Use The Following Information To Answer Items 3 and 4
Use The Following Information To Answer Items 3 and 4
Use The Following Information To Answer Items 3 and 4
1. EE Company acquired trading equity instrument for P4,000,000 on April 30, 2018. The equity instrument is
classified as financial asset at fair value through profit or loss. The transaction cost incurred amounted to
P700,000. On December 31, 2018, the fair value of the instrument was P5,500,000. What amount of gain
should be recognized in the income statement for the year ended December 31, 2018?
A. 0 B. 700,000 C. 800,000 D. 1,500,000
2. EE Company acquired non-trading equity instrument for P4,000,000 on April 30, 2018. The equity
instrument is classified as financial asset at fair value through other comprehensive income. The transaction
cost incurred amounted to P700,000. On December 31, 2018, the fair value of the instrument was
P5,500,000. What amount of gain should be recognized in other comprehensive income for the year ended
December 31, 2018?
A. 0 B. 700,000 C. 800,000 D. 1,500,000
The company sold 10,000 shares of Security Y on January 15, 2019, for P150 per share.
3. What amount of unrealized gain or loss should be reported in the income statement for 2018?
A. 200,000 loss B. 200,000 gain C. 300,000 loss D. 300,000 gain
4. What amount should be reported as gain or loss on sale of trading securities in 2019?
A. 100,000 gain B. 100,000 loss C. 200,000 gain D. 200,000 loss
6. What amount of loss on these securities should be included in the statement of comprehensive income for
the year ended December 31, 2019 as component of other comprehensive income?
A. 0 B. 100,000 C. 300,000 D. 400,000
7. What cumulative amount of loss on these securities should be reported in the statement of changes in
equity for the year ended December 31, 2019 as component of other comprehensive income?
A. 0 B. 100,000 C. 200,000 D. 400,000
9. What amount of gain or loss on these securities should be included in the statement of comprehensive
income for the year ended December 31, 2019?
A. 400,000 gain B. 400,000 loss C. 500,000 gain D. 500,000 loss
Cost Market
Security A 2,000,000 2,400,000
Security B 3,000,000 3,500,000
Security C 5,000,000 4,900,000
10. What amount should be recognized directly in retained earnings as a result of the sale of financial asset in
2021?
A. 0 B. 100,000 C. 400,000 D. 500,000
11. What amount should be recycled to profit and loss as a result of the sale of financial asset in 2021?
A. 0 B. 100,000 C. 400,000 D. 500,000
12. On January 1, 2018, HH Company purchased 40,000 shares at P100 per share to be held for trading.
Brokerage fees amounted to P120,000. A P5 dividend per share had been declared on December 15, 2017,
to be paid on March 31, 2018 to shareholders of record on January 31, 2018. No other transactions
occurred in 2018 affecting the investment. What is the initial measurement of the investment?
A. 3,800,000 B. 3,920,000 C. 4,000,000 D. 4,120,000
13. BB Company purchased 10,000 shares representing passive ownership of DD Company on February 1,
2019. BB Company received a stock dividend of 2,000 shares on March 31, 2019, when the carrying amount
per share was P350 and the market value per share was P400. DD Company paid a cash dividend of P15
per share on September 15, 2019. In the income statement for the year ended December 31, 2019, what
amount should be reported as dividend income?
A. 150,000 B. 180,000 C. 880,000 D. 980,000
14. Hipolito Company owns 20,000 shares of Homer Company’s 200,000 shares of P100 par, 6% cumulative,
non-participating preference share capital and 10,000 shares representing 2% ownership of Homer’s
ordinary share capital. During 2018, Homer Company declared and paid preference dividends of P2,400,000.
No dividends had been declared or paid during 2017. In addition, Hipolito Company received a 5% share
dividend on ordinary share from Homer Company when the quoted market price of Homer’s ordinary share
was P10. What amount should be reported as dividend income for 2018?
A. 120,000 B. 125,000 C. 240,000 D. 245,000
Heather Company has elected irrevocably to measure the investment at fair value through other comprehensive
income.
15. Total income to be reported in the income statement for the current year is
A. 150,000 B. 300,000 C. 450,000 D. 750,000
19. What total income in connection with the above transactions shall be included in the income statement for
the year 2013?
A. 950,000 B. 1,150,000 C. 1,450,000 D. 1,650,000
21. What total income in connection with the above transactions shall be included in the income statement for
the year 2013?
A. 950,000 B. 1,150,000 C. 1,450,000 D. 1,650,000
22. Bruce Company owned 50,000 ordinary shares of Banner Company. These 50,000 shares were purchased at
P120 per share. On August 30, 2001, Banner Company distributed 50,000 stock rights to Bruce Company.
Bruce Company was entitled to buy one new share of Banner Company for P90 cash and two of these
rights. On August 30, 2011, each share had a market value of P130 and each right had a market value of
P20. What total cost should be recorded for the new shares that are acquired by exercising the rights?
A. 2,250,000 B. 3,250,000 C. 3,050,000 D. 5,500,000
23. ABC Company issued rights to subscribe to its stock, the ownership of four shares entitling the shareholders
to subscribe for one share at P100. DEF Company owns 50,000 shares of ABC Company with total cost of
P5,000,000. The share is quoted right-on at P150. What is the cost of the new investment if all of the stock
rights are exercised by the investor?
A. 1,250,000 B. 1,450,000 C. 1,750,000 D. 1,762,500
24. If the FIFO approach is used, what amount of gain on sale of investment should be recognized in 2018?
A. 125,000 B. 287,500 C. 450,000 D. 700,000
25. If the average approach is used, what amount of gain on sale of investment should be recognized in 2018?
A. 125,000 B. 287,500 C. 450,000 D. 700,000
28. On December 31, 2018, what is the carrying amount of the investment in bonds?
A. 911,300 B. 916,600 C. 953,300 D. 960,600
30. What is the carrying amount of the investment in bonds on December 31, 2018?
A. 5,759,250 B. 5,800,480 C. 7,759,250 D. 7,800,480
32. What is the carrying amount of the bond investment on December 31, 2018?
A. 8,302,848 B. 8,538,542 C. 8,540,704 D. 8,594,752
At the beginning of current year, JJ Company purchased ten-year bonds with a face amount of P1,000,000 and a
stated interest rate of 8% per year payable semi-annually June 30 and December 31. The bonds were acquired to
yield 10%.
34. On January 1, 2020, RC Company purchased serial bonds with face amount of P3,000,000 and stated 12%
interest payable annually every December 31. The bonds are to be held as financial asset at amortized cost
with a 10% effective yield. The bonds mature at an annual installment of P1,000,000 every December 31.
The present value of 1 at 10% for one period is 0.91, for two periods is 0.83, and for three periods 0.75.
What is the present value of the serial bonds on January 1, 2020?
A. 3,045,000 B. 3,060,000 C. 3,106,800 D. 3,149,400
35. What amount of unrealized gain should be reported as component of other comprehensive income for
2019?
A. 0 B. 100,000 C. 268,800 D. 340,000
36. What amount of unrealized gain should be reported as component of other comprehensive income for
2020?
A. 0 B. 70,256 C. 221,200 D. 339,056
37. What amount should be recognized as gain on sale of the bond investment on June 30, 2021?
A. 250,000 B. 544,528 C. 589,056 D. 794,528
38. What amount of unrealized gain should be reported as component of other comprehensive income for
2018?
A. 0 B. 250,000 C. 400,000 D. 428,640
39. What cumulative amount of unrealized gain should be reported as component of other comprehensive
income in the statement of changes in equity for 2019?
A. 0 B. 164,291 C. 500,000 D. 592,931
40. What is the interest income for 2019?
A. 300,000 B. 379,360 C. 385,709 D. 392,931
41. What amount of unrealized loss should be reported as component of other comprehensive income in 2018?
A. 0 B. 342,480 C. 406,000 D. 469,520
42. What amount of unrealized loss should be reported as component of other comprehensive income in 2019?
A. 0 B. 131,398 C. 200,000 D. 473,878
43. What amount of cumulative unrealized loss should be reported in the statement of changes in equity for
2019?
A. 0 B. 406,000 C. 473,878 D. 606,000
44. What is the carrying amount of the bond investment on December 31, 2019?
A. 3,600,000 B. 3,800,000 C. 4,206,000 D. 4,673,878
45. What amount of gain from change in fair value should be reported for 2019?
A. 0 B. 250,000 C. 350,000 D. 750,000
47. What is the carrying amount of the bond investment on December 31, 2019?
A. 5,400,000 B. 5,450,000 C. 5,500,000 D. 5,750,000
48. What total amount of income from the investment should be reported in the income statement for 2019?
A. 540,000 B. 890,000 C. 900,000 D. 950,000
On December 31, 2018, the entity changed the business model to collect contractual cash flows and also to sell the
bonds in the open market.
50. What is the unrealized loss included in profit or loss for 2018?
A. 0 B. 40,000 C. 470,000 D. 510,000
On December 31, 2018, the entity changed the business model for this investment to realize fair value changes.
56. What total amount is included in profit or loss in 2018 as a result of the reclassification from FVOCI to FVPL?
A. 255,000 B. 385,000 C. 405,100 D. 660,100
The bonds are quoted at 105 on December 31, 2018 and 110 on December 31, 2019. The business model in
managing the financial asset is to collect contractual cash flows and also to sell the bonds in the open market. The
entity has not elected the fair value option.
On December 31, 2019, the entity changed the business model to collect only contractual cash flows. On December
31, 2020, the bonds are quoted at 115 and the market rate of interest is 10%.
57. What amount of unrealized gain should be reported as component of OCI for 2018?
A. 250,000 B. 690,000
C. 507,912 D. -0-
58. What amount of cumulative unrealized gain should be reported as component of OCI in the statement of
changes in equity for 2019?
A. 500,000 B. 678,545
C. 250,000 D. 875,200
59. What amount of unrealized gain should be reported as component of OCI for 2019?
A. 500,000 B. 250,000
C. 170,633 D. 185,200
61. What is the carrying amount of the investment on December 31, 2020?
A. 4,694,784 B. 4,668,600
C. 4,907,171 D. 5,750,000
63. What amount of unrealized gain in OCI should be recognized on January 1, 2019?
A. 0 B. 200,000 C. 269,450 D. 290,500
64. What cumulative amount in OCI is recognized in the statement of changes in equity for 2019?
A. 166,945 B. 269,450 C. 436,395 D. 499,500
66. What is the carrying amount of the investment on December 31, 2019?
A. 1,930,500 B. 1,963,605 C. 2,200,000 D. 2,400,000
On December 31, 2019, the entity changed the business model for this investment to realize fair value changes. On
January 1, 2020, the fair value of the bonds was P2,845,000 at an effective rate of 11%.
68. What amount in profit or loss should be recognized in 2020 as a result of the reclassification?
A. 531,600 B. 502,592
C. 154,200 D. -0-
71. What amount of unrealized should be recognized in profit or loss for 2018?
A. 500,000 B. 450,000
C. 105,000 D. -0-
72. What amount of unrealized gain should be recognized in profit or loss for 2019?
A. 155,000 B. 600,000
C. 705,000 D. -0-
Materials P 1,400,000
Advance for materials ordered 200,000
Goods in process 650,000
Unexpired insurance on inventory 60,000
Advertising catalogs and shipping cartons 150,000
Finished goods in factory 2,000,000
Finished goods in company-owned retail store, including 50% profit on cost 750,000
Finished goods in hands of consignees including 40% profit on sales 400,000
Finished goods in transit to customers, shipped FOB destination at cost 250,000
Finished goods out on approval, at cost 100,000
Unsalable finished goods, at cost 50,000
Office supplies 40,000
Materials in transit, shipped FOB shipping point, including freight of P30,000 360,000
Goods held on consignment, at sales price (cost, P150,000) 200,000
75. What is the correct amount of inventory?
A. 5,375,000 B. 5,500,000
C. 5,540,000 D. 5,250,000
OO Company has incurred the following costs during the current year:
77. SS Company regularly buys goods from a supplier and is allowed trade discounts of 20% and 10% from the
list price. SS made a purchase during the year and received an invoice with a list price of P600,000, a
freight charge of P15,000 and payment terms of 2/10, n/30.What is the cost of the purchase?
A. 432,000 B. 447,000
C. 438,360 D. 435,000
80. On April 1, 2018, MM Company recorded purchases of inventory of P800,000 and P1,000,000 under credit
terms of 2/15, net 30.The payment due on the P800,000 purchase was remitted on April 16. The payment
due on the P1,000,000 purchase was remitted on May 1. Under the net method and gross method, these
purchases should be included at what respective amounts in the determination of cost of goods available for
sale?
AA Company reported inventory on December 31, 2018 at P6,000,000 based on a physical count of goods priced at
cost and before any necessary year-end adjustments relating to the following:
Included in the physical count were goods billed to a customer FOB shipping point on December 30, 2018.
These goods had a cost of P125,000 and were picked up by the carrier on January 2, 2019.
Goods shipped FOB shipping point on December 28, 2018 from a vendor to AA were received and recorded
on January 2, 2019. The invoice cost was P300,000.
81. What amount should be reported as inventory on December 31, 2018?
A. 5,875,000 B. 6,000,000
C. 6,175,000 D. 6,300,000
Katindig Company conducted a physical count on December 31, 2020 which revealed inventory with a cost of
P4,410,000.
Cardo Company reported accounts payable on December 31, 2019 at P4,500,000 before any necessary year-end
adjustments relating to the following transactions:
On December 27, 2019, Cardo wrote and recorded checks to creditors totaling P2,000,000 causing an
overdraft of P500,000 in Cardo’s bank account on December 31, 2019. The checks were mailed on January
5, 2020.
On December 28, 2019, Cardo purchased and received goods for P750,000, terms 2/10, n/30. Cardo
records purchases and accounts payable at net amount. The invoice was recorded and paid January 3,
2020.
Goods shipped FOB destination on December 24, 2019 from a vendor to Cardo were received January 8,
2020. The invoice cost was P325,000.
83. On December 31, 2019, what amount should be reported as accounts payable?
A. 7,575,000 B. 7,250,000
C. 7,235,000 D. 7,553,500
Marco Company’s usual sales terms are net 60 days, FOB shipping point. Sales, net of returns and allowances,
totaled P9,200,000 for the year ended December 31, 2018, before year-end adjustments.
On December 28, 2018, Marco authorized a customer to return, for full credit, goods shipped and billed at
P200,000 on December 15, 2018. The returned goods were received by Marco on January 2, 2019, and a
P200,000 credit memo was issued and recorded on the same date.
Goods with an invoice amount of P300,000 were billed and recorded on January 3, 2019. The goods were
shipped on December 30, 2018.
Goods with an invoice amount of P400,000 were billed and recorded on December 30, 2018. The goods
were shipped on January 2, 2019.
On January 5, 2019, a customer notified Marco that goods billed and shipped on December 21, 2019 were
lost in transit. The invoice amount was P500,000.
Poodle Company’s year-end inventory balance on December 31, 2018 is P1,650,000 based on physical count and
before considering the following transactions:
Goods shipped to Poodle Company FOB Destination on December 20, 2018, were received on January 2,
2019. The invoice cost is P300,000.
Goods shipped to Poodle Company FOB shipping point on December 28, 2018, were received on January 4,
2019. The invoice cost is P170,000.
Goods shipped from Poodle Company to a customer FOB destination on December 27, 2018 were received
by the customer on January 3, 2019. The sale price is P400,000 and the cost is P220,000.
Goods shipped from Poodle Company to a customer FOB destination on December 28, 2018 were received
by the customer on December 30, 2018. The sale price is P200,000 and the cost is P130,000.
Goods shipped from Poodle Company to a customer FOB shipping point on December 26, 2018 were
received by the customer on January 7, 2019. The sale price is P250,000 and the cost is P120,000.
All merchandise is marked up to sell at its invoice cost plus 20%. Merchandise inventories at the beginning of each
month are at 30% of that month's projected cost of goods sold.
86. The cost of goods sold for the month of June is anticipated to be
a. 2,160,000 b. 2,250,000 c. 2,280,000 d. 2,475,000
COST FLOW
Mallow Company had 150,000 units of Product Z on hand at January 1, costing P21 each.
88. What is the cost of the inventory on December 31 under the FIFO method?
A. 5,850,000 B. 5,550,000
C. 5,350,000 D. 5,250,000
The following information has been extracted from the records about one product:
89. If the FIFO cost flow is used, what is the cost of the inventory on April 30?
A. 330,750 B. 315,000
C. 433,876 D. 329,360
During January, Penny Company which used a perpetual inventory system recorded the following information
pertaining to inventory:
90. Under the moving average method, what amount should Penny report as inventory on January 31?
A. 2,640,000 B. 3,225,000
C. 3,300,000 D. 3,900,000
91. Under the perpetual system, what is the moving average unit cost on January 31?
A. 167 B. 165
C. 181 D. 225
The sales for March amount to P6,000,000 comprising 60,000 units. Gross profit on sales for March was P2,400,000.
The company has always used a periodic FIFO inventory costing system.
Cost NRV
On the night of September 30, 2020, a fire destroyed most of the merchandise inventory of AA Company.
All goods were completely destroyed except for partially damaged goods that normally sell for P100,000 and that had
an estimated net realizable value of P25,000 and undamaged goods that normally sell for P60,000.
96. What is the estimated amount of fire loss on September 30, 2020?
A. 700,000 B. 615,000
C. 630,000 D. 580,000
Sales for the first five months of 2018 were P150,000. Raw materials purchased were P50,000. Freight on purchases
was P5,000. Direct labor for the five months was P40,000. To determine the value of the destroyed inventory, the
insurance adjusters have agreed to use an average gross profit rate of 32.5%. Manufacturing overhead was 45% of
direct labor cost.
97. The value of the goods manufactured and completed as of May 31, 2018 was
A. 60,000 B. 90,000 C. 95,000 D. 91,250
98. The value of destroyed work-in-process inventory as determined by the insurance adjusters would be
A. 56,750 B. 65,750 C. 86,750 D. 57,650
Use the following information to answer items 39 and 40:
Ching Company used the retail inventory method to approximate the ending inventory:
Cost Retail
Beginning inventory 650,000 1,200,000
Purchases 9,000,000 14,700,000
Freight in 200,000
Purchase returns 300,000 500,000
Purchases allowances 150,000
Departmental transfer in 200,000 300,000
Markup 400,000
Markup cancellation 100,000
Markdown 1,200,000
Markdown cancellation 200,000
Sales 9,500,000
Sales discounts 100,000
Employee discounts 500,000
Estimated normal shoplifting loss 600,000
Estimated normal shrinkage 400,000
99. What is the estimated cost of ending inventory using the conservative approach?
A. 2,400,000 B. 2,460,000
C. 3,060,000 D. 2,700,000
100. What is the estimated cost of ending inventory using the average cost approach?
A. 2,560,000 B. 2,624,000
C. 3,264,000 D. 2,880,000