1st Final Departmental Examinations Reviewer

A.Y. 2022-2023

Subject Code: ACCO 20053

Course Subject: Intermediate Accounting 1

1. It is a system of control of cash which requires that all cash receipts should be
deposited intact and all cash disbursements should be made by means of check.
a) Imprest system
b) Petty cash fund system
c) Voucher system
d) Segregation of duties

2. Which of the following would not qualify as cash and cash equivalents? a)
Escrow deposit
b) Bank drafts
c) Demand Deposit
d) Postal money orders

3. In what circumstances that the cash balance per book is less than the correct
cash balance, considering that neither the company nor the bank has made
any errors.
a) Deposit in transit
b) Unrecorded NSF checks
c) Unrecorded interest income from note collected by the bank
d) Bank service charge

4. According to PFRS 9, an entity shall recognize an impairment loss for the amount
of expected credit losses on a receivable. The discount rate that will be used to
compute for the loss allowance is
a) Historical effective rate
b) Effective interest rate available at the end of the current year
c) Stated rate
d) All of the above.

5. Whichof the following receivables is considered a current asset? a)

Claims for tax refund
b) Advances to affiliates
c) Advances to officers
d) Dividend receivable
6. When a notes receivable is dishonored, it is credited to
a) Notes receivable at face value
b) Notes receivable at face value plus interest
c) Accounts receivable at face value
d) Accounts receivable at face value plus interest

7. Which of the following would be included in the inventory account at the end of
the reporting period?

I. Purchased goods in transit, Free Along Side

II. Goods in transit, FOB Shipping point
III. Goods out on consignment
IV. Completed goods, manufactured in accordance with the customer’s
specification.
V. Goods sold with a right of return.
VI. Goods sold under installment basis
a) I, II, III, IV, V, and VI
b) II, III, IV, and V
c) II, III, and V
d) I, II, and III

8. Statement I: Raw materials and factory supplies should always be written down
if their costs exceed their net realizable value.

Statement II: The change in inventory method from FIFO to weighted will be
accounted retrospectively.
a) All the statements are correct.
b) Statement I is correct.
c) Both statements are incorrect.
d) Statement II is correct.

9. Which of the following shall be included in the cost of inventories? a)

Normal amount of wasted labor.
b) Storage costs for completed goods.
c) Freight charges on goods sold, FOB Destination
d) Borrowing costs for goods manufactured in large quantities on a repetitive basis

10. Which of the following inventory cost flow methods would result in the lowest
cost of goods sold during periods of rising prices?
a) FIFO Method
b) Weighted Average Method
c) Moving Average Method
 d) Gross Profit Method
11. The following subsequent expenditures on PPE are capitalize as asset except: a)
Normal repairs and maintenance that restore and maintain the asset to a fit condition.
b) Modification of an item of plant to extend its useful life.
c) Upgrade of machine parts to improve the quality of output.
d) Adoption of new production process leading to large reductions in operating costs.

12. In which of the following situations is the production method of depreciation

most appropriate?
a) An asset is subject to rapid obsolescence
b) An asset incurs increasing repairs and maintenance with use
c) An asset’s service potential declines with the passage of time.
d) An asset’s service potential declines with use.

13. If the asset's carrying amount is increased as a result of a revaluation, the

increase shall be?
a) credited to retained earnings
b) debited directly to revaluation surplus
c) credited to revaluation surplus
d) recognized to profit or loss

14. Which statements are incorrect concerning the residual value of an item of
property, plant and equipment?

I. The residual value shall be reviewed at least at each financial year end. II.
The depreciable amount of an asset is determined by deducting its residual
value from the asset cost.
III. Residual value is the discounted amount that the entity would obtain from
the disposal of the asset at the end of its useful life, after deducting the
estimated costs of disposal.
IV. If there is a change in the residual value of an asset, the change is
accounted for retrospectively as an adjustment retained earnings.

a) I and II
b) III and IV
c) I and IV
d) III only

15. Statement I: An impairment loss is the excess of an asset's recoverable amount

over its carrying amount
 Statement II: An impairment loss is recognized immediately as an expense in
the statement of financial position for an asset that is measured using the cost
model.
a) True, False
b) False, True
c) True, True
d) False, False

16. One or more items in property, plant and equipment maybe acquired in
exchange for non-monetary asset or assets, or a combination of monetary and
non-monetary. The cost of such an item in property, plant and equipment is
measured at fair value unless:

Statement I. The exchange transaction has commercial substance.

Statement II. Either fair value or an asset given up and the fair value of
the asset received are not reliably measurable.

a) Both statements are true

b) Both statements are false
c) Statement I is false; Statement II is true
d) Statement I is true; Statement II is false

17. The entity decided to revalue the property plant and equipment. Which option
should be selected in relation to revaluation?
a) Revalue an entire class of property, plant and equipment
b) Revalue one asset at a time as it is easier than revaluing all assets together c)
Since assets are being revalued regularly, there is no need to depreciate d) Revalue
only one-half of each class property, plant and equipment

18. When the fair value of the biological asset cannot be determined reliably, the
biological asset should be measured at
a) Cost less accumulated depreciation
b) Cost less accumulated depreciation and accumulated impairment losses c)
Cost
d) Net Realizable Value

19. Agricultural activity results in which of the following type of asset?

a) Biological asset only
b) Agricultural produce only
c) Biological asset or agricultural produce
d) Neither biological asset nor agricultural produce
20. Statement I: Bearer plants belong to the category of PPE.
Statement II: In acquisition of multiple items of PPE, incidental costs incurred
must be included in the aggregate price to be allocated to individual assets/PPE
based on its the market values.

a) True, False
b) False, True
c) True, True
d) False, False

21. Madelle Company's fiscal year ends on June 30. Its petty cash fund was
established for an amount of P15,500.

A surprise count of the fund on July 4, 2022 showed the following:

Currencies P6,000 Coins P500 Paid vouchers of office supplies
(dated July 2, 2022) P750 Paid vouchers for newspaper
subscriptions for P250 two weeks (dated June 29, 2022)
Loans to employees P2,000 Company check representing
replenishment P5,850 of the petty cash fund

How much is the shortage or overage in the petty cash fund on June 30,
2022? a) P1,500
b) P150
c) P900
d) 0

22. Severance Company purchased equipment with a cash down payment of

P200,000 and issued a P200,000 zero interest-bearing note payable in 5 years.
The prevailing interest rate for similar transactions is 12%. How much shall the
asset acquisition be recorded?

a) P200,000
b) P113,485
c) P313,485
d) P400,000

23. For the purpose of reconciling the cash balance per book of May Company with
the cash balance per bank statement on December 31:
 Book debits for December, including November and
December CM for note collected, P100,000 and 45,000 980,000

Book credits for December, Including interest charge of

5,000 and bank service charge of P500 for November. 600,000

Bank credits for December, including November Deposit

in transit for P50,000 850,000

Bank debits for December, including November

outstanding checks of P170,800 and November service 760,000
charge of P550

What is the amount of deposit in transit for the month of December?

a) P80,000
b) P35,000
c) P30,000
d) P180,000

24. Moonlight Company had the following account balances at December 31, 2023:

Cash in BPI P5,000,000 Payroll account at Metrobank P1,500,000

Savings account at BDO- Eastwood City Branch P4,500,000 Overdraft
at BDO- Cubao P.Tuazon Branch P 360,000 (checks still outstanding)
Savings deposit account at Union Bank P1,500,000 Cash on hand
P1,900,000 Cash equivalents P 600,000 Employees post-dated checks
P 50,000 IOU from Vice-President P 150,000

Additional Information:

1. Union Bank filed for bankruptcy on June 5, 2024. The net realizable value of
this account is P1,200,000.
2. The savings account at BDO - Eastwood City Branch has a compensating
balance of 100,000 which is restricted as to withdrawal and an amount of
P500,000 is earmarked for purchase of an office equipment due for delivery in
January 2024.
3. The savings account at BPI includes time deposit acquired on November 30,
2023 amounting to P500,000 with a maturity of 90 days from the balance sheet
date.
How much is the amount of cash and cash equivalents reported in its statement
 of financial position as of December 31, 2023?
a) P13,540,000
b) P13,900,000
c) P14,400,000
d) P14,100,000

25. On January 1, 2022, Raffle Company received a P5,000,000 3-year, 5% note

from Gianni Company. The prevailing market of interest on this date is 8%. The
note calls for annual interest to be paid each December 31.

On December 31, 2024, it was determined that the receivable is credit-impaired

and only P4,500,000 of the principal and interest due on December 31, 2023
will be collected. The amount is expected to be collected in two equal
installments. Because of the financial distress being suffered by Raffle
Company, Gianni agreed that no interest will be collected for the extended
period.

How much is the amount of note receivable will be reported by Gianni Company
in its December 31, 2024 statement of financial position? (use 6 decimals for
PV factor)
a) P4,012,346
b) P4,458,163
c) P4,500,000
d) P5,000,000

26. Using the same information given in no. 24, how much impairment loss should
Gianni Company recognize in its income statement for the year 2024? (use 6
decimals for PV factor)
a) P541,837
b) P500,000
c) P250,000
d) P987,654

27. On June 1, 2023, Bimby sold office equipment that originally cost P500,000. He
received a 4-year P700,000, 8% note as payment for equipment. Interest is
payable every March 31 starting 2024. At June 1, 2023, the prevailing rate of
interest for a similar obligation is 10%. On this date, there is no available cash
price for the land.

How much is the interest revenue reported in the statement of comprehensive

income for the year ended December 31, 2025? (use 6 decimals for PV factor)
a) P32,667
 b) P67,132
c) P66,518
d) P39,416

28. The following information for December 31, 2023 was provided by the
bookkeeper of Catherine Company:
Product A Product B

Beginning Inventory 1,000 @ P20 800 @ P10

January to March, 3,200 @ P22 1,000 @ P10

purchases

April, Purchases 450 @ P21.20 200 @ P11

Sales for January to April 2,550 @ P25 1,200 @P15

June to December, 5000 @ P23 1,000 @ P11

Purchases

Sales for the year 5,000 @ P25 2,000 @P15

Selling price per unit Cost to sell per

unit( based on SP)

12/31/2023 1/1/2024

Product A P25 P21 10%

Product B P15 P12 10%

The company uses FIFO method in calculating cost of goods sold for Product A
and B.

Using allowance method for inventory write-down, how much is the amount of
loss on inventory write-down recognized in the income statement? a) P6,710
b) P6,510
c) P6,250
d) P6,105
29. Using the same information given in no. 27, how much is the total amount of
inventories presented in the Statement of Financial Position for December 31,
2023?
a) P117,950
b) P111,240
c) P117,240
d) P111,420

30. The inventory account of Micool Corporation at December 31, 2023 included the
following items:

Goods purchased in transit, FAS P15,000 Goods purchased in

transit, FOB Shipping point P33,000 Cost of merchandise out on
consignment including
P400 freight-in
(returned by the consignee on December 30,2023) P45,200
Additional freight incurred by consignor for the return
of the remaining consigned goods P800 Goods held by customer
on approval P5,000

What is the cost of inventory to be shown in the Statement of Financial position

of Micool Corporation as of December 31, 2023?
a) P97,800
b) P98,200
c) P99,000
d) P82,800

31. Papa Company uses the retail inventory method to estimate inventory.
Presented below is information taken from Papa Company for 3 months ended
March 31, 2023.
Cost Retail

Beginning Inventory 655,000 887,000

Purchases 1,500,000 2,350,000

Purchase returns 200,000 350,000

Purchase allowance 25,000

Purchase discounts 17,000

 Freight-in 82,000

Sales returns and allowances 156,000

Sales 2,952,500

Sales discount 25,250

Normal spoilage 7,500

Abnormal spoilage 11,328 14,000

Departmental transfer- in 15,000 21,000

Employee Discount 3,000

Net mark up 15,600

Markdown 5,000

Markdown cancellation 3,000

How much is the cost of ending inventory assuming average method is

used? a) P100,600
b) P66,868
c) P69,152
d) P68,668

32. Using the same information given in no. 30, how much is the cost of goods sold
assuming the FIFO Method is used?
a) P1,932,279
b) P2,907,600
c) P1,929,520
d) P1,992,520

33. The accounting staff of Crystal Company submitted an inventory list that showed
a total of P4,350,000. The following information are related to the inventory of
Crystal Company as of December 31, 2023.
 1. Merchandise costing P55,000 were transferred to the delivery department on
December 28 for shipment on January 3, 2024. This inventory was included in
the inventory total.

2. Supplier’s invoice for P25,000 worth of merchandise dated December 27,

2023 was received through the mails on December 30, 2023. Shipment term is
FOB destination. Since the goods arrived only on January 4, 2024, the goods
were not included in the year-end inventory.
3. On December 31, 2023, an order for P65,000 worth of merchandise was
placed. This was included in the year-end inventory although the goods were
received only on January 5, 2024. Seller shipped the goods FOB destination.

4. Goods valued at P200,000 were received from a consignee and were included
in the ending inventory. Crystal Company incurred P5,000 for the shipment of
the returned goods.

What is the correct merchandise inventory of Persimmon Company at

December 31, 2023?
a) P4,280,000
b) P4,285,000
c) P4,350,000
d) P4,295,000

34. The records of Waffle Company for the year ended December 31, shows the
following:

Inventory, January 1 P1,000,000 Purchases P1,500,000 Purchase

returns P45,000 Purchase discount P1,500 Freight-in P60,000
Freight-out P5,000 Sales P3,500,000 Sales returns and allowances
P20,000 Sales discounts P6,000 Physical Inventory, December 31 P
35,000

The gross profit on sales has remained constant at 30% in recent year. Waffle
Company suspects that some inventory may have been pilfered by one of the
entity’s employees.

What is the estimated cost of missing inventory on December 31?

a) P44,000
b) P28,500
c) P46,700
d) P42,500
35. The following data relate to the first three years of operations for Jubee
Company:

2023 2024 2025

Profit-FIFO P500,000 P600,000 P960,000
Profit-WA 320,000 250,000 520,000
Ending Inventory-FIFO 450,000 770,000 1,500,000

How much is the ending inventory in 2025 using the weighted average (WA)
method?
a) P1,060,000
b) P540,000
c) P530,000
d) P1,420,000

36. Karenina Company bought items of raw materials on account amounting under
CIF terms. The inventory is quoted and listed at P160,000 under the following
terms: 10%, 5%.

The merchandise was still in transit as of December 31, 2023. The seller paid
for the freight and insurance amounting to P2,500 and P10,000.

How much is the value of inventory reported on December 31, 2023 by

Karenina Company?
a) P160,000
b) P138,600
c) P141,100
d) P149,300

37. Tricia Company had the following transactions during 2023:

Tricia Company had the following transactions during 2023:

Purchases of Merchandise Inventory P675,000 Purchases of Raw

Materials P950,000 Returns and allowances P50,000 Purchase discounts
taken P15,750 Prepaid insurance on inventory P20,000

All purchases were made throughout the year on terms 2/10, n/30. All returns
and allowances took place within 5 days of purchase and prior to any payment
of account.

How much were the discounts lost?

 a) P15,750
b) P15,890
c) P16,150
d) P16,290

38. Using the same information given in no. 36, how much is the inventory that will
be included on its December 31, 2023 statement of financial position? a)
P1,575,000
b) P1,599,250
c) P1,579,250
d) P1,625,000

39. The inventory account of Butter Company on December 31, 2023 included the
following:

a. Goods shipped from a supplier was in transit as of December 31, 2023 with
an invoice cost of P265,000, term CIF. The cost of shipment amounted to
P3,000. The goods were received on January 5, 2024.

b. Goods purchased amounting to P50,000 was still in transit as of December

31, 2023 to port of destination. The term of shipment is free alongside ship.

c. Goods held on consignment from Kuki Company amounting to P25,000 were

included in the physical count of inventory and in the accounts payable balance
as of December 31, 2023.
Physical count as of December 31, 2023 amounted to P105,000.
What is the correct amount of inventory on December 31, 2023?

a) P373,000
b) P348,000
c) P345,000
d) P105,000

40. The records of Leila Corp. for the year ended December 31, 2023, show the
following:
Inventory Beginning, January 1 P655,000
Purchases P1,250,000
Purchase returns P4,000
Freight-in P20,000
Sales P975,000
 Sales discounts P5,000
Sales discounts to preferred customers P3,500
Sales returns and allowances P10,000
Net mark-up P6,000
Net mark-down P2,000

The gross profit of Leila Corporation has remained constant at 25% in recent
years.

Using the gross profit method, how much is the estimated ending inventory?
a) P1,197,250
b) P1,194,250
c) P1,194,625
d) P1,197,625

41. The following information is available for Axl Company

2023 2024
Inventory 360,000 680,000
Accounts Payable 550,000 690,000
Payment to the suppliers 450,000 365,000

How much is the cost of goods sold for 2024?

a) P505,000
b) P320,000
c) P140,000
d) P185,000

42. Forrest Gump Company purchased forest assets for a lump sum amount of
P45,000,000 which is equal to the lump sum value of the group of assets. At the
time of purchase, the company is unable to determine the fair value of the trees
separately since no active market was clearly available. The other assets are
the group had a determinable fair value. The forest assets are listed below and
their related fair value less point to sell costs: Land under trees- P9,500,000;
and Road in forest- P7,000,000. What amount should the biological asset be
initially recorded?
a) P16,500,000
b) P45,000,000
c) P28,500,000
d) P38,000,000
43. Milchick Company has the following information pertaining to its biological
assets for the year 2023.
A herd of 100, 2-year old animals was held at January 2, 2023. Ten animals
aged 2.5 years were purchased on July 1, 2023 for P5,400, and ten animals
were born
on July 1, 2023. No animals were sold or disposed of during the period. Per unit
fair values less estimated cost to sell were as follows

· 2.0-year old animal at January 1, 2023- P5,000

· Newborn animal at July 1, 2023- P3,500
· 2.5-year old animal at July 1, 2023- P5,400
· Newborn animal at December 31, 2023- P3,600
· 0.5-year old animal at December 31, 2023- P4,000
· 2.0-year old animal at December 31, 2023- P5,250
· 2.5-year old animal at December 31, 2023- P5,550
· 3.0-year old animal at December 31, 2023- P6,000

What is the fair value of biological assets as of December 31, 2023?

a) P700,000
b) P735,000
c) P554,000
d) P581,500

44. Refer to #43. How much was the change in fair value less cost to sell due to
price change recognized for the year 2023?

a) P83,500
b) P27,500
c) P118,500
d) P111,000

45. A piece of equipment is acquired by Luthen Company by issuing 10,000 shares of

P10 par ordinary shares. The equipment has a list price of P150,000 and a
trade discount of 10%. If paid in cash at the time of purchase, a 5% cash
discount is allowed. The company’s ordinary shares are actively traded in a
capital market with an average market price of P13 at the date of the
exchange. What is the cost of the equipment?
a) P135,000
b) P150,000
c) P128,250
d) P130,000
46. Helly R. Corp. uses different kinds of machines in its manufacturing process. The
following information relates to the acquisition of machines that it has recorded
in 2023.

· Cash paid for equipment- P250,000

· Cost of transporting machine - insurance and transport- P9,000 ·
Labor cost of installation by expert fitter- P14,900
· Labor cost of testing equipment- P12,000
· Insurance cost for 2023- P4,500
· Cost of training for personnel who will use the machine- P7,500 ·
Cost of safety rails and platforms surrounding machine- P18,000 ·
Cost of water devices to keep machine cool- P26,000
· Cost of adjustments to machine during 2021 to make it operate more
efficiently- P22,500

What is the cost of the machine?

a) P328,000
b) P350,500
c) P358,000
d) P352,400

47. Cobel company has some old equipment that cost P700,000 with an
accumulated depreciation of P400,000. The equipment was traded in for a new
machine from a dealer company that had a list price of P800,000; however, the
new machine could be purchased without trade in for P780,000 cash. Milchick
Company paid P500,000 cash in exchange. What is the initial cost of the newly
acquired equipment and gain or loss on exchange?
a) P780,000; P0
b) P780,000; P20,000 loss
c) P780,000; P20,000 gain
d) P800,000; P0

48. On December 31, 2022, Andor Company has an item of machinery with a cost of
P4,500,000 and an accumulated depreciation of P1,800,000. On this date, the
machinery is found to be impaired due to obsolescence and major physical
damage. At the date of its acquisition, this machinery has an estimated useful
life of ten years and was depreciated using the straight-line basis.

The entity made an assessment and test for recoverability of the asset and
determined that the machinery’s fair value is P2,500,000 and estimated
disposal cost is P270,000. The entity expects net future undiscounted cash
 flows related to the continued use and eventual disposal of the machinery of
P2,600,000. The net future discounted cash flows related to the continued use
and eventual disposal of the machinery using a discount rate of 10% is
P2,180,000.

How much is the depreciation expense of this machinery for the year ended
December 31, 2023?
a) P371,667
b) P375,000
c) P416,667
d) P425,000

49. Refer to #48. Andor should recognized an impairment loss of?

a) P450,000
b) P470,000
c) P100,000
d) P200,000

50. On January 1, 2020, a new building was purchased at a cost of P30 million.
Depreciation was computed on the straight-line basis at 4% per year. On
December 31, 2021, after recording the depreciation for the year, the building
was appraised and was reported to have a fair value of P36 million and an
estimated remaining life of fifteen years. This was the first revaluation made on
the building since its acquisition.

It is the company's policy to transfer a portion of the revaluation surplus to

retained earnings as the asset is being used for its remaining life.

What is the revaluation surplus balance reported in the financial statements at

December 31, 2023?
a) P8,400,000
b) P7,840,000
c) P7,280,000
d) P6,240,000

51. Mon Mothma thought of constructing their own building for P40,000,000 which
they plan to start and finish until December 31, 2023. Mon Mothma made the
following payments, based on the construction contract, during 2023. · January
31 - P5,000,000
· February 28- P8,000,000
· July 1- P15,000,000
· August 31- P10,000,000
 · November 30- P2,000,000

Mon Mothma secured a 10% loan dated January 1, 2023, specifically intended
for the construction. The amount was P20,000,000. Interest earned from
temporary investment of the proceeds of the loan prior to their disbursement
amounted to 170,000.
Also, the entity had other debts outstanding as follows:
· 7.5%, 6-year note dated December 31, 2019- P18,000,000
· 12%, 7-year noted dated December 31, 2018 - P22,000,000
What is the total cost of the building constructed?
a) P40,000,000
b) P42,054,438
c) P42,248,408
d) P44,900,000

52. Refer to #51. How much is the total capitalized interest?

a) P1,830,000
b) P2,054,438
c) P2,248,000
d) P2,224,438

53. Irving Company purchased a machine on April 1, 2019 for P750,000. At that
time, was determined that the machine had a estimated useful life of 10 years
and an estimated residual value of P30,000. The company used the double
declining balance method of depreciation and it is the company's policy to
provide full year depreciation in the year of acquisition and no depreciation in
the year of disposal.

During 2023, after appropriate justification, the company changed its

depreciation method to straight-line, at which time the machine's remaining
useful life was estimated to be four years (including the current year) without
residual value.

How much is the depreciation expense for the machine for the year
2023? a) P61,440
b) P72,000
c) P76,800
d) P96,000

54. On Jan February 23, a piece of equipment is sold for cash of 190,000. The
equipment cost is P1,000,000 and accumulated depreciation of 750,000. The
disposal cost of P6,800 is paid by the company. What amount should be
 included in profit or loss when the item is derecognized?
a) P0
b) P66,800
c) P183,200
d) P190,000

55. Equipment costing P120,000 with residual value of 4,000 and an estimated
useful life of 5 years was acquired at the beginning of 2021. The asset is being
depreciated using the SYD method. On Jan 1, 2023 the company change to
straight-line method. Compute for the revised depreciation charge starting
2023, under new method?
a) P14,000
b) P14,467
c) P15,000
d) P15,467

56. A machine costing P3,750,000 with an eight-year estimated useful life and an
estimated residual value of P150,000 was acquired on January 1, 2021. The
asset was used productively for 5,000 hrs in 2021 and 9,500 hrs in 2022,
producing 4,200 units in 2021 and 8,600 units in 2022. Total estimated units of
production and productive hours are 40,000 and 60,000 respectively. Compute
for asset’s carrying value at December 31, 2022 using service hours method
a) P2,080,000
b) P2,880,000
c) P3,600,000
d) P3,600,500

57. On July 1, 2015, Kino Loy Company purchased a building for P49,200,000. The
building has an estimated life of 40 years. Six months depreciation was taken in
the year of purchase and the book value of the building on December 31, 2019,
after the depreciation adjusting entry is P43,755,000. What is the salvage value
of the building?
a) P640,000
b) P445,000
c) P800,000
d) P900,000

58. An old PPE with a recorded cost of P150,000 and accumulated depreciation of
P140,000 was sold for 4,000. A new PPE with a marked price of P200,000 was
purchased on February 10, 2023. Freight was charged P3,000 and installation
cost of P6,000 were paid. What is the cost of the new PPE?
a) P200,000
 b) P203,000
c) P206,000
d) P209,000

59. Innie Company purchased land, land improvements and building from Outie
Company for 15M and from Eagan Company furniture and equipment for 19M.
The total cash outlay for the transactions amounted to 34.0M. The appraised
values of the assets are as follows:
Building P6M
Equipment P4M
Furniture P1M
Land P10M
Land Improvements P1.5M

The allocated cost of the land improvements is?

a) P1,085,000
b) P1,285,714
c) P2,266,667
d) P3,600,000

60. LUMON CO. determined that, due to obsolescence, equipment with an original
cost of P900,000 and accumulated depreciation at December 31, 2022 of
P420,000 had suffered permanent impairment and as a result should have a
carrying value of only 300,000. In addition, the remaining useful life of the
equipment was reduced from 8 years to 3 years. In its December 31, 2023 SFP,
what amount should LUMON report as accumulated depreciation?
a) P100,000
b) P520,000
c) P600,000
d) P700,000
Summary of Answers

1. A 26. D 51. B 2. A 27. B 52. B 3. C 28. C 53. C 4. A 29. B 54. B 5. D 30.

A 55. D 6. A 31. C 56. B 7. D 32. A 57. C 8. D 33. A 58. D 9. A 34. D 59. B

10. A 35. C 60. D 11. A 36. D

12. D 37. A
13. C 38. B
14. B 39. B
 15. D 40. C
16. B 41. D
17. A 42. C
18. B 43. A
19. C 44. B
20. A 45. D
21. B 46. D
22. C 47. B
23. A 48. A
24. B 49. B
25. A 50. C
Summary of Answers – Explained

1. (A)
2. (A) Escrow deposit is not included in cash and cash equivalents because it is considered as
non-current asset.
3. (C) Interest income collected by the bank increases the book balance in bank reconciliation.
4. (A) PFRS 9 states that an entity should measure the impairment loss as the difference
between the asset’s gross carrying amount and the present value of estimated future cash
flows discounted at the financial asset’s original effective interest rate. 5. (D)
6. (A) DR. Accounts receivable inclusive of interest and protest fees; CR. Notes receivable at
face amount, Interest Income
7. (D)
8. (D)
● Raw materials and factory supplies may be written down to their replacement costs
provided that the cost of the finished goods inventory into which the materials will be
incorporated exceeds their net realizable value.
● The change in inventory method is considered a change in the accounting estimate.
According to PAS 8, the adjustments must be accounted for retrospectively. 9. (A)
10. (A) During periods of rising prices, the FIFO method reports the lowest COGS and the
highest amount of ending inventory and profit.
11. (A) Only capitalize when the expenditure significantly improves the condition of the asset
beyond its originally assessed standard of performance, otherwise expense when
incurred such as normal repairs and maintenance.
12. (D) Production method of depreciation depreciate assets based on how much it is use. 13.
(C) The increase in the carrying amount of a fixed asset due to revaluation is recognized as
revaluation surplus which is an equity account and therefore credited to recognize the increase
and debited when there’s a revaluation decrease (e.g. impairment loss of an asset carried at
revalued amount).
14. (B)
III – Incorrect is the discounted amount; Residual value is the estimated amount that
would obtain from the disposal of the asset, also called scrap value.
IV – Change is accounted for prospectively rather than retrospective.
15. (D)
SI - False; Impairment loss is the excess of its asset’s carrying amount over its
recoverable amount.
SII - False; It is recognized as expense in the statement of comprehensive income 16. (B)
Unless the exchange transaction lacks commercial substance or both fair value of an asset
given up and the fair value of the asset received are not reliably measurable
17. (A) If an item is revalued, the entire class of assets to which that asset belongs should be
revalued.
18. (B) Refer to IAS/PAS 41, Agriculture paragraph 30. It set out that if there is inability to
measure fair value reliably, that biological asset shall be measured at its cost less any
accumulated depreciation and any accumulated impairment losses.
19. (C) Refer to IAS/PAS 41, Agriculture paragraph 5. It states that agricultural activity is the
management by an entity of the biological transformation and harvest of biological
assets for sale or for conversion into agricultural produce or into additional biological
assets.
20. (A)
True, under the amended IAS 16 and IAS 41, bearer plants belong to the category PPE.
False, the statement only applies when incidental costs are related to all assets acquired.
If otherwise attributable only to specific asset in the group, the incidental cost is not
allocated but rather charged in full to the specific asset.
21. (B) P150
Imprest balance of petty cash P15,500 Less : Currencies P6,000
Coins P500
Paid vouchers of office supplies (dated July 2, 2020) P750
Paid vouchers for newspaper subscriptions for two weeks P250
Loans to employees 2,000
Company check representing replenishment 5,850
of the petty cash fund (P15,350) Shortage P150

22. (C) P313,485

Cash down payment P200,000
Present Value of the note (P200,000 (1 + 0.12) -5 ) 113,485
Total Asset Acquisition P313,485
23. (A) P80,000
Deposit in transit, November 30 P50,000
Book debits P980,000
Less: CM for Note collection (P150,000)
Deposits made by the company P835,000
Bank credits P850,000
Less: CM for note collection (P45,000)
Deposits acknowledge by the bank (P805,000)
Deposit in transit, December 30 P80,000

24. (B) P13,900,000

Cash in BPI P5,000,000
Less: Time Deposit ( 500,000)
Payroll account at Metrobank P1,500,000 Savings account at BDO,
Eastwood City Branch P4,500,000
Less: Compensating Balance ( 100,000) Cash Fund for PPE ( 500,000) Savings
deposit account at Union Bank P1,500,000 Cash on hand P1,900,000 Cash
equivalents P 600,000 Total balance of cash reported P13,900,000

25. (A) P4,012,346

Installment Payment PV Factor Present Value of the Note 2,250,000
1.783265 P4,012,346

26. (D) P987,654

Principal P5,000,000
Present Value of the Note (P4,012,346)
Impairment Loss P987,654

27. (B) P67,132

Interest Interest Income Amortization
Receivable

June 1, 2023
655,622

December 31,
2023 32,667 38,245 5,578 661,200

June 1, 2024
23,333 27,318 3,985 665,184

December 31,
 2024 32,667 38,802 6,135 671,320

June 1, 2025
23,333 27,716 4,383 675,703

December 31,
2025 32,667 39,416 6,749 682,452

Interest Income for 2025

June 1, 2025 P27,716
December 31, 2025 P39,416
Total P67,132

28. (C) P6,250

Quantity Product A Quantity Product B

Beginning inventory 1,000

20,000 800 8,000

January to March,
purchases 3,200 70,400 1,000 10,000

April, Purchases
450 9,540 200 2,200

Sales (2,550)
(54,100) (1,200) (12,000)

June to December,
Purchases 5,000 115,000 1,000 11,000

Sales (2,450)
(53,890) (800) (8,200)

Ending inventory 4,650

106,950 1,000 11,000

Cost NRV LCNRV Write

down
 Product A
106,950 100,440 100,440 6,510

Product B
11,000 10,800 10,800 200

Total 117,950
111,240 6,710

Beginning inventory 28,000 Allowance, end

6,710

LCNRV (27,540) Allowance,

beginning (460)

Allowance, beginning 460 Loss 6,250

29. (B) P111,240

30. (A) P97,800

Goods purchased in transit, FAS P15,000 Goods purchased in transit, FOB
Shipping point P33,000
Cost of merchandise out on consignment P44,800 Goods held by customer
on approval P5,000 Total Inventory P97,800

31. (C) P69,152

Cost Retail

Beginning Inventory 655,000

887,000

Purchases 1,500,000
2,350,000

Purchase returns (200,000)

(350,000)
Purchase allowance
(25,000)

Purchase discounts
(17,000)

Freight-in 82,000

Abnormal spoilage (11,328)

(14,000)

Departmental transfer- in
15,000 21,000

Net mark up 15,600

Markdown (5,000)

Markdown cancellation 3,000

Cost of Goods
Available for Sale 1,998,672 2,907,600

Less: Beginning (655,000)

(887,000)

Cost of Goods Available for Sale, FIFO

1,343,672 2,020,600

Cost to retail ratio = CGAS, at cost

1,998,672 0.69

CGAS, at
retail 2,907,600
 Sales
2,952,500

Sales returns and

allowances (156,000)

Employee Discounts 3,000

Normal spoilage 7,500

Adjusted sales 2,807,000

Cost of Goods
Available for Sale, at 2,907,600
retail

Adjusted sales (2,807,000)

Ending Inventory, at retail 100,600

Cost to retail ratio 0.69

Ending inventory,
at cost 69,152

32.(A) P1,932,279
Cost to retail ratio = CGAS, at cost P1,343,672
CGAS, at retail P2,020,600
= 0.66

Cost of Goods Available for Sale, at retail P2,907,600

Adjusted sales (P2,807,000)
Ending Inventory, at retail P100,600
Cost to retail ratio 0.66
Ending inventory, at cost P66,396

Cost of Goods Available for Sale, at cost P1,998,672

Less: Ending inventory, at cost (P66,396)
 Cost of Goods Sold P1,932,279

33. (A) P4,280,000

Unadjusted Inventory P4,350,000
2. FOB Destination (P65,000)
3. Freight (P5,000)
Adjusted Inventory P4,280,000

34. (D) P42,500

Sales P3,500,000 Sales returns and allowances (P20,000) Net sales
P3,480,000

Inventory, January 1 P1,000,000 Purchases P1,500,000 Purchase

discount (P1,500) Purchase returns (P45,000) Freight-in P60,000 Less:
COGS (P2,436,000) (3,480,000 x 70%)
Inventory, December 31 P77,500 Physical inventory, December 31
(P35,000) Cost of missing inventory P42,500

35. (C) P530,000

Profit-FIFO P500,000 P600,000 P960,000 Profit-WA 320,000 250,000
520,000 Overstatement in profit 180,000 350,000 440,000

Ending Inventory, 2025 P1,500,000 Total overstatement of profit

(P970,000) Ending inventory, 2025 (WA) P530,000

36. (D) P149,300

Invoice Price P136,800 Freight P2,500 Insurance while on freight
P10,000 Total initial cost of inventory P149,300

37. (A) P15,750

Purchases of Merchandise Inventory P675,000 Purchases of Raw
Materials P950,000 Returns and allowances (P50,000)
Net purchases P1,575,000 X 2%
Discount P31,500 Purchase discounts taken (P15,750) Purchase
discounts lost P15,750
38. (B) P1,599,250
Purchases of Merchandise Inventory P675,000 Purchases of Raw
Materials P950,000 Returns and allowances (P50,000)
Net purchases P1,575,000 Purchase discounts taken (P15,750)
Inventory P1,599,250

39. (B) P348,000

 Physical Count P105,000 Add: a. P268,000 Less: c. (P25,000)
Inventory as of December 31 P348,000

40. (C) P1,194,625

Sales P975,000 Sales discounts to preferred customers P3,500 Sales
returns and allowances (P10,000) Adjusted sales P968,500 X .75
COGS P726,375

Inventory Beginning, January 1 P655,000 Purchases P1,250,000

Purchase returns (P4,000) Freight-in P20,000 COGS (P726,375)
Estimated ending inventory P1,194,625

41. (D) P185,000

Accounts payable, beginning P550,000 Purchases P505,000
Payment to the suppliers P365,000 Accounts payable, ending
P690,000

Inventory, beginning P360,000 Purchases P505,000 Inventory, ending

(P680,000) Cost of goods sold P185,000

42. (C) P28,500,000

Forrest Assets P45,000,000 Land under trees (P9,500,000)
Road in Forest (P7,000,000) Biological Asset P28,500,000 The land under trees
and road in forest are not classified as biological assets but shall be included in PPE.

43. (A) P700,000

Age @Dec 31 x Qty of animals @Dec 31 x FVCTS at Dec 31)
0.5-year-old animals (10 animals x P4,000) P40,000
3-year-old animals (110 animals x P6,000) 660,000
Balance, December 31, 2023 700,000

44. (B) 27,500

Same age (beg of year/origination); different dates
Newborn 10 x (3,600– 3,500) P 1,000
2 year-old animals 100 x (5,250 – 5,000) 25,000
2.5 year-old animals 10 x (5,550 – 5,400) 1,500
Total change in FVCTS due to Price change 27,500

45. (D) P130,000

10,000 shares x P13 average market price = P130,000

46. (D) P352,400

 Cash paid for equipment 250,000 Cost of transporting machine – insurance
and transport 9,000 Labor costs of installation by expert fitter 14,900 Labor
costs of testing equipment 12,000 Costs of safety rails and platforms
surrounding
machine 18,000 Costs of water devices to keep machine cool 26,000 Costs of
adjustments to machine to make it operate more
efficiently. 22,500 352,40
Cost of machine
0

47. (B) P780,000; P20,000 Loss

Fair Value of the Asset received P780,000 Carrying
Amount (700K – 400K) 300,000 Cash Milchick should paid
P480,000 Cash paid 500,000 Loss on Exchange of
equipment P20,000
48. (A) P371,667
Fair value less cost to sell (2.5M – 270k) 2,230,000 Value in Use (discounted value
of estimated future cash flow) 2,180,000 Recoverable amount 2,230,000 being the
HIGHER of the two.

Depreciation Expense before impairment: 4,500,000/10 = 450,000

Years depreciated: 1,800,000/450,000 = 4 yrs
Remaining useful life is 6 yrs (10yrs – 4yrs)

Depreciation Expense for year ended 12/31/2023 = 2,230,000/6 = 371,667

49. (B) P470,000

Carrying amount on 12/31/2022 (4.5M – 1.8M) 2,700,000 Recoverable Amount
(HIGHER between 2.23M and 2.18M) 2,230,000 Impairment Loss 470,000

50. (C) P7,280,000

Recoverable amount 36,000,000 CV of asset at Dec. 31, 2021:
Cost 30,000,000
Accumulated Depreciation (30M * 4% * 2) 2,400,000 27,600,000
Revaluation Surplus 12/31/21 8,400,000 Portion transferred to Retained
Earning (8.4M/15yrs)*2 1,120,000 Revaluation Surplus 12/31/23
7,280,000

51. (B) P42,054,438

Weighted average accumulated expenditures:
5,000,000*11/12 4,583,333
8,000,000*10/12 6,666,667
 15,000,000*6/12 7,500,000
10,000,000*4/12 3,333,333
2,000,000*1/12 166,667
Average accumulated expenditures 22,250,000
Financed by specific borrowings 20,000,000
Finance by general borrowings 2,250,000

Capitalized Interest:
On Specific Borrowing
20,000,000 x 10% 2,000,000
Less interest earned 170,000 P1,830,000

On general borrowing
a. 18,000,000 * 7.5% = 1,350,000
22,000,000 * 12% = 2,640,000
3,990,000

3.99M/40M = 9.975%

b. 2,250,000 * 9.975% 224,437.50

The lower between (a) and (b) is: 224,437.50 Total interest added to
the cost of building 2,054,437.50

Total cost of the self-constructed asset = 40,000,000 + 2,054,437.5 =

42,054,437.5 52. (B) P2,054,438

53. (C) P76,800

Annual depreciation rate (April 1, 2017 – Dec 31, 2020) = 2/10 =
20% 2019 = 750,000 x 20% (note) 150,000
2020 = 750,000 – 112,500 = 600,000 x 20% 120,000
2021 = 600,000-120,000 = 480,000 x 20% 96,000
2022 = 480,000 – 96,000 = 384,000 x 20% 76,800
Accumulated Depreciation 442,800
Cost 4/1/2019 750,000
CV 12/31/2022 307,200
Divided by: Rem. useful life 4
Depreciation Expense for year 2023 76,800

Note: It is the company's policy to provide full year depreciation in the year of
acquisition
54. (B) P66,800
CV = 1,000,000-750,000 = 250,000
Net Proceeds = 190,000 – 6,800 = 183,200
CV > Net Proceeds = Loss on Sale of Equipment = 250k – 183.2k = 66,800

55. (D) P15,467

SYD:
Depreciable cost 120,000 – 4,000 = 116,000
Accumulated Depreciation (2021 – 2022) = (5+4)/15 * 116,000 =
69,600 CV, Jan 1, 2023 = 120,000 – 69,600 = 50,400

Straight-line:
Depreciable cost 50,400 – 4,000 = 46,400
Remaining life of the asset (5-2) = 3 yrs
Revised annual depreciation = 46,400/3yrs = 15,467
56. (B) P2,880,000
Depreciation per hour: (3,750,000 – 150,000)/60,000 = P60
Depreciation Expense for:
2021 = 5,000 hrs x P60 = 300,000
2022 = 9,500 hrs x P60 = 570,000
CV, 12/31/22 = 3,750,000 – 300,000 – 570,000 = 2,880,000

57. (C) P800,000

Total years depreciated (JULY 1, 2015 – Dec. 31, 2019) = 6 months + 4 years =
4.5 Total Accumulated Depreciation = Cost 49,200,000 – CV 43,755,000 =
5,445,000 Annual Depreciation Expense = 5,445,000/4.5= 1,210,000
Depreciable Cost = 1,210,000 x 40 years useful life = 48,400,000 (net of salvage value)
Salvage Value = Cost – Depreciable Cost = 49,200,000 – 48,400,000 = 800,000

58. (D) P209,000

Cost of new PE = 200,000 + 3,000 + 6,000 = 209,000

59. (B) P1,285,714

Purchased land, land improvements, and building from Outie Company:
15M Appraised Values of:
Land 10.0M
Land Improvements 1.5M
Building 6.0M
Total of: 17.5M

Allocate cost to land improvements = 1.5/17.5 * 15,000,000 = 1,285,714

60. (D) P700,000
Accumulated Depreciation after impairment at 12/31/22
= 900,000 – 300,000 = 600,000
Depreciation expense in 2023 = 300,000/3rem. useful yrs = 100,000
Accumulated Depreciation, 12/31/2023 = 600,000 + 100,000 = 700,000