Conceptual Framework and "Counting Standards: Frerg%t 20,000

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CONCEPTUAL FRAMEWORK and "COUNTING STANDARDS

"sÅ$thejbllowing informationfor the next two questions:


ntity acquires an invesünent property for ? cash. Additional costs incurred are as
follows: Repairs and remodelling before occupancy, P50,Q00,
• Legal costs of tansfening fitle to the property, P20,000, Repairs
after occupancy, P

'The investment property is estimateg to have a remaining useful life of 10 years and a residual value equal
to 5% of initial cost.

l. Enfity A uses the staight Ime method of depreciation. How much is the canying of the investment
prOperty under the cpst model after one year?

2, Enüty A uses the sfraight line method of The invesunent property has a fair value of P9S0,000 at the
end of Year l. How much is the carrying amount of the investment propelty under the fair value
model after one year?

Use thefollowing .informaiion/or the nextjiye questions:


Entity A acquires equipment on Jqnuary I, 20xI. Information on costs is as follows:

Purchase price, gross of gade discpunt


Trade discount available 10,000
Frerg%t 20,000
Testing costs 30,000/
Net disposal proceeds of samples generated
i;
during testing 4.
present value of estimated costs of dismantling the
equipment at the end of its useful life

I. How much is the initial cost of the eqyipment? 1,041,209

2, The equipment has an estimated useful life of 10 years and a residual value of P200,000. Entity A
uses the might line method of depreciation. How much is the carrying amount ofthe equipment on
December 3 1, 20>0? 788,846
3, On December 31, 20x3, Entity A revalues the equipment at a fair value o! P820,000, There is no
change in the residual value and the remaining useful life of the asset. Hoy much is thg
revaluation surplus on December 31, 20x3? 31,154

4, How much is the depreciation expense in 20x4? 88,571

me ovdted.a,y ofO•oubZe..' I will/dzü»exyow, amdvyowshawg.lorify me


CONCEPTUAL FRAMEWORK and ACCOUNTING STANDARDS

(Jse the.fbllowing infbrmationfor the next two questions:


Entity A acquires an investment property for P 1,000,000 cash. Additional costs incuned are as follows:
• Repairs and remodelling before occupancy, P50,000.
• Legal costs of transferring title to the property, P20,000.
• Repairs after occupancy, PI 5,000.
The investment property is estimated to have a remaining useful life of 10 years and a residual value
equal to 5% of initial cost.

I. Entity A uses the straight line method of depreciation. How much is the canying amount of the
investment property under the cost model after one year?

2. Entity A uses the straight line method of depreciation. The investment propefly has a fair value
of P980,000 at the end of Year l. How much is the carlYing amount of the investment property
under the fair value model after one year?

Use the following informationfor the nextfive


questions:

30,000/

Entity A acquires equipment on January I, 20xl. Information on costs is as follows:

Purchase price, gross of trade discount


Trade discount available
Freight costs
Testing costs
Net disposal proceeds of samples generated during testing 5,000
Present value of estimated costs of dismantling the equipment at
the end of its useful life

1. How much is the initial cost of the equipment? 1,041,209

2. The equipment has an estimated useful life of 10 years and a residual value of P200,000. Entity A uses
the straight line method of depreciation. How much is the carrying amount of the equipment on
December 3 1, 20>0? 788,846
3, On December 31, 20x3, Entity A revalues the equipment at a fair value o! There is no change in the
residual value and the remaining useful life of the asset, Hoy much is the revaluation surplus on
December 31, 20x3? 31,154

4. How much is the depreciation expense in 20x4? 88,571

"CæZDu.porv me oftroubLe;, I
andzyowsha.wg.lorify
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CONCEPTUAL FRAMEWORK and "COUNTING STANDARDS

"sÅ$thejbllowing informationfor the next two questions:


ntity acquires an invesünent property for ? cash. Additional costs incurred are as
follows: Repairs and remodelling before occupancy, P50,Q00,
• Legal costs of tansfening fitle to the property, P20,000, Repairs
after occupancy, P

'The investment property is estimateg to have a remaining useful life of 10 years and a residual value equal
to 5% of initial cost.

l. Enfity A uses the staight Ime method of depreciation. How much is the canying of the investment
prOperty under the cpst model after one year?

2, Enüty A uses the sfraight line method of The invesunent property has a fair value of P9S0,000 at the
end of Year l. How much is the carrying amount of the investment propelty under the fair value
model after one year?

Use thefollowing .informaiion/or the nextjiye questions:


Entity A acquires equipment on Jqnuary I, 20xI. Information on costs is as follows:

Purchase price, gross of gade discpunt


Trade discount available 10,000
Frerg%t 20,000
Testing costs 30,000/
Net disposal proceeds of samples generated
i;
during testing 4.
present value of estimated costs of dismantling the
equipment at the end of its useful life

I. How much is the initial cost of the eqyipment? 1,041,209

2, The equipment has an estimated useful life of 10 years and a residual value of P200,000. Entity A
uses the might line method of depreciation. How much is the carrying amount ofthe equipment on
December 3 1, 20>0? 788,846

3, On December 31, 20x3, Entity A revalues the equipment at a fair value o! P820,000, There is no
change in the residual value and the remaining useful life of the asset. Hoy much is thg
revaluation surplus on December 31, 20x3? 31,154

4, How much is the depreciation expense in 20x4? 88,571


me ovdted.a,y ofO•oubZe..' I will/dzü»exyow, amdvyowshawg.lorify me

CONCEPTUAL FRAMEWORK and "COUNTING STANDARDS

"sÅ$thejbllowing informationfor the next two questions:


ntity acquires an invesünent property for ? cash. Additional costs incurred are as
follows: Repairs and remodelling before occupancy, P50,Q00,
• Legal costs of tansfening fitle to the property, P20,000, Repairs
after occupancy, P

'The investment property is estimateg to have a remaining useful life of 10 years and a residual value equal
to 5% of initial cost.

l. Enfity A uses the staight Ime method of depreciation. How much is the canying of the investment
prOperty under the cpst model after one year?

2, Enüty A uses the sfraight line method of The invesunent property has a fair value of P9S0,000 at the
end of Year l. How much is the carrying amount of the investment propelty under the fair value
model after one year?

Use thefollowing .informaiion/or the nextjiye questions:


Entity A acquires equipment on Jqnuary I, 20xI. Information on costs is as follows:

Purchase price, gross of gade discpunt


Trade discount available 10,000
Frerg%t 20,000
Testing costs 30,000/
Net disposal proceeds of samples generated
i;
during testing 4.
present value of estimated costs of dismantling the
equipment at the end of its useful life

I. How much is the initial cost of the eqyipment? 1,041,209

2, The equipment has an estimated useful life of 10 years and a residual value of P200,000. Entity A
uses the might line method of depreciation. How much is the carrying amount ofthe equipment on
December 3 1, 20>0? 788,846

3, On December 31, 20x3, Entity A revalues the equipment at a fair value o! P820,000, There is no
change in the residual value and the remaining useful life of the asset. Hoy much is thg
revaluation surplus on December 31, 20x3? 31,154

4, How much is the depreciation expense in 20x4? 88,571


me ovdted.a,y ofO•oubZe..' I will/dzü»exyow, amdvyowshawg.lorify me

depreciation dunng a
production dunng the
no change in

2. Entity B sells a machine Entity puys the broker a 10%

How much is the gain (loss) from the


sale?
// gn,mv = Z t

on CONCEPTUAL FRAMEWORK and ACCOUNTING STANDARDS


10. Which of the following items ofPPE is most likely to be dQc0Y1ized?

a. a fully depreciated PPE


b. A damaged PPE with a scrap value

c. A PPE that is idle and withdrawn from active use d, A PPE that is donated to an extemal party

A ll. Which of the following qualifies for classification as an investment


property? a, Property that is currently being developed for frture use as
investment property
b. Investment property frat is currently being developed for future use as owner-occupied property
c. Property that is leased out to entity under a finance lease
d. Building being rented from u10ther enüty and leased out under various operating sub-leases

12. The distinguishing chuacteristic that identifies an investment property from the other assets of an entity is a,
changes in fair value of the asset is recognized in profit or loss.
b. the property does not derive cash flows separate from the other assets of the entity.
c. it generates separately identifiable cash flows from the other assets of the entity. d', it
earns rental as part of the ordinary operations of the entity.

A 13. Under dlis model, an invesUnent property' is measured at cost less accumulated depreciation and
accumulated impainnent losses.
a. Impairment loss model c. Fair value model
b. Cost model d. Gorgeous model

14. According to PAS 16, die selection of an appropnate depreciation rests upon fre entity's
h a. management.
b. accountant.
c. regulator,
d. all of these
15. Which of the following is not one of the essential characteristics of a
PPE? a, tangible asset b, used in business c, primarily held for sale
d. long-term in nature

161 PAS 16 requires an entity to review the depreciation method and the estimates q(useful lifq end residual
value at the end of each year-end. A change in any of these is accounted for using

a. • a specific transitional provision of a PFRS.


b, retrospective application.
c. prospective application.
d. any of these

17. If plotted on a graph (X-axis: time; Y-axis: P), the depreciation charges under the straight.line method would
show
a. a straight-line.
b. an upward line sloping to the right.
c. a downward line sloping to the left.
d. a curvilinear line sloping and there.
QUIZ 1 on CONCEPTUAL FRAMEWORK and ACCOUNTING STANDARDS

1. MULTIPLE CHOICE: Choose the letter of the best answer. No erasures or any form of
alterations are allowed
1. Which of the following is not classified property, plant and equipment?
a. Land held for future plant site
b. Building used in business
c. Equipment held for environmental and safety reasons
d. Minor spare parts and short-lived stand-by equipment
Which of the following does not fonn part of the initial cost of an item of PPE?
a. Purchase price, net oftrade discounts and rebates
b. Freight Costs cc.
Installation and testing costs
d. Advertising and promotional Costs
Depreciation does not cease in which of the following instances?
a. mie item of PPE is classified as held for sale or included in a disposal group in accordance with PFRS

'b. The item of PPE is derecognized through disposal


c. fie item of PPE is fully depreciated
d. The item becomes idle or is retired frotn active use.
4. In which of the following cases is an asset not considered to be fully depreciated?
a. When the asset's carrytng amount is zero
b. When the asset's carrying amount is equal to its residual value
c. When the sum of the asset's accumulated depreciation, accumulated impairment
Josses and residual value is equal to its cost
d. When the asset's cost is equal to its carrying amount.
Which of the following instances precludes an entity from recognizing depreciation?
g. The fair value of the asset exceeds its carrying amount but the asset's residual value
does not exceed its canying amount
b. The asset is subsequently measured under the revaluation model
c. ' The asset comprises several significal)i and insignificant parts
d. The asset is classified as held for sale ender PFRS 5
Which of the following does not affect the determination of depreciation charges on an item of
PPE? a: Useful life c. Residual Value b, Cost d. Repairs and Maintenance

Which ofthe following is not an acceptable choice of depreciation method under PAS
16? a, A method that results to the same amqpnt of depreciation charge from period
to period
b. A method that is based on the levels of revenue earned
c. A composite method that is applied to a group of items of PPE
d. A retiremen method thatrecognizes deprecjation when a smdl item ofPPE retired The
doreciation method prescribed by P," 16 is
a. S&aight line c. units of production
b. Diminishing balance d. none
According to PAS 16, an entire class of PFE is subsequently measured under the
a. Cost model c. fair value model b, Revaluation
model d. a orb

1
the next two questions:

Legal costs Of transferring tide to the property, P20,000.


, Repairs after occupancy, Pl5,000.

1. Entity A uses the line method of depreciation. How much is the carrying amount of the
straight
inNesbnent propertypunder the cost model after one year?

2. Entity A uses the straight line method of depreciation. The investment property has a fair value
of P980,000 at the end of Year 1. How much is the carrying amount of the investment property
under the fair value model aser one year†

Use the following information for the next@'e questions:


fi9tity A acquires equipment on January 1, 20xl. Information on sosts is as follows:
Purchase price, gross of tra4e discount 1,000,000
Trade'discount available , 10,000
Freight costs 20,000
Testing costs 30,000J
, Net disposal proceeds of siunples generated
5,000
costs of dismantling
the 6,209^
/ tlipment at the end of its useful life

1. How muGh is the initial cost of the equipment? 1,041,209

2. The equipment has an estimated usetiil life of 10 years and a residual value of P200,000. Entity A
uses the straight line method of depreciation. How muGh is the carrying amount of the equipment
on December 31, 20x3? 788,846

3. On December 31, 20x3, Entity A revalues the equipment at a fair value o( P820,000, There is no
change in the residual value and the remaining useful life of the asset. How lunch is thy revaluation
surplus on December 31, 20x3† 31,154

4. How much is the depreciation expense in 20x4? 88,57 l


the next two questions:

Legal costs Of transferring tide to the property, P20,000.


, Repairs after occupancy, Pl5,000.

1. Entity A uses the line method of depreciation. How much is the carrying amount of the
straight
inNesbnent propertypunder the cost model after one year?

2. Entity A uses the straight line method of depreciation. The investment property has a fair value
of P980,000 at the end of Year 1. How much is the carrying amount of the investment property
under the fair value model aser one year†

Use the following information for the next@'e questions:


fi9tity A acquires equipment on January 1, 20xl. Information on sosts is as follows:
Purchase price, gross of tra4e discount 1,000,000
Trade'discount available , 10,000
Freight costs 20,000
Testing costs 30,000J
, Net disposal proceeds of siunples generated
5,000
costs of dismantling
the 6,209^
/ tlipment at the end of its useful life

1. How muGh is the initial cost of the equipment? 1,041,209

2. The equipment has an estimated usetiil life of 10 years and a residual value of P200,000. Entity A
uses the straight line method of depreciation. How muGh is the carrying amount of the equipment
on December 31, 20x3? 788,846

3. On December 31, 20x3, Entity A revalues the equipment at a fair value o( P820,000, There is no
change in the residual value and the remaining useful life of the asset. How lunch is thy revaluation
surplus on December 31, 20x3† 31,154

4. How much is the depreciation expense in 20x4? 88,57 l


the next two questions:

Legal costs Of transferring tide to the property, P20,000.


, Repairs after occupancy, Pl5,000.

1. Entity A uses the line method of depreciation. How much is the carrying amount of the
straight
inNesbnent propertypunder the cost model after one year?

2. Entity A uses the straight line method of depreciation. The investment property has a fair value
of P980,000 at the end of Year 1. How much is the carrying amount of the investment property
under the fair value model aser one year†

Use the following information for the next@'e questions:


fi9tity A acquires equipment on January 1, 20xl. Information on sosts is as follows:
Purchase price, gross of tra4e discount 1,000,000
Trade'discount available , 10,000
Freight costs 20,000
Testing costs 30,000J
, Net disposal proceeds of siunples generated
5,000
costs of dismantling
the 6,209^
/ tlipment at the end of its useful life

1. How muGh is the initial cost of the equipment? 1,041,209

2. The equipment has an estimated usetiil life of 10 years and a residual value of P200,000. Entity A
uses the straight line method of depreciation. How muGh is the carrying amount of the equipment
on December 31, 20x3? 788,846

3. On December 31, 20x3, Entity A revalues the equipment at a fair value o( P820,000, There is no
change in the residual value and the remaining useful life of the asset. How lunch is thy revaluation
surplus on December 31, 20x3† 31,154

4. How much is the depreciation expense in 20x4? 88,57 l


lowkg Ôstaaces doo not precludc an en ty from rœo gitlzing depfcciatïon ‹Ïurir jp, ,/

.The aasot is being depreciated using the units of production method and there is no production dunnb thc
c.The asset is classified as held for sale under PFRS 5.
4. -The asset becomes idle or is & en out of active use.

h+ PROBLEM F LYING: Show your solutions. No solution, no credits. Encircle and double rule your final
answor. (3pts. Each)

1. Entity A acquifC5 equipment on January 1, 20x1. lnformatioii on cost is as follows:

$urchase price, gross of Phpl0,000.00 trade discount 800,000


Non-refundable purchase taxes 20,000
DcliVer}r. æd H æ dling cost 40,000
Installation Cost 30,000
Present value of decommissioning and restoration cost î0,000 "

The equipment has a useful life or io ,>is «d « residual value of Php90,000.00. Entity A uses the
straight line method of depreciation.

On December 31, 20x2, Enéty A revalues the equipment at a fair value of 820,000. There is no ciiaiigc
in
ti c z n al value and thG remaining useful life. ) fi › +°z °z âg

t" Co pute for the following: -

' 1. Initial cost of the Equipmen t I

2. Depreciation Expense for the period December 31, 20xl


- 3. Carrying amount for the year endai December 31, 20x2
4. Revaluation Surplus on Decetn 31, 20x2
S. Revised annual Depreciation

2. Bnèç B sclls a machine gs PPE for Php1,700,000.00. Entity B flys the bi oder u l0%8
that jp as follows:
conuoission. Infono8ôon on Php19OO,OOOOO
Can:y’mg amount 4OO,OOŒOO
RcvaluaÑon Supfus
}{pw much is the gain (loss) bom the sale7
ollowing qualifies for classification as an investment property?
o currently being developed for fixture use as investment prop
2P y that is currently being developed for future use as owner-occupied property
out to another entity under a finance lease
t clod from another entity and leased out under various operaiing sub-leases

iiing characteristic that identifies an investment property from the other assets of an entity
is fi fair value of the asset is recognized in profit or loss.
ertf does not derive cash flows seoarate from the other
separately identifiable cash dows from the other
it rental as part of the ordinary operations of tire entity.

i. Which of the following is not one of the essential characteristics of a PPE?

of
RATING:
DATC:

MULTIPLE C HOICE: ChOOSe the letter of the best answer. No mesures or any form of
alleretions are allowed

Buüding used in business


Equipment held for envéonmental and safety reasons
d, Mitio r spare pans and short-lÎVCd Stand-by equipment
Q2 iGh of the following docs not fonn part of the initial cost of an item of PPE?
8. Purchase price, net of tmde discoiints and rebat

Installation and testing costs


d. Advertising arid promotional Costs
3. Depreciation doTs not cease in which ot’the following instanccu?
a. The itCtii of PPE is classified as held lbt sale or included in a disposal group in accordance with PFkS

b. The item of PPE is derecognized through d Î sposal


c. The item of PPE is fully deprœiaied

ich of the following instances precludes an entity from recognizing deprcciatjpn"?


,The fair value of the asset exceeds its Carrying amount but the asset’s residugl value docs not vxcccd
marrying omount
: asset is su ently measured uqdcr ihc revaluation model
: asset 0omprig9s several significm;l and insignificant parts
•asset is classified as held for sale pndcr I'FRS 5
'ollowing dws not alTect th9 detenninatio i of depreciation charges on an item ol’
I•I*E’›
c. Residual Value
d. Repairs and Maintenance
'ollowing is aot an acccPtablc choice of *P‹e ‹ o• ctkod «nder PAS t6?
ts to tke sazito amqpnt of depreciation ckargc from pcric›rI to period

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