7 – CASH AND CASH EQUIVALENTS

7-5. On December 31, 2010, Wonderful Company had the following cash balances:

Cash in Bank P1,800,000

Petty Cash Fund (all funds were reimbursed on 12/31/2010) 50,000
Time deposit (due February 1, 2011) 250,000

Cash in bank includes P600,000 of compensating balance against short-term borrowing

arrangement at December 31, 2010. The compensating balance is legally restricted as to
withdrawal by Wonderful.

In the current assets section of Wonderful’s December 31, 2010 statement of financial position
what total amount should be reported as cash and cash equivalents?
A. 1,850,000 C. 2,100,000
B. 1,250,000 D. 1,500,000

AA14.Young Company holds the following assets at year-end and classifies as cash equivalents
everything allowed by professional standards.

Treasury bills acquired with less than 3 months before maturity P1,500,000
Treasury bills acquired with greater than 3 months before maturity 2,000,000
Commercial papers 1,200,000
Investment in marketable equity securities 1,000,000

What would be the total cash equivalents at year-end for Young Company?
A. P1,500,000
B. P4,700,000
C. P2,700,000
D. P3,700,000

8 – BANK RECONCILIATION

8-17. The cash account in the ledger of K Company shows a balance of P1,652,000 at December 31.
The bank statement, however, shows a balance of P2,090,000 at the same date. The only
reconciling items consist of bank service charge of P2,000, a large number of outstanding checks
totaling P590,000 and a deposit in transit.

What is the deposit in transit in the December 31 bank reconciliation?

A. 150,000 C. 154,000
B. 440,000 D. 592,000

9 – ACCOUNTS RECEIVABLE

9-5. In the December 31, 2010 statement of financial position of MM Company, the current
receivables consisted of the following:

Trade accounts receivable P 930,000

Allowance for uncollectible accounts ( 20,000)
Claim against shipper for goods lost in transit(November 2010) 30,000
Selling price of unsold goods sent by MM on consignment at 130% of cost
(not included in MM’s ending inventory) 260,000
Security deposit on lease of warehouse used for storing some inventories 300,000
Total P1,500,000

At December 31, 2010, the correct total of current net receivables was
A. 940,000 C. 1,240,000
 B. 1,200,000 D. 1,500,000

10 – RECEIVABLE FINANCING

10-14. Rain Company accepted from a customer a P4,000,000, 90-day, 12% interest-bearing note dated
August 31, 2010. On September 30, 2010, Rain discounted the note with recourse at the AA State
Bank at 15%. However, the proceeds were not received until October 1, 2010.

The discounting with recourse is accounted for as a conditional sale with recognition of a
contingent liability.

What is the loss on note receivable discounting?

A. 40,000 C. 17,000
B. 23,000 D. 20,000

11- NOTES RECEIVABLE AND LOAN IMPAIRMENT

11-7. Calasiao Company is a dealer in equipment. On December 31,2009, Calasiao Company sold an
equipment in exchange for a noninterest bearing note requiring five annual payments of
P500,000. The first payment was made December 31, 2010. The market interest for similar notes
was 8%. The relevant present value factors are:

PV of 1 @ 8% for 5 periods .68

PV of an ordinary annuity of 1 @ 8% for 5 years 3.99

In its December 31,2009 statement of financial position, what should Calasiao report as notes
receivable?
A. 2,500,000 C. 1,700,000
B. 1,995,000 D. 1,495,000

6. What interest income should be reported for 2010?

A. 505,000 C. 159,600
B. 101,000 D. 119,600

INVENTORY

12-17.
On December 1, 2010, Pete Department Store received 505 sweaters on consignment from Tiny.
Tiny’s cost for the sweaters was P800 each, and they were priced to sell at P1,000. Pete’s
commission on consigned goods is 10%.

At December 31, 2010 statement of financial position, what amount should Pete report as
payable for consigned goods?

A. P490,000 C. P450,000
B. P454,000 D. P404,000

12-27.
Ram Company records its purchases at gross amount but wishes to change to recording
purchases net of purchase discounts. Discount available on purchases for the current year totaled
P100,000. Of this amount, P10,000 is still available in the accounts payable balance. The
balances in the accounts as of and for the year ended December 31 before conversion are:

Purchases P5,000,000
Purchase discounts taken 40,000
Accounts payable 1,500,000
 What is the accounts payable balance as of December 31 after the conversion?
A. P1,490,000 C. P1,440,000
B. P1,460,000 D. P1,410,000

12-29.
Ben Company began operations late in 2009. For the first quarter ended March 31, 2010, Ben
made available the following information:

Total merchandise purchased through March 15, 2010

recorded at net P4,900,000
Merchandise inventory at December 31, 2009, at
selling price 1,500,000

All merchandise was acquired on credit and no payments have been made on accounts payable
since the inception of the entity. All merchandise is marked to sell at 50% above invoice cost
before time discounts of 2/10, n/30. No sales were made in 2010.

How much cash is required to eliminate the current balance in accounts payable?
A. P6,000,000 C. P6,400,000
B. P5,900,000 D. P5,750,000

12-30.
The balance in Rey Company’s accounts payable at December 31, 2010 was P4,900,000 before
the following information was considered:

 Goods shipped FOB destination on December 21, 2010 from a vendor to Rey were lost in
transit. The invoice cost of P180,000 was not recorded by Rey. On December 28, 2010, Rey
notified the vendor of the lost shipment.
 Goods were in transit from a vendor to Rey on December 31, 2010. The invoice cost was
P240,000 and the goods were shipped FOB shipping point on December 28, 2010. Rey
received the goods on January 6, 2011.

What amount should Rey report as accounts payable in its December 31, 2010 statement of
financial position?
A. P5,320,000 C. P5,080,000
B. P5,140,000 D. P4,900,000

12-31.
Green Company’s accounts payable at December 31, 2010, totaled P4,500,000 before any
necessary year-end adjustments relating to the following transactions:

 On December 27, 2010, Green wrote and recorded checks to creditors totaling P2,000,000
causing an overdraft of P500,000 in Green’s bank account at December 31, 2010. The checks
were mailed on January 10,2011.

 On December 28, 2010, Green purchased and received goods for P750,000, terms 2/10, n/30.
Green records purchases and accounts payable at net amount. The invoice was recorded and
paid January 3, 2011.

 Goods shipped FOB destination on December 20, 2010 from a vendor to Green were
received January 2, 2011. The invoice cost was P325,000.

At December 31, 2010, what amount should Green report as accounts payable?
A. P7,575,000 C. P7,235,000
B. P7,250,000 D. P7,553,500
12-32.
Liane Company is preparing its financial statements for the year ended December 31, 2010.
Accounts payable amounted to P3,600,00 before any necessary year-end adjustment related to
the following:

 At December 31, 2010, Liane has a P500,000 debit balance in its accounts payable to Rose, a
supplier, resulting from a P500,000 advance payment for goods to be manufactured to
Liane’s specifications.

 Checks in the amount of P1,000,000 were written to vendors and recorded on December 29,
2010. The checks were mailed on January 5, 2011.

What amount should Liane report as accounts payable in its December 31, 2010 statement of
financial position?
A. P5,100,000 C. P3,100,000
B. P4,100,000 D. P2,100,000

12-33.
Kim Company’s accounts payable balance at December 31, 2010, was P2,200,000 before
considering the following data:

 Goods shipped to Kim FOB shipping point on December 22, 2010, were lost in transit. The
invoice cost of P40,000 was not recorded by Kim. On January 27, 2011, Kim filed a P40,000
claim against the common carrier.

 On December 27, 2010, a vendor authorized Kim to return, for full credit, goods shipped and
billed at P70,000 on December 3, 2010. The returned goods were shipped by Kim on
December 28, 2010. A P70,000 credit memo was received and recorded by Kim on January
5, 2011.

What amount should Kim report as accounts payable in its December 3, 2011 statement of
financial position?
A. P2,170,000 C. P2,230,000
B. P2,180,000 D. P2,280,000

16 – FIN’L ASSETS AT FAIR VALUE

16-2. On January 1, 2009, ABC Company purchased marketable equity securities to be held as
“trading” for P5,000,000. The entity also paid commission, taxes and other transaction costs
amounting to P200,000. The securities had a market value of P5,500,000 on December 31, 2009.

No securities were sold during 2009.

What amount of unrealized gain or loss on these securities should be reported in the 2009 income
statement?
A. 500,000 unrealized gain C. 300,000 unrealized gain
B. 500,000 unrealized loss D. 300,000 unrealized loss

(?)16-9.
On January 2, 2008, Handsome Company acquired an investment property and the initial cost of
investment property was P5,000,000. On the date of acquisition, the company chooses the cost
model to account for its investment. As of December 31, 2009, it has a carrying value of
P4,900,000 and a fair value of P5,100,000. On December 31, 2010, the company decided to
transfer the investment property to owner occupied property. On this date of transfer, the fair
value of property is P5,000,000 while its carrying value was P4,800,000.
 What amount of gain or loss on transfer should the company recognize on December 31, 2010?
A. No gain or loss C. P200,000 loss
B. P100,000 loss D. P300,000 loss

(?)16-10.
On January 2, 2010, Wishco Company converted its occupied property to investment property
that is to be carried at fair value. The carrying value of the property in the company’s books is
P4,000,000.

Assuming the fair value of the property on the date of transfer or conversion is P3,800,000,
Wishco Company should recognize
A. An impairment loss of P200,000 in the income statement.
B. A P200,000 deferred loss as an asset
C. A P200,000 unrealized loss in the shareholders’ equity
D. A P4,000,000 cost of the investment property

Base on the above, assuming the fair value of the property on the date of transfer or conversion is
P4,400,000, Hope Company should recognize
A. A P400,000 unrealized gain in the income statement
B. A P400,000 revaluation surplus in the shareholders’ equity
C. A P400,000 unrealized gain in the liability section
D. A P400,000 direct credit to accumulated profits and losses

(?)16-13.
On January 2, 2009, Joy Corporation acquired a track of land that is to be sold in the ordinary
conduct of business. The purchase price of the property of P50,000,000 was paid in cash and a
total transaction costs of P500,000 related to the acquisition of the property was also paid at a
later date. The land was subdivided into 2,000 lots (200 square meters for every lot) for an
additional cost of P5,500,000. On December 31, 2009, the market value of the lot was P1,500 per
square meter.

As of December 31, 2010, only 20,000 square meters are still unsold and market value of the lot
had increased to P1,600 per square meter. On this date, Joy decided to transfer the remaining lots
into investment property that is to be carried under the fair value model. There was no additional
cost incurred on the change of intention on the property.

What amount of gain should Joy Corporation recognize as a result of the transfer?
A. P29,200,000 C. P29,475,000
B. P29,225,000 D. P29,500,000

INVESTMENT IN EQUITY SECURITIES

17-6.
Paperdoll Company owns 20,000 shares of Sanrio Company’s 200,000 shares of P100 par, 6%
cumulative, non-participating preference share capital and 10,000 shares representing 2 %
ownership of Sanrio’s ordinary share capital. During 2010, Sanrio declared and paid preference
dividends of P2,400,000. No dividends had been declared or paid during 2009.

In addition, Paperdoll received a 5% stock dividend on ordinary share from Sanrio’s ordinary
share was P10.

What amount should Paperdoll report as dividend income in its 2010 income statement?
A. P120,000 C. P240,000
B. P125,000 D. P245,000

17-10.
 On March 1, 2010, Rose Company purchased 10,000 ordinary shares of Cherry Company at P80
per share. On September 30, 2010, Rose received 10,000 stock rights to purchase an additional
10,000 shares at P90 per share. The stock rights had an expiration date of February 1, 2011. On
September 30, 2010, Cherry’s share had a market value ex-right of P95 and the stock right had a
market value of P5.

What amount should Rose report in its September 30, 2010 statement of financial position for
investment in stock rights?
A. P 40,000 C. P100,000
B. P50,000 D. P150,000

17-5. During 2009, Mayon Company bought the shares of Lava Company as follows:

June 1 20,000 shares @ P100 P2,000,000

December 1 30,000 shares @ P120 3,600,000
P5,600,000

The transactions for 2010 are:

January 10 Received cash dividend at P10 per share.
January 20 Received 20% stock dividend.
December 10 Sold 30,000 shares at P125 per share.

The gain on sale of the shares assuming the FIFO approach is

A. P1,150,000 C. P150,000
B. P 950,000 D. P550,000

17-6. May Company owns 20,000 shares of April Company’s 200,000 shares of P100 par, 6%
cumulative, non-participating preference share capital and 10,000 shares representing 2%
ownership of April’s ordinary share capital. During 2010, April declared and paid preference
dividends of P2,400,000. No dividends had been declared or paid during 2009.

In addition, May received a 5% stock dividend on ordinary share from April when the quoted
market price of April’s ordinary share was P10.

What amount should May report as dividend income in its 2010 income statement?
A. 120,000 C. 240,000
B. 125,000 D. 245,000

17-11. Food Company owns 30,000 ordinary shares of Beverages Company acquired on July 31, 2010,
at a total cost of P1,100,000. On December 1, 2010, Food received 30,000 stock rights from
Beverages. Each right entitles the holder to acquire one share at P45. The market price of
Beverages’s share on this date, ex-right, was P50 and the market price of each right was P5. Food
sold its rights the same date at P5 a right less a P10,000 commission.

The gain from the sale of the rights should be reported by Food at
A. P150,000 C. P50,000
B. P140,000 D. P40,000

17-13. Apple Company owns 50,000 ordinary shares of Orange Company, which has several hundred
thousand shares publicly traded. These 50,000 shares were purchased by Apple in 2008 for P100
per share. On August 30, 2010, Orange distributed 50,000 stock rights to Apple. Apple was
entitled to buy one new share of Orange for P90 cash and two of these rights. On August 30,
2010, each share had a market value of P132 ex-right, and each right had a market value of P18.

What cost should be recorded for each new share that Apple acquired by exercising the rights?
A. P 90 C. P126
 B. 114 D. P132

AA23. In January 2010, Jenny Company acquired 20% of the outstanding voting ordinary shares of Lyn
Company for P2,800,000. This investment enabled Jenny to exercise significant influence over
Lyn. The book value of the acquired shares was P2,100,000. The excess of cost over book value
was attributed to an identifiable intangible asset that was undervalued in Lyn’s statement of
financial position and that had a remaining useful life of 10 years.

For the year ended December 31, 2010, Lyn reported income of P630,000 and paid cash dividend
of P140,000 on its ordinary shares.

What is the proper carrying value of Jenny’s investment Lyn at December 31, 2010?
A. P2,700,000
B. P2,730,000
C. P2,800,000
D. P2,828,000

INVESTMENT IN ASSOCIATE

18-5. On January 1, 2010, Dry Company paid P18,000,000 for 50,000 ordinary shares of Rain
Company which represent a 25% interest in the net assets of Rain. The acquisition cost is equal
to the book value of the net assets acquired. Dry has the ability to exercise significant influence
over Rain. Dry received a dividend of P35 per share from Rain in 2009, Rain reported net
income of P9,600,000 for the year ended December 31, 2010.

In its December 31, 2010 statement of financial position, Dry should report the investment in
Rain Company at
A. P22,150,000 C. P18,650,000
B. P20,400,000 D. P18,000,000

18-6. On January 1, 2010, Moon Company purchased 10% of Light Company’s outstanding ordinary
shares for P4,000,000. Moon is the largest single shareholder in Light and Moon’s officers are a
majority of Light’s board of directors. Light reported net income of P5,000,000 for 2010 and
paid dividends of P1,500,000.

In its December 31, 2010 statement of financial position, what amount should Moon report s
investment in Light?
A. P4,500,000 C. P4,000,000
B. P4,350,000 D. P3,850,000

18-17. Red Company owns 30% of the outstanding ordinary shares and 100% of the outstanding
noncumulative nonvoting preference shares of White Company. In 2010, White declared
dividend of P1,000,000 on its ordinary share capital and P600,000 on its preference share capital.

What amount of dividend revenue should Red report in its income statement for the year ended
December 31, 2010?
A. P900,000 C. P600,000
B. P300,000 D. 0

18-26. Chest Company owns 20% of Nut Company’s preference share capital and 80% of its ordinary
share capital. Nut’s share capital outstanding at December 31, 2010 is as follows:

10% cumulative preference share capital P5,000,000

Ordinary share capital 7,000,000

Nut reported net income P3,000,000 for the year ended December 31, 2010.
 What amount should Chest record as equity in earnings of Nut for the year ended December 1,
2010?
A. P2,000,000 C. P2,100,000
B. P2,400,000 D. P2,300,000

INVESTMENT (HELD TO MATURITY SECURITIES)

19-1. On July 1, 2010, Wonderful Company purchased as trading investment a P2,000,000 face value
Bright Company 8% bond for P1,850,000 plus accrued interest to yield 10%. The bonds mature
on January 1, 2015, and pay interest annually on December 31. On December 31, 2010, the
bonds had a market value of P1,890,000. On February 15, 2011, Wonderful sold the bonds for
P1,900,000.

In its December 31, 2010 statement of financial position, what amount should Wonderful report
for investment in trading securities?
A. P1,850,000 C. P1,890,000
B. P1,875,000 D. P1,900,000

19-5. On October 1, 2010, Micro Company purchased 4,000 of the P1,000 face value,10% bonds of
Bac Company for P4,400,000 which includes accrued interest of P100,000. The bonds, which
mature on January 1, 2017, pay interest semiannually on January 1 and July 1. Micro uses the
straight line method of amortization and appropriately recorded the bonds as held to maturity.

The bonds should be shown in Micro’s December 31, 2010 statement of financial position at
A. P4,284,000 C. P4,300,000
B. P4,288,000 D. P4,400,000

19-7. Sun Company purchased bonds at a discount of P100,000. Subsequently, Sun sold these bonds at
a premium of P140,000. During the period hat Sun held this held for maturity investment,
amortization of the discount amounted to P20,000.

What amount should Sun report as gain on the sale of bonds?

A. P120,000 C. P240000
B. P220,000 D. P260,000

19-16. On January 1, 2010, Mini Company purchased ten-year bonds with a face value of P1,000,000
and a stated interest rate of 8% per year payable semiannually July 1 and January 1. The bonds
were acquired to yield 10%. Present value factors are as follows:

Present value of 1 for 10 periods at 10% .386

Present value of 1 for 20 periods at 5% .377
Present value of an annuity of 1 for 10 periods at 10% 6.145
Present value of an annuity of 1 for 20 periods at 5% 12.462

The purchase price of the bonds is

A. P1,124,620 C. P1,000,000
B. P1,100,000 D. P 875,380

20 – INVESTMENT PROPERTY

20-4. Dream Company owns three properties which are classified as investment properties. Details of
the properties are as follows:

Initial cost Fair value at 12/31/2009 Fair value at 1/31/2010

Property 1 2,700,000 3,200,000 3,500,000
 Property 2 3,450,000 3,050,000 2,850,000
Property 3 3,300,000 3,850,000 3,600,000

Each property was acquired in 2006 with a useful life of 25 years. The entity’s 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 31,2010?
A. P189,000 loss C. P300,000 gain
B. P150,000 loss D. P450,000 loss

21 – FUND AND OTHER INVESTMENTS

21-1. In January 2010 Cool Company established a sinking fund in connection with its issue of bonds
due in 2012. A bank was appointed as independent trustee of the fund. On December 31, 2010,
the trustee held P364,000 cash in the sinking fund account representing P300,000 in annual
deposits to the fund, and P64,000 of interest earned on those deposits.

How should the sinking fund be reported in Cool’s statement of financial position at
December 31,2010?
A. No part of the sinking fund should appear in Cool’s statement of financial position
B. P64,000 should appear as a current asset
C. P364,000 should appear as a current asset
D. P364,000 should appear as a noncurrent asset

23 – PROPERTY, PLANT & EQUIPMENT

23-13. In October of the current year, Everest Company exchanged an old packing machine, which cost
P1,200,000 and was 50% depreciated, for another used machine and paid a cash difference of
P160,000. The fair value of the old packaging machine was determined to be P700,000.

What is the cost of the machine acquired in the exchange on the books of Everest Company?
A. P860,000 C. P760,000
B. P700,000 D. P540,000

25 – LAND, BUILDINGS & MACHINERY

25-13. On December 31, 2010, the property, plant and equipment account of Pure Company includes
the details below:

Plant assets acquired from Zip Company P7,500,000

Repairs made on building prior to occupancy 200,000
Special Tax assessment 30,000
Construction of platform for machinery 70,000
Remodeling of office space in building including new partitions
and walls 400,000
Purchase of new machinery 800,000
Total property, plant and equipment P9,000,000

In exchange for the plant assets of Zip company, Pure 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 P 500,000
Building 4,000,000
Machinery 1,500,000
 The Land should be reported at
A. P530,000 C. P625,000
B P500,000 D. P655,000

16. The building should be reported at

A. P4,400,000 C. P5,600,000
B. P4,600,000 D. P5,400,000

17. The machinery should be reported at

A. P2,300,000 C. P2,370,000
B. P2,675,000 D. P2,745,000

26 – BORROWING COST

26-5. Coco Company commenced construction of a new plant on February 1, 2010. The cost of
P18,000,000 was funded from existing general borrowings. The construction was completed on
September 30,2009. Coco Company’s borrowings during 2009 comprised of the following:
Bank A - 6% P 8,000,000
Bank B - 6.6% 10,000,000
Bank C - 7% 30,000,000

What is the amount of borrowing costs that should be capitalized in relation to the plant?
A. P1,215,000 C. P911,250
B. P 810,000 D. P 0

27 - DEP’N.

27-4. Pacific Company’s depreciation policy on machinery is as follows:

 A full year’s depreciation is taken in the year of an asset’s acquisition.

 No depreciation is taken in the year of an asset’s disposition.
 The estimated useful life is five years.
 The straight line method is used.

On June 30, 2010, Pacific sold for P2,300,000 a machine acquired in 2007 for P4,200,000. The
estimated residual value was P600,000.

How much gain on the disposal should Pacific record in

2010?
A. P140,000 C. P620,000
B. P260,000 D. P980,000

27-8. Hills Company provided the following information with respect to its building.

 The building was acquired January 1, 2005 at a cost of P7,800,000 with an estimated useful
life of 40 years and residual value of P200,000. Yearly depreciation was computed on the
straight line method.
 The building was renovated on January 1, 2007 at a cost of P760,000. This was considered as
improvement. Residual value did not change.
 On January 1, 2010, the management decided to change the total life of the building to 30
years.

What is the depreciation of the building for 2010?

A. P292,400 C. P334,400
B. P266,000 D. P294,000
27-15. Euro Company purchased a machine for P4,500,000 on January 1, 2009. The machine has an
estimated useful life of four years and a residual value of P500,000. The machine is being
depreciated using the sum of the year’s digits method.

The December 31, 2010 asset balance, net of accumulated depreciation, should be
A. P2,900,000 C. P1,700,000
B. P2,700,000 D. P1,350,000

27-20. On July 1, 2009, Dagupan Company purchased factory equipment for P5,000,000. Residual
value was estimated at P20,000. The equipment is depreciated over ten years using the double
declining balance method.

Counting the year of acquisition as one half year, Dagupan should record depreciation expense
for 2010 at
A. P1,000,000 C. P768,000
B. P 900,000 D. P960,000

27-26. In January 2009, Nova Company purchased equipment at a cost of P6,000,000 to be used in its
manufacturing operations. The equipment was estimated to have a useful life of eight years with
residual value estimated at P600,000. Nova considered various methods of depreciation and
selected the sum of years’ digits method.

On December 31,2010, the accumulated depreciation should have a balance of

A. P750,000 less than under the straight line method
B. P750,000 less than under the double declining balance method
C. P900,000 greater than under the straight line method
D. P900,000 greater than under the double declining balance method

DEPLETION

28-3. At the beginning of the current year, Von Company purchased a mineral mine for P26,400,000
with removable ore estimated at 1,200,000 tons. After it had extracted all the ore, Von will be
required by law to restore the land to its original condition at a discounted amount of P1,800,000.
Von believes it will be able to sell the property afterwards for P3,000,000. During the current
year, Von incurred P3,600,000 of development cost preparing the mine for production and
removed and sold 60,000 tons of ore.

In its income statement for the current year, what amount should Von report as depletion?
A. P1,350,000 C. P1,500,000
B. P1,440,000 D. P1,590,000

28-12. On July 1, 2010, Bohol Company, a calendar year corporation, purchased the rights to a mine.
The total purchase price was P13,200,000, of which P400,000 was allocable to the land.
Estimated reserves were 1,600,000 tons. Bohol expects to extract and sell 25,000 tons per month.
Bohol purchased new equipment on July 1, 2010. The equipment cost P6,600,000 and had a
useful life of 8 years. However, after all the resource is removed, the equipment will be of no use
and will be sold for P200,000.

. Bohol Company should record depletion for 2010 at

A. P1,200,000 C. P1,237,500
B. P2,400,000 D. P2,475,000

. Bohol Company should record depreciation of the mining equipment for 2010 at
A. P400,000 C. P600,000
 B. P800,000 D. P300,000

REVALUATION

29-4. On January 1, 2010, the historical balances of the land and building of Diner Company are:

Cost Accumulated depreciation

Land P 50,000,000
Building 300,000,000 P90,000,000

The land and building were appraised on same date and the revaluation revealed the following:

Sound Value
Land P 70,000,000
Building 315,000,000

There were no additions or disposals during 2010. Depreciation is computed on the straight line.
The estimated life of the building is 20 years.

The depreciation of the building for 2010 should be

A. P22,500,000 C. P15,000,000
B. P25,750,000 D. P10,500,000

Ignoring income tax, the December 31, 2010 statement of financial position should show
revaluation surplus at
A. P117,500,000 C. P105,000,000
B. P125,000,000 D. P119,750,000

30 – IMPAIRMENT OF ASSETS

AB5. Rupert Company owns a noncurrent asset which is damaged and is to be reviewed for
impairment. The following information relates to the noncurrent asset:

Current carrying amount P2,000,000

Fair value 2,200,000
Expected disposal costs 100,000
Value in use 2,050,000

What should be the carrying amount of the net asset after the impairment review?
A. P2,000,000
B. P2,200,000
C. P2,100,000
D. P2,050,000

INTANGIBLES

31-8. On January 1, 2007, Hope Company purchased patent for P7,140,000. The patent was amortized
over its remaining life of 15 years expiring on January 1, 2022. During 2010, Hope determined
that the economic benefits of the patent would not last longer than ten years from the date of
acquisition.

What amount should be reported in the statement of financial position for the patent, net of
accumulated amortization, at December 31, 2010?
A. P4,284,000 C. P5,050,000
B. P4,896,000 D. P5,236,000
31-12 .On January 1, 2010, Matt Company purchased Pia Company at a cost that resulted in
recognition of goodwill of P2,000,000. During the first quarter of 2010, Matt spent an additional
P800,000 on expenditures designed to develop and maintain goodwill by training and hiring new
employees. Due to these expenditures, at December 31, 2010, Matt estimated that the benefit
period of goodwill was indefinite.

In its December 31, 2010 statement of financial position, what amount should Matt report as
Goodwill?
A. P1,800,000 C. P2,000,000
B. P1,900,000 D. P2,660,000