total cost P2,849,454
7. ALDUB, INC. has constructed a production equipment needed for the

company's expansion program. Aldub received a P2,000,000 bid from a
reputable manufacturer for the construction of the equipment.
The costs of direct material and direct labor incurred to construct the
equipment were P1,060,000 and P700,000, respectively. It is estimated that
incremental overhead costs for construction amount to 140% of direct labor
costs.
Fixed costs (excluding interest) of P3,200,000 were incurred during the
construction period. This amount was allocated to construction on the basis
of total prime costs-the sum of direct labor and direct material. The prime
costs incurred to construct the new equipment amounted to 35% of the total
prime costs incurred for the period. The company's policy is to capitalize all
possible costs on self-construction projects.
To assist in financing the construction of the production equipment, Aldub

borrowed P2 million at the beginning of the 6-month construction period. The
loan was for 2 years with interest at 10%.
What is the total cost of the self-constructed equipment?

a. 3,960,000
b. 3,096,000
c. 2,960,000
d. 3,285,000
Answer: A
Solution:
Direct material P1,060,000

Direct labor 700,000
Variable overhead (P700,000 x 140%) 980,000
Fixed overhead (P3,200,000 x 35%) 1,120,000
Interest on specific borrowing
(P2,000,000 x 10% x 6/12) 100,000
Total cost of self-constructed equipment P3,960,000
8-10. CEILO CORP. has been experiencing a significant increase in customers'

demand for its product. To expand its production capacity, Ceilo decided to
purchase equipment from BigayPera Company on January 2, 2015. Ceilo
issues a P2,400,000 5-year, noninterest bearing note to BigayPera for the
new equipment when prevailing market rate of interest for obligations of this
nature is 12%. The company will pay off the note in five P480,000
installments due at the end of each year over the life of the note. Ceilo's
financial year-end is December 31. The appropriate present value factor of
an ordinary equity of 1 at 12% for 5 periods 3.60478.
i. What is the cost of the equipment?

a. 2,400,000
b. 1,730,294
c. 1,457,931
d. 2,112,000
ii. What is the carrying value of the note at December 31, 2017?
a. 811,226
b. 1,440,000
c. 1,152,880
d. 1,480,932
iii. What amount of interest expense should be reported in Ceilo's income

statement for the year ended December 31, 2016?
a. 230,400
b. 207,635
c. 174,951
d. 288,000
Answer: (i) B (ii) A (iii) C
Solution:
(i)
Cost of the equipment (P480,000 x 3.60478) P1,730,294
The entry to record the purchase is:

Equipment 1,730,294
Discount on note payable
(P2,400,000 - 1,730,294) 669,706
Note payable 2,400,000
(ii)
Carrying value of note payable at Dec. 31, 2017 P811,226
AMORTIZATION SCHEDULE
Reduction Carrying
Date Payment Interest of Principal Value
Jan. 2, 2015 P1,730,294
Dec. 31, 2015 P480,000 P207,635 P272,365 1,457,929
Dec. 31, 2016 480,000 174,951 305,049 1,152,880
Dec. 31, 2017 480,000 138,346 341,654 811,226
Dec. 31, 2018 480,000 97,347 382,653 428,573
Dec. 31, 2019 480,000 51,427* 428,573 ----------
* P 428,573 x 12% = P51,429

Discrepancy of P2 (P51,429 - P51,427) due to rounding
(iii)
Interest expense for 2016
(See amortization schedule) P174,951
The entries to record the payment and interest for 2016 are:
Interest expense 174,951
Discount on notes payable 174,951
Note payable 480,000

Cash 480,000
GOVERNMENT GRANT
1. On January 1, 2015 Madlangtuta Co. received a grant of P25,000,000 from
the British government for the construction of a laboratory and research
facility with an estimated cost of P15,000,000 and useful life of 5 years. The
laboratory and research facility was completed and ready for the intended
use on January 1, 2015. What amount of grant income should be included in
the income statement for 2016?
a. 3,000,000
b. 5,000,000
c. 0
d. d.1,500,000
Answer: B
Solution:
Grant income (25,000,000/5) 5,000,000
2. On January 1,2015, Lourde Company received a grant of P25,000,000 from

the American Government in order to defray safety and environmental cost
within the area where the entity is located. The safety and environment cost
are expected to be incurred over four years, respectively,P2,000,000
,P4,000,000 ,P6,000,000 and P8,000,000.What amount of grant income
should be recognized in 2015?
a. 25,000,000
b. 2,000,000
c. 2,500,000
d. 6,250,000
Answer: C
Solution:
Year Cost Fraction Income
2014 2,000,000 2/20 2,500,000
2015 4,000,000 4/20 5,000,000
2016 6,000,000 6/20 7,500,000
2017 8,000,000 8/20 10,000,000
20,000,000 25,000,000
3. On January 2 ,2014, Marlborough Company received a grant of

P60,000,000 to compensate for costs to be incurred in planting trees over a
period of 5 years. The entity will incur such cost at P2,000,000 for 2014,
P4,000,000 for 2015, P6,000,000 for 2016, P8,000,000 for 2017, and
P10,000,000 for 2018.
What amount of grant income should be recognized for 2015?

a. 6,000,000
b. 4,000,000
c. 12,000,000
d. 8,000,000
Answer: D
Solution
Grant income (4/30 x 60,000,000) 8,000,000
4-5. Clause Co. purchased a varnishing machine for P4,000,000 on January

1,2015. The entity received a government grant of P840,000 in respect of
this asset. The accounting policy is to depreciate the asset over 4 years on a
straight line method basis and to treat the grant as deferred income.
i. What amount should be reported as deferred grant income on
December 31, 2016?
a. 420,000
b. 720,000
c. 840,000
d. 120,000
ii. What is the carrying amount of the machine on December 31, 2016?
a. 2,000,000
b. 3,000,000
c. 2,420,009
d. 3,160,000

Solution:
(i)
Deferred Grant income 840,000
Income Earned (840,000/4x2) 420,000
Deferred Grant Income - Dec. 31,2015 420,000
(ii)
Cost 4,000,000
Accumulated Depreciation (4,000,000/4x2) (2,000,000)
Carrying Amount-Dec. 31 ,2016 2,000,000
6. TMZ Company purchased a jewel polishing machine for P4,000,000 on

January 1, 2015 and received a government grant of P500,000 toward the
capital cost. The accounting policy is to treat the grant as reduction in the
cost of the asset. The machine is to be depreciated on a straight line basis
over 8 years and estimated to have a residual value of P200,000 at the end
of this period.
What is the depreciation of the machine for 2015?

a. 412,500
b. 475,000
c. 437,500
d. 500,000
Answer: A
Solution :
Cost 4,000,000
Government Grant (500,000)
Net Cost 3,500,000
Residual value (200,000)
Depreciable amount 3,300,000
Annual Depreciation (3,300,000/8) 412,500
7-8. Arancar Company purchased a machine for P8,000,000 on January

1,2015 and received a government grant of P2,000,000 toward the capital
cost. The machine is to be depreciated on a straight line basis over 5 years
and estimated to have a residual value of P500,000 at the end of this period.
The accounting policy is to treat the grant as a deferred income.
i. What is the deferred grant income on December 31,2016?
a. 1,600,000
b. 400,000
c. 1,200,000
d. 800,000
ii. What is the carrying amount of the asset on December 31,2016?
a. 6,500,000
b. 1,500,000
c. 5,000,000
d. 3,000,000
Answer: (i) C (ii) C
Solution:
(i)
Deferred Income Jan. 1,2015 2,000,000
Earned Grant Income(2,000,000/5x2) (800,000)
Deferred Grant Income - Dec. 31, 2016 1,200,000
(ii)
Cost of Machine 8,000,000
Accumulated Depreciation (8,000,000-500,000=7,500,000/5x2) 3,000,000
Carrying Amount - Dec. 31 ,2016 5,000,000
9. Mikmak Company purchased a varnishing machine for P3,000,000 on

January 1,2014. The entity received a government grant of P500,000 in
respect of this aaset. The accounting policy is to depreciate the asset over 4
years on a straight line basis and to treat the grant as deferred income.
a. 500,000
b. 125,000
c. 250,000
d. 0
Answer:B
Solution:
Grant income (500,000/4) 125,000
Intangible Assets
10. Brainless Company received a government grant of P15,000,000 to

install and run a windmill in an economically backward area. The entity had
estimated that such a windmill would cost P25,000,000 to construct. The
secondary condition attached to the grant is that the entity shall hire labor in
the area where the windmill is to locate. The construction was completed on
January 1,2014 .The windmill is to be depreciated using the straight line
method over a period of 10 years.
a. 1,500,000
b. 3,000,000
c. 2,500,000
d. 5,000,000
Answer: A
Solution:
Grant income (15,000,000/10) = 1,500,000
BORROWING COSTS
1. On January 1, 2015, Shawty Company borrowed 8,750,000 at an annual
interest rate of 12% to finance specifically the cost of building a plant.
Construction commenced on January 1, 2015 with a cost P9,500,000. The
entity earned P370,000 interest income from its fund. The plant was
completed on December 31, 2015. What amount of interest should be
capitalized?
a. 750,000
b. 680,000
c. 380,000
d. 770,000
Answer: B
Solution:
Actual interest (8,750,000 x 12%) 1,050,000
Capitalizable interest 680,000
2. Disney Company borrowed P30,000,000 at 15% partly for YOUReral

purposes and partly to finance the construction of an office building on
January 1, 2015. The loan shall be repaid commencing the month following
completion of the building. Expenditures incurred evenly during the year for
the completed building totaled P10,000,000 on December 31, 2015. The
entity earned interest of P300,000 for the year on the unexpected portion of
the loan. What amount of interest capitalized on December 31, 2015?
a. 750,000
b. 450,000
c. 1,500,000
d. 1,200,000
Answer: A
Solution:
Average expenditure (10,000,000/2)
5,000,000
5,000,000 Capitalizable Interest (5,000,000 x 15%)
750,000
3. During 2015, Jerusalem Company constructed a building costing

P3,200,000. The weighted average expenditure during 2015 amounted to
P2,700,000. The entity borrowed P1,500,000 at 9.5% on January 1, 2015.
Funds not needed for construction were temporarily invested and earned
P45,000 in interest revenue. In addition to the construction loan, the entity
had two other notes outstanding during the year, a P1,000,000. 10-year, 9%
note payable date October 1, 2013, and a P800,000, 7%, 5-year note
payable dated November 5, 2014. What amount of interest should be
capitalized during 2015?
a. 288,500
b. 275,500
c. 320,700
d. 243,500
Answer: B
Solution :
Principal Interest
10-year note (9%) 1,000,000 90,000
5-year note (7%) 800,000 56,000
1,800,000 146,000
Average rate (146,000/1,800,000) 8.1%
Average expenditure 2,700,000

Specific borrowing (1,500,000 x 9.5%) 142,500

Interest related to specific borrowing (45,000)
YOUReral borrowing (2,200,000 x 8.1%) 178,200
4. UNI Company borrowed 5,500,000 on a 8% note payable to finance a new

plant which the entity is constructing for own use. The only other debt of the
entity is a P10,000,000, 12% mortgage payable on an office building. At the
end of the current year, average accumulated expenditure on the new
factory totaled P9,000,000. What amount should be capitalized as interest
for the current year?
a. 1,140,000
b. 1,620,000
c. 860,000
d. 640,000
Answer: C
Solution:
Accumulated Average Expenditure
9,000,000
Applicable to specific loan
5,500,000
Applicable to YOUReral loan
3,500,000
Specific borrowing (5,500,000 x 8%)

440,000
YOUReral borrowing (3,500,000 x 12%)
420,000
5. Agsunta Company started construction of a new building on January 1,

2015, and moved into the finished building on June 31, 2015. Of the
P20,000,000 total cost, P30,000,000 was incurred in 2015 evenly throughout
the year. The incremental borrowing rate was 15% throughout 2015 and the
total amount of interest incurred was P2,000,000. What amount should be
reported as capitalized interest on December 31, 2015?
a. 4,500,000
b. 3,000,000
c. 2,250,000
d. 2,000,000
Answer: D
Solution:
Average Expenditure ( 30,000,000/2) 15,000,000
Average Interest (15,000,000 x 15%) 2,250,000
Capitalizable Interest 2,000,000
The capitalizable borrowing cost is limited to the actual borrowing cost
incurred of P2,000,000 because this is the lower than the computed
amount of P1,200,000.
6. Sheeran Company borrowed P6,000,000 on a 15% note payable to finance
a new factory which the entity is constructing for own use. The only other
debt of the entity is a P8,000,000, 10% mortgage payable on an office
building. At the end of the current year, average accumulated expenditure
on the new factory totaled P7,850,000. What amount should be capitalized
as interest for the current year?
a. 1,850,000
b. 1,700,000
c. 1,085,000
d. 1,075,000
Answer: C
Solution:
Accumulated Average Expenditure 7,850,000
Specific borrowing (6,000,000 x 15%) 900,000

YOUReral borrowing (1,850,000 x 10%) 185,000
Capitalizable interest 1,085,000
7. Kyra Company had loans outstanding during 2015 and 2016.

Specific construction loan 2,500,000 8%
YOUReral loan 12,000,000 10%
The entity began the self-construction of a new building on January 1, 2015
and the building was completed on December 31, 2016. Expenditures during
2015 and 2016 were:
January 1, 2015 3,000,000
July 1, 2015 1,500,000
November 1, 2015 3,000,000
July 1, 2016 2,000,000
What is the cost of the new building on December 31, 2016?

a. 8,125,000
b. 7,500,000
c. 7,875,000
d. 7,675,000
Answer: C
Solution:
Fractional Average
Expenditure Months
Expenditure
January 1, 2015 3,000,000 12/12 3,000,000
July 1, 2015 1,500,000 6/12 750,000
November 1, 2015 3,000,000 2/12 500,000
7,500,000 4,250,000
Average expenditure in 2015 4,250,000

Actual expenditure in 2015 7,500,000

Capitalizable interest in 2015:
Specific (2,500,000 x 8%) 200,000
YOUReral (1,750,000 x 10%) 175,000
Total cost of new building – 12/31/2015 7,875,000
Fractional Average
Expenditure Months
Expenditure
January 1, 2016 7,875,000 12/12 7,875,000
July 1, 2016 2,000,000 6/12 1,000,000
9,875,000 8,875,000
Average expenditure 2016 8,875,000

Actual expenditure 9,875,000

Capitalizable interest in 2016:
Specific (2,500,000 x 8%) 200,000
YOUReral (6,375,000 x10%) 637,500
Total cost of new building – 12/31/16 10,712,500
8. On January 1, 2015, BLUE Company borrowed P10,000,000 at an annual
interest rate of 9% to finance specifically the cost of building a plant.
Construction commenced on January 1, 2015 with a cost P10,000,000. The
entity invested its idle funds and earned interest income of P100,000. The
project was completed on October 31, 2015. What is the carrying amount of
the plant?
a. 10,650,000
b. b.10,800,000
c. 10,000,000
d. 10,100,000
Answer: A
Solution:
Construction cost 10,000,000

Interest (10,000,000 x 9% x 10/12) 750,000
Total cost of plant 10,650,000
9. Benny Company commenced construction of a new plant on February 1,

2015. The cost of P20,500,000 was paid in full to the contractor on February
1, 2015 and was funded from existing YOUReral borrowings. The construction
was completed on October 31, 2015. The entity’s borrowing during 2015
comprised the following:
Bank A – 7% 9,000,000
Bank B – 7.7% 11,000,000
Bank C – 8% 25,000,000
What is the amount of borrowing cost that should be capitalized in relation of

the plant?
a. 2,608,875
b. 2,898,750
c. 3,477,000
d. 3,478,500
Answer: A
Solution:
Principal Interest
Bank A – 7% 9,000,000 630,000
Bank B – 7.7% 11,000,000 847,000
Bank C – 8% 25,000,000 2,000,000
Total 45,000,000 3,477,000
Average interest rate (3,477,000/45,000,000) 7.73%

Capitalizable borrowing cost (45,000,000 x 7.73% x 9/12) 2,608,875
10. On January 1, 2015, Alaska Company borrowed 6,450,000 at an annual

interest rate of 7.5% to finance specifically the cost of building a plant.
Construction commenced on January 1, 2015 with a cost 8,000,000. The
entity earned P300,000 interest income from its fund. The plant was
completed on December 31, 2015. What amount of interest should be
capitalized?
a. 483,750
b. 300,000
c. 220,000
d. 183,750
Answer: D
Solution:
Actual interest (6,450,000 x 7.5%) 483,750

LAND AND BUILDING

1-3. At year-end, Hecker Company provided the following information about
property, plant, & equipment:
Plant assets acquired form Krom Company 8,000,000

Repairs made on building prior to occupancy 250,000
Special tax assessment 40,000
Construction of platform for machinery 70,000
Remodeling of office space in building including
new partitions and walls 500,000
Purchase of new machinery 900,000
Total property, plant and equipment 9,760,000
In exchange for the plant assets of Krom company, Hecker company issued
50,000 shares with P100 par value. On the date of purchase, the share had a
quoted price of P150 and the plant assets had the following fair value:
Land 600,000
Building 4,500,000
Machinery 2,000,000
i. What is the cost of Building?
a. 5,250,000
b. 5,500,000
c. 5,000,000
d. 4,500,000
ii. What is the cost of Land?

a. 600,000
b. 640,000
c. 670,000
d. 690,000
iii. What is the cost of machinery?

a. 2,900,000
b. 2,000,000
c. 2,970,000
d. 2,830,000
Answer: (i) A (ii) B (iii) C
Solution:
(i)
Fair Value 4,500,000
Repairs 250,000
Remodeling of Office Space 500,000
Total Cost of Building 5,250,000
(ii)
Fair Value 600,000
Special tax assessment 40,000
Total Cost of Land 640,000
(iii)
Fair Value 2.000,000

Construction of platform 70,000
New Machinery 900,000
Total Cost of Machinery 2,970,000
4. Hasht5 Company purchased a P5,000,000 tract of land for a factory site.
The entity razed an old building on the property to make room for the
construction of new building and sold the materials salvaged from the
demolition. The entity incurred additional costs and realized salvage
proceeds as follows:
Legal fees for purchase contract and recording ownership 250,000

Title guarantee insurance 70,000
Demolition of Old Building 400,000
Proceeds from sale of salvaged materials 30,000
What is carrying amount of Land?

a. 5,290,000
b. 4,920,000
c. 5,320,000
d. 5,720,000
Answer: C
Solution:
Purchase Price 5,000,000
Legal fees 250,000
Title guarantee insurance
70,000
Carrying Amount of Land
5,320,000
5-7 Kingsman Company incurred the following costs during the current year
in relation to property, plant and equipment:
Realtor commission 500,000

Legal fees, realty taxes and documentation expenses 40,000
Cash paid for purchase of land 3,500,000
Mortgage assumed on the land purchased, including
interest accrued 400,000
Amount paid to relocate persons squatting on the property 150,000
Cost of tearing down an old building on the land to
make room for construction of new building
350,000
Building permit fee 40,000
Salvage value of the old building demolished
50,000
Cost of fencing the property 110,000
Amount paid to contractor for the building constructed
4,500,000
Excavation 45,000
Architect Fee 200,000
Allowances and hotel accommodation, paid to foreign
technicians during installation and test run of machine
500,000
Interest that would have been earned had the money used
during the period of construction been invested 1
50,000
Invoice cost of machine acquired
2,500,000
Freight, unloading and delivery charges 60,000
Custom duties and other charges 140,000
i. What amount should be capitalized as cost of machine?

a. 3,060,000
b. 3,140,000
c. 3,200,000
d. 3,000,000
ii. What amount should be capitalized as cost of land?

a. 5,450,000
b. 5,440,000
c. 5,590,000
d. 5,550,000
iii. What amount should be capitalized as cost of building?

a. 5,000,000
b. 5,135,000
c. 5,085,000
d. 4,885,000
Answer: (i) C (ii)C (iii)C
Solution:
(i)
Invoice cost 2,500,000
Freight 60,000
Custom duties and other charges 140,000
Allowances and hotel accommodation 500,000
Cost of Machine 3,200,000
(ii)
Cash paid for Land 3,500,000

Mortgage assumed including interest accured 1,400,000
Commission 500,000
Legal fees, realty taxes and documentation 40,000
Cost of relocating squatters 150,000
Cost of land 5,590,000
(iii)
Cost of tearing down old building 350,000
Salvage value of old building ( 50,000)
Amount paid to contractor 4,500,000
Building permit fee 40,000
Excavation 45,000
Architect fee 200,000
Cost of Building 5,085,000
8-10. Pabebe Company incurred the following expenditures related to the

construction of a new home office:
Legal fees, including fee for title search 20,000

Payment of land mortgage and related interest due
at time of sale 60,000
Payment of delinquent property taxes 15,000
Cost of Land, which included usable old apartment
building with fair value of P200,000 3,000,000
Architect fee on new building 250,000
Payment to building contractor 7,000,000
Interest cost on specific borrowing during construction
200,000
Cost of razing the apartment building 45,000
Grading and drainage on land site 20,000
Payment of medical bills of employees accidentally
injured while inspecting building construction 30,000
Premium for insurance on building during construction
22,000
Cost of paving driveway and parking lot 70,000
Cost of trees, shrubs, and other landscaping 65,000
Cost of installing light in parking lot 8,000
Cost of open house party to celebrate opening of building 80,000
i. What is the cost of land?

a. 2,720,000
b. 3,205,000
c. 2,915,000
d. 2,950,000
ii. What is the cost of land improvement?

a. 200,000
b. 143,000
c. 203,000
d. 0
iii. What is the cost of building?
a. 7,517,000
b. 7,495,000
c. 7,537,000
d. 7,525,000
Answer: (i) C (ii) B (iii ) A
Solution:
(i)
Allocated cost of land (3,000,000 – 200,000) 2,800,000
Legal fees 20,000
Payment of land mortgage 60,000
Payment of delinquent property taxes 15,000
Graining and drainage 20,000
Total Cost of Land 2,915,000
(ii)
Cost of paving driveway and parking lot 70,000
Cost of trees, shrubs, and other landscaping 65,000
Cost of installing light in parking lot 8,000
Total Cost of Land Improvement 143,000
(iii)
Cost of razing old apartment building 45,000
Architect fee 250,000
Payment to building contractor 7,000,000
Interest cost 200,000
Premium for insurance during construction 22,000
Total Cost of New Building 7,517,000
MACHINERY
1. Tiny Company purchased a second-hand polishing machine and incurred
the following costs:
Agreed price to be paid to vendor 7,500,000

Dismantling the machine at the current location
500,000
Transportation to Tiny’s factory 450,000
Machine refurbishment costs prior to reinstallation 250,000
Reinstallation 150,000
What is the cost of the second-hand machine?

a. 8,850,000
b. 7,500,000
c. 8,600,000
d. 8,350,000
Answer: A
Solution:
Dismantling the machine 500,000
Transportation 450,000
Refurbishment costs prior to reinstallation 250,000
Total Cost 8,850,000
2. Nag-aral Company completed the rearrangement of group of factory

machines to secure greater efficiency in production. The entity estimated
that benefits from the rearrangement would extend the remaining five year
useful life of the machines. The following costs were incurred:
Moving 550,000
Annual Maintenance 200,000
What total amount of the costs incurred should be capitalized?

a. 1,600,000
b. 850,000
c. 1,400,000
d. 0
Answer: C
Solution:
Moving 550,000
Total Costs 1,400,000
3. On October 1, 2014, Lumpiang Toge Company purchased a machine for

P1,270,000 that was placed in service on November 30, 2014. The entity
incurred additional costs for this machine as follows:
Testing 50,000
Shipping 80,000
Installation 100,000
On December 31, 2014, what amount should be reported as machinery?
a. 1,270,000
b. 1,450,000
c. 1,500,000
d. 1,350,000
Answer: C
Solution:
Shipping 80,000
Testing 50,000
4. La’Place Printing Company incurred the following costs:
Purchase of collating and stapling attachment 900,000

Installation of attachment 350,000
Replacement parts for overhaul of press 250,000
Labor and overhead in connection with overhaul
100,000
The overhaul resulted in significant increase in production. Neither the

attachment nor the overhaul increased the estimated useful life of the press.
What total amount of the costs should be capitalized?
a. 1,600,000
b. 900,000
c. 1,500,000
d. 0
Answer: A
Solution:
Purchase Price 900,000
Replacement parts for overhaul of press 250,000
Labor and overhead in connection with overhaul 100,000
5. On July 1, 2014, Magic Company had a delivery van which was destroyed
in an accident. On that date, the van’s carrying amount was P600,000. On
July 15, 2014, the entity received and recorded a P160,000 invoice for a new
engine installed in the van in May, and another P100,000 invoice for various
repairs. In August, the entity received P850,000 under an insurance policy on
the van, which it plans to use to replace the van.
What amount should be reported as gain on disposal of the van in the
income statement?
a. 190,000
b. 90,000
c. 850,000
d. 0
Answer: B
Solution:
Carrying amount, July 1 600,000
Add: Cost of new engine 160,000
Adjusted carrying amount 760,000
Proceeds of Insurance Policy 850,000

Less: Adjusted carrying amount 760,000
Gain on Disposal 90,000
6. On December 31, 2014, a building owned by SUNSHINCECompany was

totally destroyed by fire. The building had fire insurance coverage up to
P6,000,000. Other pertinent information on December 31, 2014 follows:
Building, carrying amount 6,300,000
Building, fair value 6,700,000
Removal and clean-up cost 200,000
During January 2015, before the 2014 financial statements were issued, the
entity received insurance proceeds of P6,000,000. On what amount should
the determination of the loss on involuntary conversion be based?
a. 6,700,000
b. 6,900,000
c. 6,500,000
d. 6,300,000
Answer: C
Solution:
Carrying Amount 6,300,000
Removal and clean-up cost 200,000
Total Carrying Amount 6,500,000
7. Troll Company made the following expenditures:
 Renovation of a group of machines at a cost of P700,000 to secure

greater efficiency in production over their remaining five-year useful
lives. The project was completed on December 31.
 Continuing, frequent, and low cost repairs at a cost of P430,000.
 A broken gear on a machine was replaced at a cost of P70,000.
What amount should be charged to repair and maintenance expense?

a. 770,000
b. 500,000
c. 1,130,000
d. 1,200,000
Answer: B
Solution:
Continuing, frequent and low cost repairs 430,000
Replacement of broken gear of a machine 70,000
Total Repair and maintenance expense 500,000
8. On June 30, 2014, a fire in Durian Company’s plant caused a total loss to a
production machine. The machine was depreciated at P200,000 annually and
had a carrying amount of P2,600,000 on January 1, 2014. On the date of the
fire, the fair value of the machine was P3,200,000, and the entity received
insurance proceeds of P3,000,000 in October 2014. What amount should be
recognized as gain on disposal?
a. 500,000
b. 700,000
c. 400,000
d. 600,000
Answer: A
Solution:
Depreciation – January 1, 2014 to June 30, 2014
(200,000 x 6/12) ( 100,000)
Carrying amount – June 30, 2014 2,500,000
Insurance proceeds 3,000,000

Gain on Disposition 500,000
9. Gigolo Company made the following expenditures:
Major improvements to the electrical wiring system 400,000

Continuing and frequent repairs 350,000
Partial replacement of roof tiles 160,000
Repainted the plant building 150,000
What amount should be charged to repair and maintenance expense?

a. 1,060,000
b. 660,000
c. 510,000
d. 550,000
Answer: B
Solution:
Continuing and frequent repairs 350,000
Repainted the plant building 150,000
Partial Replacement of roof tiles 160,000
Total Repair and Maintenance Expense 660,000
10. Begonia Company installed a new equipment at the production facility

and incurred the following costs: Initial delivery and handling cost
400,000 Cost of site preparation 700,000
Cost of equipment per supplier’s invoice 3,000,000 Consultants used for
advice on the acquisition of equipment 800,000Interest charges paid to
supplier for deferred credit 300,000 Estimated dismantling cost to be
incurred as required by contract 350,000
Operating losses before commercial production 450,000.
What total amount should be capitalized as cost of the equipment?

a. 5,250,000
b. 5,550,000
c. 4,900,000
d. 5,100,000
Answer: A
Solution:
Cost of Equipment 3,000,000

Initial delivery and handling cost 400,000
Cost of site preparation 700,000
Consultants used for advice 800,000
Estimated dismantling cost 350,000
DEPRECIATION
1. On April 1, 2012, Everbleen Co. purchased a new equipment for P300,000.
The equipment has an estimated useful life of 5 years, and the depreciation
expense is computed using sum-of-the-year- digits method. The accumulated
depreciation of the machinery at March 31, 2014 should be
a. 192,000
b. 180,000
c. 100,000
d. 150,000
Answer: B
Solution:
n+1
SYD = 2 ) ; where n= useful life (in years)
n¿
Remaining Useful Life
Depreciation Formula: Cost x SYD
Depreciation for the year ended March 31, 2013(300,000 x 5/15) P

100,000
Depreciation for the year ended March 31, 2014(300,000 x 4/15)
80,000
Accumulated Depreciation 3/31/14 P 180,000
2. Anneth runs a business making embroidered linens for receptions. She

purchases a new machine for P15,000. The machine is expected to produce
approximately 5,000 linens, at which point it will be valueless. During the
first year after buying the machine, Anneth uses it to produce 1,500 linens.
She plans to use the units of production method of depreciation. At year end,
which of the following entries is correct?
a. A debit to Depreciation Expense 5,500.
b. A credit to Depreciation Expense 4,500.
c. A credit to Accumulated Depreciation 5,500.
d. A debit to Depreciation Expense 4,500.
Answer: D
Solution:
P15,000 depreciable value ÷ 5,000 units = P3 of depreciation per unit
1,500 units produce x P3 per unit = P 4,500 depreciation expense.
To record depreciation for the first year:
Depreciation Expense 4,500
Accumulated 4,50
Depreciation 0
3. JJ spends P20,000 cash on a piece of equipment for use in her restaurant.

She plans to use the straight-line method to depreciate the equipment over 5
years. She expects it to have no value at the end of the 5 years. After 4
years, JJ sells the equipment for P2,000. What is the gain/loss on sale of the
equipment?
a. P4,000 loss
b. P4,000 gain
c. P2,000 loss
d. P2,000 gain
Answer: C
Solution:
Accumulated Depreciation after 4 years : ( 20000

5 ) = 4000 x 4 = 16,000
Computation for gain or loss:

Selling Price P 2,000
Less : Carrying Amount (20,000-16,000) 4,000
P 2,000 loss
4. On July 1, 2006, Oh Corp. purchased computer equipment at a cost of

P360,000. This equipment was estimated to have a six-year life with no
residual value and was depreciated by the straight-line method. On January
1, 2009, Oh determined that this equipment could no longer process data
efficiently, that its value had been permanently impaired, and that P70,000
could be recovered with a residual value of 5,000 over the remaining useful
life of the equipment. What is the amount of accumulated depreciation that
should be reported at December 31, 2009 statement of financial position?
a. 308,571.43
b. 380,571.34
c. 308,517.43
d. 308,517.43
Answer: A
Solution:
Accumulated Depreciation ( 360000

6 )
6
= 60000 x 2 12 = 150,000
New Carrying Amount as of 1/1/09 = 70,000 ,

Impairment Loss = 70,000- 210,000 = 140,000
70000−5000
New Depreciation Expense = 3.5 = 18,571.43
Accumulated Depreciation 12/31/09 = 150,000 + 140,000 = 18,571.43 =

308,571.43
5. Jun-jun Company’s statement of financial position at December 31, 2014

and 2013 reported accumulated depreciation balances of P950,000 and
P600,000 respectively. Property with a cost of P50,000 and a carrying
amount of P35,000 was the only property sold in 2014. Depreciation
charged to operations in 2014 was
a. 350,000
b. 365,000
c. 370,000
d. 375,000
Answer: B
Solution:
Accumulated Depreciation for 2013
600,000
Less: Accumulated Depreciation of the
property sold (50,000-35,000)
15,000
Accumulated Depreciation balance before 2014 depreciation expense
585,000
Accumulated Depreciation for 2014 950,000

Accumulated Depreciation, per above
585,000
Depreciation charged to operations in 2014
365,000
6. On January 1, 2013, Tropang OTWOL Co. sold a building for P900,000 to

Tutan Corp. , its wholly-owned subsidiary. Tropang OTWOL Co. paid
P1,000,000 for this building, which had accumulated depreciation of
P250,000. Tropang OTWOL Co. estimated a P100,000 salvage value and
depreciated the building on the straight-line method over 20 years. In
Tropang OTWOL Co.’s December 31, 2013 consolidated statement of
financial position, this building should be included in cost and accumulated
depreciation as
Cost Accumulated Depreciation

a. 850,000 42,500
b. 900,000 40,000
c. 1,100,000 290,000
d. 1,100,000 300,000
Answer: D
Solution:
Cost of the building P1,100,000
Accumulated Depreciation
At January 1, 2013 P 250,000
1,100,000−100,000
For 2013 ( 20 ) 50,000
Total P 300,000
7. Klatuu purchased a photocopy machine at P500,000 on January 2008.
The machine had an estimated salvage value of P100,000, an estimated 8-
year useful life, and was being depreciated by the straight line method. Two
years later, it became apparent to Klaatu that this machine suffered a
permanent impairment value. In January 2010, management determined the
carrying amount should be only P175,000, with a 2-year remaining useful
life, and the salvage value should be reduced by P25,000. How much will be
the difference of the original depreciation expense and the new depreciation
expense of the machine?
a. 12,500
b. 25,000
c. 0
d. no answer
Answer: C
Solution:
Original Depreciation Expense= ( 500,000−100,000

8 ) = 50,000
2010 New Carrying amount = 175,000

175,000−75,000
New Depreciation Expense = ( 2 ) = 50,000
Difference of the original depreciation expense and the new depreciation

expense of the machine = 0
8. Sapphire Sky Company provided the following information with respect to

a building:
 The building was acquired January 1, 2011 at cost of P3,000,000. It has
an estimated useful life of 12 years and salvage value of P150,000.
The method of depreciation used was double declining method.
 The building was renovated on January 1, 2014 at a cost of P800,000.
The residual value became P200,000.
 On January 1, 2015, the management decided to change the method
being used to straight line method.
What is the depreciation of the building for December 2014?
a. 439,351.85
b. 304,513.89
c. 493,351.58
d. 340,513.98
Answer: A
Solution:
Accumulated Depreciation =
2
Y1 (
3,000,000 x
12 ) = P 500,000
Y2 (2,500,000 x 122 ) = 416,666.67
Y3 (2,083,333.33 x 122 ) = 247,222.22
P 1,163,888.89
CA = 3,000,000−¿ 1,163,888.89 = 1,836,111.11 + 800,000 capitalized cost
= 2, 636,111.11
Depreciation for 2014:
(2, 636,111.11 x 122 ) = P 439,351.85
9. Angela Company used straight line depreciation for property, plant and
equipment which consisted the following:
2014
2013
Land 500,000 500,000
Machinery and Equipment 1,800,000
1,350,000
Total 2,300,000
1,850,000
Less: Accumulated Depreciation 1,000,000
700,000
1,300,000
1,150,000
What amount was debited to accumulation depreciation during 2014 of

property, plant and equipment retirements if the depreciation for 2013 and
2014 was P300,000 and P200,000 respectively.
a. 50,000
b. 75,000
c. 100,000
d. 125,000
Answer: C
Solution:
Accumulated Depreciation – December 2013 P 700,000
Add: Depreciation for 2014 200,000
900,000
Less: Accumulated Depreciation on Property Retirement (squeeze)
100,000
Accumulated Depreciation – December 2014 P
1,000,000
10. On January 1, 2011, Lene Corporation purchased a building with an

estimated useful life of 10 years. At the end of its life, it is expected to sold
at 5,000. The sum-of-the-years-digit method was used in computing its
depreciation. For the year ended December 31, 2014, the depreciation
applicable to the equipment was P42,000. What is the acquisition cost of the
equipment?
a. 309,000
b. 390,000
c. 930,000
d. 903,000
Answer: B
Solution:
x = acquisition cost
6
42,000 = ( x−5000 ) x 11
10
2
42,000
6
11 = x – 5000
10
2
385,000 + 50000 = x
390,000 = x
DEPLETION
1-3. On January 1, 2012, Spiderman Company paid 10,000,000 for property
containing natural resources of 3,000,000 tons. The present value of the
estimated cost of restoring the land is 800,000 and the land will have a value
of 600,000 after it is restored for suitable use.
Building and bunk houses were build costing 8,000,000 , it is use as a
storage of mining equipment and houses for the miners. Its expected useful
life is 10 years with no residual value.
Operations began on January 1, 2013 and resources removed totaled
500,000 tons. During 2014, it is discovered that available resource will
total 1,500,000 tons.
At the beginning of 2014, 800,000 development cost were incurred,
and only 200,000 tons are extracted.
i. What is the depreciation for the year ended December 31, 2013 assuming
that it uses a straight line method of depreciation.
a. 800,000
b. 1,700,000
c. 888,888
d. 900,000
ii. What amount should be reported as depletion for 2013?

a. 1,800,000
b. 1,600,000
c. 1,700,000
d. 1,500,000
iii. What is the depletion for the year ended December 31, 2014?
a. 1,240,000
b. 1,300,000
c. 1,200,000
d. 1,340,000
Answer: (i) A (ii) C (iii) A
Solution:
(i)
Depreciation (8,000,000/ 10 years) 800,000
(ii)
Acquisition cost 10,000,000
Restoration cost 800,000
Total cost 10,200,000
Rate per ton ( 10,200,000/3,000,000) 3.4
Depletion (500,000 x 3.4) 1,700,000
(iii)
Depletion-2013 (1,700,000)
Development cost 800,000
Depletion rate (9,300,000/1,500,000) 6.2

Depletion- 2015 (200,000 x 6.2) 1,240,000
4. The following data are available at year-end:
Wasting asset, at cost 5,000,000
Accumulated depletion
3,500,000
Unrealized depletion in ending inventory 850,000
Retained earnings 9,000,000
Capital liquidated
2,000,000
What amount will be the maximum dividend?

a. 10,500,000
b. 9,650,000
c. 12,500,000
d. 9,000,000
Answer: B
Solution:
Retained earnings 9,000,000
Accumulated depletion 3,500,000
Total 12,500,000
Capital liquidated (2,000,000)
Unrealized depletion in ending inventory (850,000)
Maximum dividend 9,650,000
5-6. Tropang OTWOL Company, purchased a tract of land for mining worth
5,000,000 with removable ore estimated at 20,000,000 tons. Before the start
of its operation the company incurred 3,000,000 exploration cost. Of these
cost 2,000,000 was associated with successful wells and the remaining with
so called “dry holes”. The entity uses the full cost method in accounting the
exploration cost. The entity also incurred development cost of 3,600,000
during the current year. The entity is required by the law to restore the land
to its original condition at estimated cost of 4,000,000. The present value of
estimated restoration cost is 3,300,000The land is estimated to be sold at
1,500,000 afterwards. The entity removed 400,000 tons during the year and
sold 300,000 of it.
i. What total amount of depletion should be recorded for the current year?
a. 262,000
b. 268,000
c. 312,000
d. 201,000
ii. Using the same information, what amount of depletion will be included on
cost of goods sold?
a. 196,500
b. 150,750
c. 234,000
d. 201,000
Answer: (i) B (ii) D
Solution:
(i)
Cost of land 5,000,000
Exploration cost 3,000,000
Development cost 3,600,000
Restoration cost 3,300,000
Total cost of wasting asset 14,900,000
Residual value of land 1,500,000
Depletable amount 13,400,000
Rate per ton (13,400,000/20,000,000) .67

Depletion (400,000 x .67) 268,000
(ii)
Cost of goods sold (.67 x 300,000) 201,000
7. On July 1, 2012, Nasasaktan Corp. purchased a mining land for

12,000,000. The entity expects to extract 3,000,000 tons for the entire
operation. They also estimated to extract 500,000 tons per year. The entity
purchased new mining equipment for10,000,000 with estimated useful life of
10 years. The equipment is said to have a residual value of 400,000. The
entity was able to extract 250,000 tons for the year. What amount should be
reported as depreciation of the mining equipment for 2012?
a. 960,000
b. 1,000,000
c. 2,000,000
d. 500,000
Answer: B
Solution:
Depreciation per rate (12,000,000/3,000,000)
4
Depreciation (4 x 250,000) 1,000,000
Since the life of the mine(3,000,000/500,000= 6 years) is shorter than the

life of the equipment (8 years)he output method is used.
8-9. Ganda company acquired a tract of land containing an extractable

natural resource. The entity is required to restore the land after it has
extracted the natural resources. Geological studyindicated that the
recoverable reserves will be 2,500,000 tons which will be completed in 10
years. Relevant costs are as follows:
Land
12,000,000
Exploration and development costs
3,000,000
Expected cash flow for restoration cost
2,000,000
Credit –adjusted risk free interest rate 10%
PV of 1 at 10% for 10 periods
.39
i. What is the depletion rate per ton?

a. 6.31
b. 6.8
c. 5.56
d. 6.5
ii. Assuming that the entity has extracted 250,000 at the end of the year
and new geological study reveals that 5,000,000 tons are available for
mining . What is the new depletion per ton?
a. 3.16
b. 4.31
c. 2.84
d. 6.31
Answer: (i) A (ii) C
Solution:
(i)
Cost of land
12,000,000
Exploration and development costs 3,000,000
Restoration cost (2,000,000 x .39) 780,000
15,780,000
Depletion rate (15,780,000/ 2,500,000) 6.31
(ii)
Total cost
15,780,000
Less: depletion for the year (6.31 x 250,000)
(1,577,500)
Carrying amount at the end of the year
14,202,500
New depletion per rate (14,202,500/5,000,000)

2.84
10. The entity purchased a mining land for 7,000,000. The entity incurred
exploration costs of 5,000,000. Of these cost 3,500,000 is associated with
successful holes and the remaining is with “dry holes”. The entity uses
successful method in accounting the exploration costs. The entity also
incurred 2,000,000 development costs. What is the total amount of the
wasting asset?
a. 12,000,000
b. 14,000,000
c. 11,500,000
d. 12,500,000
Answer: D
Solution:
Land cost 7,000,000
Exploration costs 3,500,000
Development costs 2,000,000
______________________________________________________________________________
________________________
REVALUATION
1. Optimism Corporation provided the following information on January 1,
2010 relating to property, plant and equipment: Land 15,000,000 Building
40,000,000 Accumulated Depreciation- Building 20,000,000 Equipment
13,000,000 Accumulated Depreciation- Equipment 8,000,000. There were no
new non-current assets or disposals acquired during the year 2010. The
management is applying straight line method for the building and equipment
that has useful life of 10 years and 13 years respectively with both having no
residual value. On September 30, 2010, all of the property, plant and
equipment had sound values as follows: Land 20,000,000 Building
30,000,000 Equipment 8,000,000. The balance of revaluation surplus at
December 31, 2010 is
a. 18,000,000
b. 17,350,000
c. 16,550,000
d. 15,400,000
Answer: B
Solution:
Sound Value Carrying Amount
Revaluation Surplus
Land 20,000,000 15,000,000
5,000,000
Building 30,000,000 20,000,000
10,000,000
Equipment 8,000,000 5,000,000
3,000,000
Total P 18,000,000
Amortization of Revaluation Surplus
10,000,000
Building: 5 = 2,000,000 x 3/12 = 500,000
3,000,000
Equipment: 5 = 600,000 x 3/12 = 150,000
Unamortized Revaluation Surplus = 18,000,000 – (500,000+150,000) =

17,350,000
2. A machinery was acquired on January 1, 2005 at a cost of P6,000,000.

Depreciation of the machinery is computed on a straight line basis and the
annual depreciation is 150,000. On December 31, 2013, the machinery is
appraised at a fair market value of 5,550,000 with a new total useful life of
30 years. What amount should be debited to Revaluation Surplus at
December 31, 2014?
a. 20,177.50
b. 29,032.26
c. 27, 435.74
d. no answer
Answer: B
Solution:
6,000,000
Useful Life = 150,000 = 40 yrs.
Carrying Amount as of 12/31/13 = 6,000,000 – (150,000x 9yrs) =

4,650,000
Revaluation Surplus = 5,550,000 - 4,650,000 = 900,000
900,00
Amortization of Revaluation Surplus: 31 = 29,032.26
3. Due to obsolescence, Castillo Company discovered that a sewing machine

with an original cost of P300,000 and accumulated depreciation at December
31, 2012 of P60,000 had suffered permanent impairment and as a result
should have a carrying value of only P200,000 at that date. In addition, its
original estimated useful life of 30 years and straight line method for
depreciation was not changed. On January 1, 2015 the same asset had a
recoverable amount of P250,000. If the company uses the revaluation model
to measure long live assets, what is the Revaluation Surplus to be reported
a. 200,000
b. 183,333.33
c. 66,666.67
d. 63,636.37
Answer: D
Solution:
12/31/12 CA = 300,000 – 60,000 = 240,000
Impairment loss = 200,000 - 240,000 = 40,000
New CA = 200,000
1/1/15
200,000
CA = 200,000 –[ ( 24 ) x 2yrs ] = 183,333.33
Revaluation Surplus = 250,000 - 183,333.33 = 66,666.67

66,666.67
Amortization: 22 = 3,030.30
12/31/15 Unamortized Revaluation Surplus = 63,636.37

4. Pastillas Corp. carries in its books a factory that was constructed years ago
at a cost of P 7,000,000 and accumulated depreciation of 1,000,000 on
September 1, 2014. The factory has been depreciated on the straight line
method over a fourteen-year estimated useful life. On the same day, the
plant is revalued at P9,000,000. What is the amount credited to Retained
Earnings on the second year assuming that the corporation uses elimination
approach?
a. 250,000
b. 205,000
c. 200,500
d. 520,000
Answer: A
Solution:
7,000,000 – 1,000,000 = 6,000,000
Revaluation Surplus = 9,000,000 – 6,000,000 = 3,000,000
3,000,000
Amortization of Revaluation Surplus: 12 = 250,000
5. Rogelio Rogelio Company bought a land for P1,750,000. On 2010, It was

revalued downward to conform with the market value of P1,300,000.
However on 2011, there has been a surge in land therefore having a fair
value of P 2,000,000. Which of the following entries is included to record the
revaluation?
a. a credit to Retained Earnings 700,000
b. a credit to Revaluation Gain 250,000
c. a credit to Revaluation Surplus 250,000
d. a debit to Land 2,000,000
Answer:
Solution:
Impairment Loss : 1,300,000 - 1,750,000 = 450,000
2011 Revaluation Surplus : 2,000,000 - 1,300,000 = 700,000
Land 700,000
Revaluation Gain 450,000
Revaluation Surplus 250,000
6. On December 31, 2012, Powermart Corp. reported the following in relation

to machinery: Machinery 3,250,000 Accumulated Depreciation P1,000,000. It
was depreciated using straight line basis over a 13-year period with a
residual value of P250,000 and measured using the cost model. On January
1, 2013, the management discovered that the machinery was impaired. Its
fair value less cost of disposal is P2,000,000 while its value in use is
P1,750,000. On December 31, 2014, the entity decided to change the basis
of measurement of the machinery from cost to revaluation model. It was
revalued to the market value of P2,750,000 with an expected remaining
useful life of 5 years. What amount is the revaluation surplus on December
31,2015?
a. 670,000
b. 680,000
c. 690,000
d. 700,000
Answer: C
Solution:
1/1/13 Imp. Loss = 2,000,000 - 2,250,000 = 250,000

2,000,000−250,000
12/31/14 CA = 2,000,000 – [( 4 ) x 2] = 1,912,500
Revaluation Surplus: 2,750,000 - 1,912,500= 837,500

Amortization: 837,500 /5 = 167,500
2015 Unamortized Revaluation Surplus = 837,500 - 167,500 = P 670,000
7. The following data was available on EXO Company’s book on January 1,

2011: Building 2,350,000 Accumulated Depreciation P 940,000. It was
depreciated using straight line basis over a 10-year period with a residual
value of zero. On January 1, 2012, a test for impairment indicated that the
building was impaired. As of the same date, its fair value less cost of disposal
was P1,100,000 while its value in use was P1,150,000. At the beginning of
2013 a revaluation of the building was made and it appraised to the market
value of P3,200,000. What is the amount of revaluation surplus on January 1,
2013?
a. 1,175,000
b. 2,737,000
c. 2,337,500
d. 862,500
Answer: C
Solution:
1/1/12 CA = 2,350,000 - (940,000 + 235,000)= 1,175,000
Imp. Loss = 1,175,000 - 1,150,000 = 25,000
1/1/13
CA = 1,150,000 – (1,150,000/4) = 862,500
Revaluation Surplus = 3,200,000 - 862,500 = P 2,337,500
8. On May 17, 2004, Selene Company bought a land for P7,230,000. The land
was revalued downward on April 7, 2012 to conform with the market value of
P5,000,000. However on 2014, there has been a reversal of revaluation
decrease in land therefore having a fair market value of P 5,900,000. Which
of the following entries is not included to record the 2014 revaluation?
a. a credit to Revaluation Surplus 540,000
b. a credit to Revaluation Gain 2,230,000
c. a credit to Revaluation Surplus 2,770,000
d. a debit to Land 2,770,000
Answer: C
Solution:
Impairment Loss : 5,000,000 – 7,230,000 = 2,230,000
4/7/12 Revaluation Surplus : 5,000,000 - 2,230,000 = 2,770,000
Land 2,770,000
Revaluation Gain 2,230,000
Revaluation Surplus 540,000
9-10. Based on the books of Jaeger Corporation, the following account

balances are available relating to real properties: Land A P4,555,000 Land B
P3,200,500 Land C P5,000,000. On December 31, 2014, the entity revalued
land to fair value. As of this date, the following data is available:
Land A P 7,000,000
Land B P 5,000,000
Land C P 6,000,000
The buildings and other facilities located on all three properties are
depreciated using sum-of-the-years-digit method using a 12-year useful life.
On December 31, 2015, Land A and C were sold for a lump sum of
P10,000,000.
i. What amount of revaluation surplus should be transferred to retained

earnings on 2015?
a. 3,445,000
b. 5,244,500
c. 1,799,500
d. 0
ii. Using the same problem above, which of the following is true?
a. The remaining unrealized revaluation surplus is 1,799,500.
b. The retained earnings will have piecemeal realization of Land B’s
Realization on the next years.
c. The remaining unrealized revaluation surplus is 3,445,000.
d. All of the above
Solution:
Sound Value Carrying Amount
Revaluation Surplus
Land A 7,000,000 4,555,000
2,445,000
Land B 5,000,000 3,200,500
1,799,500
Land C 6,000,000 5,000,000
1,000,000
Total P 5,244,500
Realization of Revaluation Surplus:
Land A 2,445,000
Land C 1,000,000
Total P 3,445,000
Unrealized Revaluation Surplus: P 1,799,500
IMPAIRMENT OF ASSETS
1-3. Gold Company operates a product line which is treated as a cash
YOURerating unit for impairment purposes. On December 31, 2014, the
carrying amounts of the noncurrent assets are as follows:
Machine 4,000,000
Equipment 3,000,000
Goodwill 1,000,000
On December 31, 2014 the fair value less cost to sell is 7,500,000
i. What amount will be the balance of goodwill?

a. 500,000
b. 62,500
c. 1,000,000
d. 66,667
ii. Assuming that the fair value less cost to sell is 6,000,000. What is the
amount of impairment allocated to machine?
a. 4,000,000
b. 571,428.57
c. 857,142.86
d. 3,000,000
iii. What is the new carrying amount of goodwill, machine and equipment
respectively?
a. 500,000; 3,500,000; 2,500,000
b. 0; 3,428,571.43; 3,000,000
c. 0; 3,428,571.43; 2,571,428.57
d. 750,000; 3,000,000; 2,250,000
Answer: (i) A (ii) B (iii) C
Solution:
(i)
Carrying amount of CGU 8,000,000
Fair value less cost to sell 7,500,000
Impairment is charged to goodwill up to the extent of it balance.

Goodwill (1,000,000-500,000) 500,000
(ii)
Impairment loss (8,000,000-6,000,000) 2,000,000
Charged to goodwill 1,000,000
Allocable to other assets 1,000,000
Allocated to machine (1,000,000 x 4/7) 571, 428.57
(iii)
Goodwill 0
Machine [4,000,000-(1,000,000 x 4/7)] 3,428,571.43;
Equipment [3,000,000-(1,000,000 x 3/7)] 2,571,428.57
4. James Pogi Company acquired a machine for 5,000,000 on July 1, 2014.

The machine has a12-year useful life, a 500,000 residual value, and was
depreciated using the straight-line method. On June 30, 2016 a test for
recoverability revealed that the machine has been impaired. The fair value
less cost of disposal on this date is 1,750,000 and the value in use amount to
1,500,000. What amount should be recognized as impairment loss?
a. 2,750,000
b. 2,500,000
c. 2,875,000
d. 3,125,000
Answer : B
Solution:
Acquisition cost 5,000,000
Accumulated Depreciation (4,500,000/12 x 2) 750,000
Cost 5,000,000
Accumulated depreciation ( 750,0000)
Fair value less cost of disposal (1,750,000)
5, January 1, 2008, Maganda company purchased a sewing machine for

3,000,000, with a residual value of 500,000. On January 1, 2011 the
Accumulated Depreciation account has a balance of 750,000. A test for
impairment also revealed that the undiscounted cash flow from the sewing
machine are 200,000 a year for the remaining 7 periods. The prevailing
market rate at this date is 5%. The fair value less cost of disposal amounted
to 1,600,000. PV of ordinary annuity if 1 at 5% for 7 period is 5.79.
What amount should be reported as loss on impairment?
a. 650,000
b. 1,092,000
c. 150,000
d. 592,000
Answer: A
Solution:
Value in use (200,000 x 5.79) 1,158,000
Fair value less cost of disposal 1,600,000
Cost 3,000,000
Accumulated Depreciation (750,000)
Less: fair value less cost of disposal 1,600,000
6-7. On January 1, 2013, Umasa Corporation acquired equipment for

19,000,000 with an estimated useful life of 15 years. It is also estimated that
the equipment will be sold for 1,500,000 at the end of its useful life. The
entity uses the sum of year’s digit for depreciation. At the year ended
December 31, 2014one of the adjusting entry includes an impairment loss of
500,000.
i. What will be the carrying amount of the equipment on December 31,

2014?
a. 16,812,500
b. 17,312,500
c. 14,270,833
d. 19,000,000
ii. Using the same information in No.2,Umasa Corporation changeits

depreciation method into straight line method at the beginning of 2015. It
is estimated to have a residual value of 1,000,000it is estimated to have a
total of 10-year useful life. What amount should be recognized as
depreciation in 2015?
a. 1,914,062.5
b. 2,039,062.5
c. 1,701,388.89
d. 1,531,250
Answer: (i)C (ii)A
Solution:
(i)
SYD [15(15+1/2)] 120
Cost 19,000,000
Residual value (1,500,000)
Cost 19,000,000
Depreciation-2013(17,500,000 x 15/120) 2,187,500
Carrying amount-January2014 16,812,500
Depreciation-2014(17,500,000 x 14/120) 2,041,667
14,770,883
Carrying amount
14,770,883
Impairment loss (500,000)
Recoverable amount/ carrying amount- December 2014 14,270,833
(ii)
Residual value (1,000,000)
Depreciation (15,312,500/8years) 1,914,062.5
8-10. On January 1, 2013, Diosa Company purchased equipment with cost of

15,000,000, useful life of 10 years and no residual value. The entity used
straight line depreciation. On December 31, 2013, and December 31, 2014,
the entity determined the impairment indicators are present. There is no
change in useful life or residual value.
December 31, 2013

December 31, 2014
Fair value less cost of disposal 9,100,000
9,300,000
Value in use 9,600,000
9,200,000
i. What would be the balance of Accumulated Depreciation on December

31, 2013?
a. 1,500,000
b. 3,000,000
c. 3,900,000
d. 5,400,000
ii. What is the impairment loss for 2013?

a. 4,400,000
b. 5,000,000
c. 5,400,000
d. 3,900,000
iii. What is the gain on reversal of impairment for 2014?

a. 766,667
b. 800,000
c. 866,667
d. 700,000
Answer: (i)D (ii)D(iii)A
Solution:
(i)
Accumulated Depreciation 1,500,000
Accumulated Depreciation- 2013 5,400,000
(ii)
Cost 15,000,000
Depreciation (15,000,000/10) 1,500,000
Value in use- (higher) 9,600,000
(iii)
Carrying amount- 01/01/2014 9,600,000
Depreciation- 2014(9,600,000/9) (1,066,667)
Carrying amount- with impairment 8,533,333
Cost- 01/01/2013 15,000,000

Accumulated Depreciation(15,000,000/10 x 2) (3,000,000)
Carrying amount- with no impairment 12,000,000
Fair value less cost of disposal (higher) 9,300,000

Carrying amount –with impairment (8,533,333)
Gain on reversal of impairment 766,667
INTANGIBLE ASSETS
1. A patent for a new consumer product for P900,000 was bought ME Inc. on
January 1,2012. At the time of purchase, the patent was valid for 15 years.
However, the patent's useful life was estimated to be only 10 years due to
competitive nature of the product. On Dec. 31,2015, the product was
permanently withdrawn from sale under governmental order because of a
potential health hazard in the product. What amount should be changed
against income of 2015 if amortization is recorded at the end of each year?
a. 90,000
b. 540,000
c. 720,000
d. 630,000
Answer: D
Solution:
Acquisition cost 900,000
Amortization ( 900,000/10x3) (270,000)
Carrying Amount - Jan. 1,2015 630,000
2. Qevi Co. builds and sells equipment. On December 31, 2013 , the entity
has financial assets at fair value through profit or loss at P1,000,000,goodwill
valued at P1,500,000, prepaid insurance at P50,000 , patent valued at
P2,500,000, and a customer list valued at P500,000. What amount should be
reported as total intangible assets Dec. 31,2013?
a. 4,500,000
b. 4,000,000
c. 5,500,000
d. 3,000,000
Answer: A
Solution:
Goodwill 1,500,000
Patent 2,500,000
Customer list 500,000
Total Intangible Assets 4,500,000
3. On Jan. 1,2015, Dante Company bought a trademark from Lucia Co. For
P5,000,000. The entity retained an independent consultant who estimated
the trademark's useful life to be indefinite. The carrying amount of the
trademark was P1,500,000 on the books of Lucia Co. On Dec. 31,2015, what
is the carrying amount of the Trademark?
a. 5,000,000
b. 1,500,000
c. 1,800,000
d. 0
Answer: D
Solution:
The trademark will not be amortized.
4. On December 31, 2015, CHANYEOL Corp showed the following balances:

Copyright 900,000 Deposit wih advertising agency used to promote goodwill
600,000 Bond sinking fund 2,000,000 Excess of Cost over fair value of
Identifiable asset 500,000 Trademark 4,000,000 What amount should be
reported as intangible assets?
a. 1,400,000
b. 4,500,000
c. 5,400,000
d. 5,800,000
Answer: C
Solution :
Total Intangible Assets (900,000+ 500,000+ 4,000,000) 5,400,000
5. SING CO. incurred P1,200,000 of research and development cost to

develop a product for which a patent was granted at the beginning year.
Legal fees and other cost associated with registration of the patent totaled
P500,000. At year end, the entity paid P750,000 for legal fees in a successful
defense of the patent. What is the total amount that should be capitalized for
the patent at year end?
a. 2,250,000
b. 500,000
c. 300,000
d. 750,000
Answer: B
Solution :
Legal fees and other cost associated with registration 500,000
6-7. A new machine was developed by SHEWOLF Company for

manufacturing baseballs. Because the machine is considered very valuable,
the entity had it patented. The following expenditures were incurred in
developing and patenting the machine: Purchase of new equipment to be
used solely for development of new machine 2,000,000 Research salaries
and fringe benefits for engineer and scientists 200,000 Cost of testing
prototype 350,000 Legal fees for filing of patent 250,000 Fees paid to
government patent office 50,000 Drawings required by patent office to be
filed with patent application 40,000
i. What amount should be capitalized as cost of patent?

a. 340,000
b. 290,000
c. 250,000
d. 300,000
ii. What amount of research and development cost should be expensed in

the current year?
a. 2,550,000
b. 2,200,000
c. 2,350,000
d. 2,750,000
Answer: (i)A (ii)A

Solution:
(i)
Legal cost for filing patent 250,000
Fees paid to patent office 50,000
Drawings required by the patent office 40,000
Total cost of patent 340,000
(ii)
Purchase of special equipment 2,000,000
Research and fringe benefits 200,000
Cost testing prototype 350,000
Research and development expense 2,550,000
8. BAE Company has acquired a trademark relating to the introduction of a

new manufacturing process. The cost incurred were as follows: Cost of
Trademark 3,500,000 Expenditure on promoting the new product 50,000
Employee benefits relating to the process 400,000 What total cost should be
capitalized as intangible non current asset in respect to the new process?
a. 4,150,000
b. 3,500,000
c. 7,450,000
d. 3,900,000
Answer: D
Solution:
Total Cost ( 3,500,000+400,000) 3,900,000
9. On January 1,2009, SHEMAY Co. Purchased a patent for P6,000,000. The

original useful life was estimated to be 15 years. However, in Dec. 2014, the
management received information proving conclusively that the product
protected by the SHEMAY patent would be obsolete within 4 years.
Accordingly, the entity decided to write off the unamortized cost of patent
over 5 years beginning in 2014. What is the patent amortization for 2014?
a. 800,000
b. 1,200,000
c. 1,000,000
d. 400,000
Answer: A
Solution:
Cost 6,000,000
Accumulated Depreciation (6,000,000/15x5) (2,000,000)
Carrying Amount -Jan. 2014 4,000,000
Amortization for 2014 ( 4,000,000/5) 800,000
10. SEXY Company acquired a patent for a drug with remaining legal and
useful life of 6 years on January 1,2012 for P3,600,000. On January 1,2014, a
new patent is received for a timed release version of the same drug. The new
patent has a legal and useful life of 20 years. What is the amortization
expense for 2014?
a. 200,000
b. 50,000
c. 120,000
d. 20,000
Answer: C
Solution:
Cost 3,600,000
Amortization (3,600,000/6x2) (1,200,000)
Carrying Amount- Jan. 1, 2014 2,400,000
Amortization for 2014 ( 2,400,000/20) 120,000

Cash and Cash Equivalents: Answer: C

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CASH AND CASH EQUIVALENTS

1. San Agustin Corporation’s cash account as of December 31, 2012 consists

Balance of deposit in current account with City Bank P

2. The books of Love Company provided the following information with

Isa Bank’s checking account balance

What amount of petty cash should be reported at December 31, 2013?

4. An analysis at year-end showed the following details in Somewhere

5. MasMaganda Co. had the following account balances as of December 31,

Cash in bank – current account

What amount should be reported as cash on December 31, 2015?

First checking account P 155,000

10. Silento Corporation established a petty cash fund on February 3 in order

Deposits in transit P 790

The adjusted cash balance per books on September 30 is:

Cash balance per books P7,500

Adjusted cash balance P7,700

Beginning cash balance P40,000

SMILE Company has a policy of maintaining a minimum cash balance of

3. ZIA's bank statement dated Dec 31, Y5 shows a balance of P24,594.72.

 A deposit of P400.00 made on Dec 31 does not appear on bank

What is the Adjusted Balance per bank statement?

What is the Adjusted Balance per bank statement?

Bank Statement Balance P1,350 Book Cash Balance P995

5. Gutom na Co. collected the following information to prepare its October

Bank Statement P Book Cash Balance - P

What is Sexy’s correct cash balance on the end of the year?

7. The following adjustments were given in relation with IKON’s reconciliation

What is iKON’s correct cash book balance?

At October 31, 2007, Sehun’s adjusted cash balance is

Balance per cash book P 47,330

9. Bebang’s Cash Book at September 30, 2012 showed an overdrawn

Balance as per bank statement P (2,118)

 Balance per books P 387,000

Balance per bank statement

Balance per books P387,000

 Trade accounts receivable

 Bad debts (80,000)

 Security deposit lease of warehouse

 used for storing some inventories

 Selling price of unsold goods sent by CHOCOLATE

CHOCOLATE’s ending inventory)

 Claim against shipper for goods lost in transit

Trade accounts receivable P1,030,000

MAHAL Co’s accounts receivable turnover is 2016 is 5 times.

What is the accounts receivable balance as December 31, 2014?

Net Receivables, Dec. 31, 2014 P442,000

3. STAY CORP. had an account receivable with balance of P3,540,000 at

Required allowance P130,000

4. The following information is from RORO CORP’s first year of operations:

5. B2ST Inc. has a business of exporting variety of local products. By selling

Allowance for bad debts, January 1, 2016 P

Year Sales Allow. For Bad debts

a. 77,500 ; 98,660; 57,750

7. AOA Corporation has the following selected transactions occurred during

Bad debt expense (P586,600 x 2%) P 11,732

Less: Accounts written off (191,000)

9. An analysis and aging of its accounts receivable at December 31, 2015 in

Accounts Receivable – Dec. 31 P8,900,000

Interest income for 2016 (9% x 2,112,000)