1. On August 1, 2014, Lleiram Corporation purchased a new machine on a deferred payment basis.

A down
payment of P200,000 was made and 4 annual installments of P600,000 each are to be made beginning
on September 1, 2014. Terms of the contract are not normal in the industry where the same types of
assets are being traded. Due to an employee strike, Flight could not install the machine immediately,
thus, incurred P3,000 of storage cost. Cost of installation (excluding the storage cost) amounted to
P20,000. The cash price of the machine was P2,300,000.

How much should be capitalized as cost of the machine?

a. 2,300,000 c. 2,323,000
b. 2,320,000 d. 2,600,000

2. Ybba Company has received a donation of land from a rich shareholder. The land originally had a cost of
P 1,000,000. On the date of the donation, the land had a market value of P 1,500,000 and an assessed
value of 1,200,000. How much income should be recognized from the donation?
a. 1,500,000 c. 1,200,000
b. 1,000,000 d. 0

3. Siri Company imported an equipment at peso equivalent to P300,000. The company has to pay
additional cost of importing the asset such as P40,000 import duties and P 15,000 non-refundable
purchase taxes. Cost of bringing and preparing the asset for its intended use include P2,000
transportation cost, P4,000 installation and testing trial run costs.

How much is the initial cost of the new machine?

a. 300,000 c. 346,000
b. 336,000 d. 361,000

4. Atac Company acquired a machine on October 1, 2013 at a cost of P 2,500,000 and depreciated it at 20%
per annum on a straight line basis. On October 1, 2015, the entity spent P 375,000 on upgrade to the
machine in order to improve its efficiency and increase the inflow of economic benefits over the
machine‘s remaining useful life. What amount of depreciation should be recognized for the year
September 30, 2016?
a. 725,000 c. 850,000
b. 625,000 d. 875,000

5. Eiram Company has recently purchased a computer system for its office. The following information was
gathered in relation to the acquisition of the unit:
List price P 150,000
Trade Discount and rebates taken 56,000
Installation and assembly cost 5,160
Initial delivery and handling cost 6,400
Purchase discount 2%

What is the acquisition cost of the new computer?

a. 94,080 c. 105,680
b. 103,680 d. 160,600

6. On August 1, 2014, Ecarg Company purchased a new machine on a deferred payment basis. A down
payment of P100,000 was made and four monthly installment of P250,000 each are to be made
beginning on August 1, 2014. The terms of the agreement is not considered normal. The cash equivalent
price of the machine was P950,000. Ecarg incurred and paid installation costs amounting to P30,000.

How much should be capitalized as cost of the machine?

a. P950,000 c. 1,100,000
b. 980,000 d. 1,130,000

7. Mehb Incorporation purchased a machine under a deferred payment contract on December 31, 2014.
Under the terms of the contract, Mighty is required to make 8 annual payment of P490,000 each
beginning December 31, 2015. The applicable interest rate is 8%

What is the purchase of the machine?

a. 4,862,165 c. 3,920,000
b. 3,041,150 d. 2,815,834

Joey B. Beringuela, CPA | joeyberinguela@gmail.com

 8. On March 31, 2015, Tedas Enterprises, traded an old machine having a carrying amount of P1,600,000
and paid a cash difference of P600,000 for a new machine having a total cash price of P2,000,000.

On March 31, 2015, what amount of loss should Tedas recognize of this exchanged?
a. Nil Amount c. 400,000
b. 200,000 d. 600,000

In October 2015, Yapu Company exchange a used packaging machine having a book value of P240,000 for a new
machine and a cash a difference of P30,000. The market value of the used packaging machine was determined to
be P280,000.

9. In its profit/loss for the year ended December 31, 2015, how much gain should Yapu recognized on this
exchange, assuming the exchange is considered with commercial substance?
a. None c. 30,000
b. 10,000 d. 40,000

10. On the date of exchange, what amount should Yapu Company recognized as the cost of the asset
received, assuming the exchange is considered not lacking in commercial substance?
a. 200,000 c. 280,000
b. 250,000 d. 310,000

11. Snow White Corporation, an investor of Wolf Company, owned an idle parcel of real estate consisting of
land and a factory building. Snow White gave title to this realty to Wolf Company as an incentive for wolf
to establish manufacturing operations in the area. Wolf paid nothing for this realty which had a fair
market value of P2,000,000 at the date of the grant.

How should Wolf record this non-monetary transaction?

a. Memo entry only
b. Credit to accumulated profits and losses for P2,000,000
c. Credit to unearned revenue for P2,000,000
d. Credit to equity reserve for P2,000,000

12. Perfect Company acquired land on April 1, 2014 on which a new building will be immediately
constructed. The costs related to the acquisition include:

Cash payment 2,000,000

Broker’s fee 50,000
Option paid for the land acquired 20,000
Option paid for an alternative land not acquired 10,000
Delinquent property taxes for 2013 assumed and paid 30,000
Property taxes for 2014, which will be paid on or before
December 31, 2014 60,000

What is the proper cost of the land?

a. 1,125,000 c. 2,160,000
b. 2,115,000 d. 2,170,000

13. Amber Company acquired a building in early 2014. The costs related to the acquisition include:
Acquisition price 7,000,000
Options 300,000
Repairs 500,000

The options include P 200,000 on the building acquired and P 100,000 on the building which was not
acquired. The repairs include renovation, remodeling of office space and new partitions prior to the
occupancy of the building.

What is the proper cost of the building?

a. 7,300,000 c. 7,700,000
b. 7,500,000 d. 7,800,000

Joey B. Beringuela, CPA | joeyberinguela@gmail.com

 14. During 2014, Demo Company had the following transactions pertaining to its new office building:
Purchase price – land 420,000
Legal fees for contracts to purchase land 14,000
Architect’s fee 56,000
Demolition of old building on site 35,000
Sale of scrap from old building 21,000
Construction cost of new building (fully completed) 2,450,000

At what amounts should the cost of land and cost of building be shown in Demo’s December 31, 2014
statement of financial position respectively?
a. 413,000 ; 2,541,000 c. 434,000 ; 2,520,000
b. 420,000 ; 2,541,000 d. 455,000 ; 2,520,000

15. During 2014, Joker Company installed a production assembly line to manufacture furniture. In 2014,
Joker Company purchased a new machine and rearranged the assembly line to install this machine. The
rearrangement did not increase the estimated useful life of the assembly line, but it did result in
significantly more efficient production. The following expenditures were incurred in connection with this
project:

Machine 150,000
Parts added in rearranging the assembly line to
provide future benefits 80,000
Labor to install machine 28,000
Labor and overhead to rearrange the assembly line 36,000

What amount of the above expenditures should be capitalized in 2014?

a. 150,000 c. 214,000
b. 178,000 d. 294,000

16. Grabb Ayag Company made the following expenditures relating to its plant asset assets during 2014:

Partial replacement of roof tiles 42,000

Major improvement to the electrical wiring system 196,000
Continuing and frequent repair 120,000

As a result of the improvement to the electrical wiring system future economic benefit will flow to the
enterprise. How much should be charged to repairs and maintenance expense in 2014?
a. 120,000 c. 238,000
b. 162,000 d. 358,000

LIN Company acquired land and building for P 5,500,000 cash at the beginning of the current year. The land was
fairly valued at P 2,400,000 and the building at P 3,600,000. Unpaid property taxes assumed by LIN Company
amounted to P 250,000. The entity also incurred building renovation of P 500,000, option of P 50,000 on land
and building not acquired, cost of survey P 30,000, escrow fee of P 100,000 and real estate commission of P
200,000.

17. What is the cost of land?

a. 2,420,000 c. 2,470,000
b. 2,450,000 d. 2,500,000

18. What is the cost of building?

a. 4,160,000 c. 4,070,000
b. 4,130,000 d. 3,800,000

19. At the beginning of the current year, PORQUE Company purchased a machine for P 250,000 that was
placed in service at year-end. The entity incurred the following additional costs for the machine:
Shipping 5,000
Installation 10,000
Testing 35,000

What amount should be reported as cost of the machine at year-end?

a. 250,000 c. 265,000
b. 255,000 d. 300,000

Joey B. Beringuela, CPA | joeyberinguela@gmail.com

20. Eureka Cushion Company purchased land with a current market value of P 2,400,000. The carrying
amount of the land was P 1,305,000. In exchange for the land, Eureka Cushion issued P 20,000 ordinary
shares with par value of P100 and market value of P 140 per share. The shares are traded in an establish
stock exchange.

What amount should Eureka Cushion record as cost of the land?

a. 1,305,000 c. 2,400,000
b. 2,000,000 d. 2,800,000

21. Porky Pig Company acquired land and paid in full by issuing P 600,000 of its 10 percent bonds payable
and 40,000 ordinary shares with par value of P10. The share was selling at P19 and the bonds were
trading at 102. What amount should Porky Pig record as cost of the land?
a. 988,000 c. 1,372,000
b. 1,000,000 d. 1,387,200

22. On September 1, 2010 Insta Ganda Company issued 100,000 treasury shares with P25 par value for a
parcel of land to be held for a future plant site. The treasury shares were acquired by Insta Ganda at a
cost of P30 per share. Insta Ganda share had a fair market value of P40 on September 1, 2010. Insta
Ganda received P50,000 from the sale of scrap when an existing structure on the site was razed. At what
amount should the land be initially measured?
a.4, 000,000 c. 3,000,000
b.3, 950,000 d. 2,500,000

23. During the current year, Revised Company paid P 100,000 cash and traded inventory, which had a
carrying amount of P2, 000,000 and fair value of P 2,100,000, for other inventory in the same line of
business with a fair value of P2, 200,000. What amount should Revised Company record as cost of the
inventory received in exchange?
a. 2,000,000 c. 2,200,000
b. 2,100,000 d. 2,300,000

24. At the beginning of the current year, Baby Company traded in an old machine having carrying amount of
P 1,680,000 and paid cash difference of P 600,000 for a new machine having a cash price of 2,050,000.
What amount of loss should Baby Company recognize on the exchange?
a. 600,000 c. 370,000
b. 230,000 d. 0

25. Flame Corporation purchased a depreciable asset for P420,000 on January 1, 2012. The estimated
salvage value is P42,000, and the estimated useful life is 9 years. The straight-line method is used for
depreciation. In 2015, Flame changed its estimates to a useful life of 5 years with a salvage of P70,000.

How much is the 2015 depreciation expense?

a. 42,000 c. 112,000
b. 70,000 d. 126,000

END OF EXAMINATION

Joey B. Beringuela, CPA | joeyberinguela@gmail.com