La Consolacion College-Manila

REINVENTING EDUCATION FOR THE FUTURE

SCHOOL OF BUSINESS AND ACCOUNTANCY

PRE-FINAL EXAMINATION
2nd SEMESTER SY 2019-2020

INTERMEDIATE ACCOUNTING 1

SET - A
I. Multiple Choice

Instruction: Identify the letter that best completes the statement or answers the
question. Shade the box letter of your choice. ERASURES NOT ALLOWED.

1. The following are the cash balances of KHUBID, Inc. at December 31, 2010:
Undeposited collections (in currency and coins) P 40,200
Current Account – unrestricted 620,000
Disbursement checks written and recorded in
December 2010 but are to be released
to the payees in January 2011 130,000
Restricted time deposits (expected use in June 2011) 2,000,000

KHUBID, Inc. agreed to maintain a P 200,000 compensating balance in its unrestricted current account in
accordance with the loan covenant.
How much should KHUBID, Inc. report as cash on its December 31, 2010, statement of financial position?
a. P 590,200
b. P 2,790,200
c. P 790,200
d. P 750,000

2. The accountant of 1st WAVE Company is in the process of preparing the company’s financial
statements for the year ended December 31, 2010. He is trying to determine the correct balance of
cash and cash equivalents to be reported as a current asset on the statement of financial
position. The following items are being considered.
 Balances in the company’s accounts at the Metropolitan Bank:
 Current account P 81,000
 Savings account P 132,600
 Undeposited customer checks of P 22,200 (including a customer check dated January 2, 2011 for
P 3,000).
 Currency and coins on hand of P 3,480.
 Savings account at the Northern Philippines Bank with a balance of P 2,400,000. This account is
being used to accumulate cash for future plant expansion (in 2011).
 Petty cash of P 4,000 (currency of P 1,200 and unreplenished vouchers for P2,800).
 P120,000 in a current account at the Northern Philippines Bank. This represents a 20%
compensating balance for P 600,000 loan with the bank. 1st WAVE Company is legally restricted to
withdraw the funds until the loan is due in 2013.
 Treasury bills:
Two-month maturity bills P 90,000
Seven-month bills 120,000
 Time deposit P 100,000
What us the correct balance of cash and cash equivalents to be reported in the current assets section of the
statement of financial position?
a. P547,480
b. P 427,480
c. P 430,280
d. P 327,480

3. On December 31, 2010, the financial statements of 2nd WAVECorp. reveals the following:

Current account at Prime Bank P (30,000)

Current account at Prudent Bank 135,000
Treasury Bills (acquired 3 months befire maturity) 30,000
Treasury Bills (maturity date is Dec. 31, 2011) 1,500,000
Payroll Account 390,000

Foreign bank account - restricted (translated using the

December 31, 2010, exchage rate) 2,000,000
Postage Stamps 1,250
Employee's postdated check 4,500
IOU from the vice-president 8,000
Credit memo from a supplier for a purchase return 8,100
Traveler's check 21,000
Money Order 12,900

Petty Cash fund (P 3,000 in currency and expense receipts

for P 12,000) 15,000

What amount would be reported as “cash and cash equivalents” on the statement of financial position on
December 31, 2010?

a. P 840,050 c. P 849,400
b. P 873,900 d. P 861,900

4-5
AYUDA, Inc. needs P 2,000,000 to finance its expansion program. AYUDA, Inc. is negotiating a loan with
Metropolis Bank which requires the company to maintain a compensating balance of 10% of the loan
principal on deposit in the current account at the bank. AYUDA, Inc. currently maintains a balance P 20,000
in its current account. The current account earns interest of 2% per annum; the interest rate on the loan is
12% per annum.

4. What is the principal amount of the loan?

a. P 2,200,000 c. P 1,980,000
b. P 2,000,000 d. P 2,220,000

5. What is the effective interest rate on the loan?

a.13.2%
b.11..8%
c.13%
d.12%
6-7
On January 1, 2010, SAP Company established a petty cash fund of P 10,000. On December 31, 2010, the
petty cash fund was examined and found to have receipts and documents for miscellaneous general
expenses amounting to P 8, 120. In addition, there was cash amounting to P 1, 500.

6. What is the amount of petty cash shortage or overage?

a. P 380 overage
b. P 380 shortage
c. P 1,880 shortage
d. P 1, 880 overage

7. What entry would be required to adjust the petty cash fund on December 31,, 2010?

a. Miscellaneous general expenses 8,120

Cash short or over 380
Petty Cash Fund 8,500

b. Miscellaneous general expenses 8,120

Cash short or over 380
Petty cash fund 7,740

c. Miscellneous general expenses 8,120

Petty cash fund 8,120

d. Miscellaneous general expenses 8,500

Cash short or over 380
Petty cash fund 8,120

8-12 (BANK RECONCILIATION)

The cash receipts and the cash payments of EASY Q Company for April, 2010 follows:

Cash Receipts (CR) Cash Payments (CP)

Date Cash Debit Check No. Cash Credit
April 2 P 208,700 4113 P 44,550
8 20,350 4114 7,350
10 27,950 4115 96,500
16 109,350 4116 33,200
22 92,700 4117 73,600
29 53,000 4118 50,000
30 16,850 4119 31,600
Total P 528,900 4120 83,750
 4121 5,000
4122 120,650
Total 546,200

The cash account of EASY Q Company shows the following information at April 30,
2010:

CASH
Date Item Ref. Debit Credit Balance
April 1 Balance 95,550
30 CR 6 528,900 624,450
30 CP 11 546,200 78,250

EASY Q Company received the following bank statement on April 30, 2010:

Bank Statement for April 2010

Beginning balance P 95,550
Deposits and other Credits:
April 1 P 16,300 EFT
4 208,400
9 20,350
12 27,950
17 109,350
22 68,400 BC
23 92,700
Checks and other debits: P 543,750
April 7 44,550
13 69,500
14 45,150 US
15 7,350
18 33,200
21 10,950 EFT
26 73,600
30 50,000
30 1,000 SC (335,300)
Ending Balance P 304,000
_______________
Explanation: EFT – electronic funds transfer
 US -- unauthorized signature
BC -- bank collection
SC -- service charge

Additional data for the bank reconciliation include the following:

a. The EFT deposit was a receipt of monthly rent. The EFT debit was a monthly
insurance payment.
b. The unauthorized signature check was received from Lester Soon.
c. The P 68,400 bank collection of a note receivable on April 22 included P 9,250
interest revenue.
d. The correct amount of check number 4115, a payment on account is P 69,500.
(EASY Q’s accountant mistakenly recorded the check for P 96,500.)

8. What is the amount of deposits in transit on April 30?

a.P 53,000
b.P 69,850
c.P 45,100
d.P 115,000

9. What is the amount of outstanding checks on April 30?

a.P 241,000
b.P 337,500
c.P 286,150
d.P 310,500

10. What is the amount of bank receipts in April?

a.P 543,450
b.P 527,450
c.P 459,050
d.P 528,900

11.What is the amount of bank disbursements in April?

a.P 290,150
b.P 335,300
c.P 289,150
d.P 316,150

12.What is the correct cash balance as of April 30?

 a.P 132,850
b.P 87,700
c.P 122,150
d.P 223,150

13-14
Sunflower Company sells a variety of imported goods. By selling on credit, Sunflower
cannot expect to collect 100% of its accounts receivable. At December 31, 2009,
Sunflower reported the following on its statement of financial position:

Accounts receivable P 2,197,500

Less: Allowance for bad debts (133,500)
Accounts receivable, net P 2,064,000

During the year ended December 31, 2010 Sunflower earned sales revenue of P 537,
702,500 and collected cash of P 528,070,500 from customers. Assume bad debt expense
for the year was 1% of sales revenue and that Sunflower wrote off uncollectible accounts
receivable totaling P 5,439,500.

13. What is the accounts receivable balance at December 31, 2010?

a. P 6,390,000
b. P 2,197,500
c. P 11,829,500
d. P 6,318,975

14 .What is the December 31, 2010, balance of the Allowance for bad debts
account?
a.P 133,500
b.P 71,025
c.P 61, 975
d.P 71,525

15. The following information pertains to Acacia, Inc. for the year ended December 31,
2010:
Credit sales during 2010 P 4,450,000
Collected of accounts written off in 2010 170,000
Worthless accounts written off in 2010 191,000
Allowance for doubtful accounts, Jan 1, 2010 155,000
Acasia, Inc. Provides for doubtful accounts based on 1 1/2% of credit sales.

What is that balance of the allowance for doubtful accounts at December 31, 2010?
A. P 345,750 C. P 200,750
B. P 66,750 D. P 242,750

16.Mahogany Company’s analysis and aging of its accounts receivable at December 31,
2010, disclosed the following:

Accounts receivable P460,000

Accounts estimated to be uncollectible (per aging) 95,000
Allowance for bad debts (per books) 103,000

What is the net realizable value of Mahogany’s receivables at December 31, 2010?
A. P 357,000 C. P 460,000
B. P 262,000 D. P 365,000

17. The allowance for doubtful accounts had a credit balance of p 150,000 at December
31, 2009. During 2010, uncollectible accounts of p 35,000 had been written off.
Thecompany estimates its bad debt expense to be 2% of net sales. The balance of the
allowance account at the end of 2010 was p 437,000.

The company’s net sales for 2010 amounted to

A. P 12,600,000 C. P 21,850,000
B. P 16,100,000 D. P 14,350,000

18.The following amounts are shown on the 2010 and 2009 financial statements of San
Francisco Co.:

2010 2009
Accounts receivable ? P 470,000
Allowance for bad debts 20,000 10,000
Net sales 2,600,000 2,400,000
Cost of goods sold 1,900,000 1,752,000
What is the account receivable balance at December 31, 2010?
A. P 820,000
B. P 340,000
C. P 360,000
D. P 470,000

19.The policy of Ilang-Ilang, Inc. is to debit bad debt expense for 3% of all new sales.
The following are the company’s sales and allowance for bad debts for the past four
years.

ALLOWANCE FOR BAD

DEBTS YEAR-END
YEAR SALES BALANCE
2007 P 3,000,000 P 45,000
2008 2,950,000 56,000
2009 3,120,000 60,000
2010 2,420,000 75,000

THE ACOUNTS WRITTEN OFF IN 2008, 2009, AND 2010 AMOUNTED TO

2008 2009 2010

A. P 99,500 P 97,600 P 87,600
B. 77,500 89,600 57,600
C. 11,000 4,000 15,000
D. 12,500 22,400 62,400

20.Banawe Inc. estimates its uncollectible accounts to be 3% of the accounts receivable

balances. The following information was taken from the company’s statement
of financial position at December 31, 2010:

DEBIT CREDIT
Net sales(including cash sales of p 825,000) P 3,460,000
Allowance for bad debts P 69,000
Accounts receivable 2,460,000

What is the bad debt expense to be reported for 2010?

A. P 79,050 B. P 69,000
 C. P 73,800 D. P 142,800

21.The following information was taken from the records of SYCAMORE BOTIQUE for
the month of December:

Sales P 198,000
Sales returns 4,000
Additional markups 20,000
Markup cancellations 3,000
Markdowns 18,600
Markdown cancellations 5,600
Freight-in 4,800

Purchases at cost 96,000

Purchases at retail 176,000
Purchase returns at cost 4,000
Purchase returns at retail 6,000
Beginning inventory at cost 60,000
Beginning inventory at retail 93,000

What is the cost of Sycamore’s ending inventory under the retail inventory (average
cost) method?

A.P40,880
B.P43,070
C.P51,296
D.P43,500

22. On September 10, 2012, a fire damaged the warehouse of TIGER COMPANY. All
inventory items and many accounting records stored in the warehouse
were destroyed.
However, a portion of the inventory could be sold for scrap. The company’s
backup files provide the following information:

Inventory, January 1 P 750,000

Cash sale, January 1 - September 10 445,000
2,770,00
Purchases, January 1 - September 10 0
4,230,00
Collection of accounts receivable, January 1 - Semptember 10 0
Accounts receivable, January 1 350,000
 Accounts receivable, September 10 530,000
Salvage value of inventory 15,000
Gross profit ratio 32%

What is the estimated inventory fire loss?

A. P208,400 C. P203,600
B. P506,200 D. P218,600

23. The physical inventory of RAGE, INC. as of December 26, 2012, totaled
P945,000. You
agreed on the December 26 count as the company has a good internal control
system.
In trying to establish the December 31 inventory, you noted the following
transactions
from December 27 to December 31, 2012.

390,00
Sales (30% markup on cost) P 0

Credit memos issued:

For goods returned on:
December 15 10,800
December 20 18,000
December 29 15,600
For goods delivered to customers not
in accordance with specifications 3,600

Credit memos received:

For goods returned on:
December 10 5,400
December 26 4,200
December 28 6,000

Purchases:
Placed in stock 90,000
124,50
In transit, FOB shipping point 0
In transit, FOB destination 39,000
What is the inventory balance on December 31, 2012?
A. P690,000
B. P780,000
C. P693,600
D. P865,500
 Page 12
SET-A

24-25

The Garrett Corporation uses the lower-of-cost-or-nrv method to value inventory.

Data regarding the items in work-in-process inventory are presented below.

Markers Pens Highlighters

Historical cost ................ P24,000 P18,880 P30,000
Selling price .................. 36,000 36,000 36,000
Estimated cost to complete ..... 4,800 4,800 6,800
Replacement cost ............... 20,800 16,800 31,800
Normal profit margin as a
percentage of selling price .... 25% 25% 10%

24. See information regarding the Garrett Corporation above. When valuing the pens, the
market value to be used in the lower-of-cost-or- market comparison is
a. P22,200.
b. P31,200.
c. P16,800.
d. P18,800.

25. See information regarding the Garrett Corporation above. The inventory valuation for
highlighters using the lower-of-cost-or-NRV method is
a. P25,600.
b. P29,200.
c. P31,800.
d. P30,000.

26. The following information is available for the Neptune Company for the three months
ended March 31 of this year:

Inventory, January 1 .................................. P 450,000

Purchases ............................................. 1,700,000
Freight-in ............................................ 100,000
Sales ................................................. 2,400,000

The gross margin was estimated to be 25 percent of sales. What is the estimated
inventory balance at March 31?
a. P350,000
b. P450,000
c. P562,500
d. P600,000

27. Elrond Company began operations in 2007. During the first two years of operations,
Elrond made undiscovered errors in taking its year-end inventories that overstated 2007
ending inventory by P50,000 and overstated 2008 ending inventory by P40,000. The
combined effect of these errors on reported income is

2007 2008 2009

a. overstated P50,000 overstated P90,000 understated P40,000
b. overstated P50,000 overstated P40,000 not affected
c. understated P50,000 understated P90,000 not affected
d. overstated P50,000 understated P10,000 understated P40,000
 Page 13
SET-A

28. Jupiter Company prepares monthly income statements. A physical inventory is taken
only at year-end; hence, month-end inventories must be estimated. All sales are made
on account. The rate of markup on cost is 50 percent. The following information relates
to the month of May:

Accounts receivable, May 1 ............................ P20,000

Accounts receivable, May 31 ........................... 30,000
Collection of accounts receivable during May .......... 50,000
Inventory, May 1 ...................................... 36,000
Purchases of inventory during May ..................... 32,000

The estimated cost of the May 31 inventory is

a. P24,000.
b. P28,000.
c. P38,000.
d. P44,000.

29. On August 1, Stephan Company recorded purchases of inventory of P80,000 and

P100,000 under credit terms of 2/15, net 30. The payment due on the P80,000 purchase
was remitted on August 14. The payment due on the P100,000 purchase was remitted
on August 29. Under the net method and the gross method, these purchases should be
included at what respective net amounts in the determination of cost of goods available
for sale?

Net Method Gross Method

a.   P178,400 P176,400
b.   P176,400 P176,400
c.   P176,400 P178,400
d.   P180,000 P176,400
 Page 14
SET-A

30. Holdaway Co., a manufacturer, had inventories at the beginning and end of its current year as
follows:

Beginning End
Raw materials ............................. P11,000 P15,000
Work in process ........................... 20,000 24,000
Finished goods ............................ 12,500 9,000
 Page 15
SET-A

During the year, the following costs and expenses were incurred:

Raw materials purchased ............................... P150,000

Direct labor cost ..................................... 60,000
Indirect factory labor ................................ 30,000
Taxes and depreciation on factory building ............ 10,000
Taxes and depreciation on sales room and office ....... 7,500
Sales salaries ........................................ 20,000
Office salaries ....................................... 12,000
Utilities (60% applicable to factory, 20% to sales room,
and 20% to office) .................................... 25,000

Holdaway's cost of goods sold for the year is

a. P257,000.
b. P260,500.
c. P261,000.
d. P269,500.

31. Nichols Enterprises has an investment in 250 bonds of Elliott Electronics that Nichols accounts for as
FVOCI securities. Elliott bonds are publicly traded and have a quoted price of P1,000 per bond, but
Nichols believes the market has not appreciated the full value of the Elliott bonds and that a more accurate
price is P1,200 per bond. Nichols should carry the Elliott investment on its statement of financial position
at ______. 
 

A.  P300,000
B.  P250,000
C.  either P250,000 or P300,000, as both are defensible valuations
D.  P275,000, the midpoint of Nichols' range of reasonably likely valuations of Elliott

 
32. On January 1, 2022, Nana Company paid P100,000 for 8,000 ordinary shares of Papa Company. The
ownership in Papa Company is 10%. Nana Company does not have significant influence over Papa
Company. Papa reported net income of P52,000 for the year ended December 31, 2022. The fair value of the
Papa shares on that date was P45 per share. What amount will be reported in the statement of financial
position of Nana Company for the investment in Papa on December 31, 2022? 
 

A.  P284,400
B.  P300,000
C.  P315,600
D.  P360,000

33. Hobson Company bought the securities listed below during 2022. These securities were classified as FVTPL
securities. In its income statement for the year ended December 31, 2022, Hobson reported a net fair value
loss of P13,000 on these securities. Pertinent data at the end of June 2023 are as follows:
 
Security Cost Fair Value
X P380,000  P352,000 
Y 180,000  160,000 
Z 420,000  414,000 

What amount of fair value loss on these securities should Hobson include in its income statement for the six
months ended June 30, 2023? 
 

A.  P41,000
B.  P54,000
C.  P13,000
D.  P0

 
 Page 16
SET-A

34. Simpson and Homer Corporation acquired an office building on three acres of land for a lump-sum price of
P2,400,000. The building was completely furnished. According to independent appraisals, the fair values
were P1,300,000, P780,000, and P520,000 for the building, land, and furniture and fixtures, respectively.
The initial values of the building, land, and furniture and fixtures would be ______.
 
  Building Land Fixtures
a. P1,300,000  P780,000   P520,000 
b. P1,200,000  P720,000  P480,000 
c. P720,000 P1,200,000  P480,000 
d. none of these

A.  Option A
B.  Option B
C.  Option C
D.  Option D

35. On January 1, 2018, Laramie Inc. acquired land for P6.2 million. Laramie paid P1.2 million in cash and
signed a 6% note requiring the company to pay the remaining P5 million plus interest on December 31,
2019. An interest rate of 6% properly reflects the time value of money for this type of loan agreement. For
what amount should Laramie record the purchase of land? 
 

A.  P6.8 million

B.  P5.0 million
C.  P5.6 million
D.  P6.2 million

 
 
36. On July 1, 2018, Markwell Company acquired equipment. Markwell paid P160,000 in cash on July 1, 2018,
and signed a P640,000 noninterest-bearing note for the remaining balance which is due on July 1, 2019. An
interest rate of 5% reflects the time value of money for this type of loan agreement.

Which of the following should be included in the journal entry on July 1, 2018? 
 

A.  Credit: Notes payable, P609,523

B.  Debit: Equipment, P800,000
C.  Debit: Discount on notes payable, P30,477
D.  Credit: Notes payable, P609,523 and Debit: Discount on notes payable, P30,477
 

37. Horton Stores exchanged land and cash of P5,000 for similar land. The book value and the fair value of the
land were P90,000 and P100,000, respectively.

Assuming that the exchange has commercial substance, Horton would record land-new and a gain/(loss) of
______.
 
  Land Gain/(loss)
a. P105,000  P0 
b. P105,000   P10,000 
c. P95,000   P0 
d. P95,000   P10,000 
 
 

A.  Option A
B.  Option B
C.  Option C
D.  Option D
 Page 17
SET-A

38. Wendy Company acquired several fixtures for its new building, including display cases, shelves
and hanging racks. The invoice price of the fixtures was P700,000. the company received a 2 % cash
discount by paying within the discount period. Freight and insurance during shipment totaled P3,000.
Costs of assembling and installing fixtures were 5,000. While installing a display case, a new employee
carelessly broke a glass top. This top was replaced at a cost P2,000. What is the cost of the fixtures?

a. 694,000
b. 696,000
c. 708,000
d. 710,000

39. Tracie Company acquired the following plant assets during 2020.

a. Equipment – Acquired at an invoice price of P600,000, subject to a 5% cash discount which was
not taken.

b. Land – Acquired by issuing 10,000 shares pf P50 par value common when the market price of
the stock was P120 last month and P130 this month. The fair value of the land is P1,100,000.

c. Machinery – Acquired at a cost of P275,000. Installation cost was P7,000, trial runs and other
testing cost P18,000, and construction of base, P10,000.

What is the total increase in property, plant and equipment as a result of plant asset transactions?

a. 1,980,000
b. 2,180,000
c. 2,080,000
d. 1,770,000
(ftg rev)

40. On March 1, 2020, MATATAG Company purchased for P450,000 a tract of land as a factory site.
An existing dilapidated building on the property was razed and construction was begun on a
new factory building in April 2020. Additional data are available as follows.

Cost of razing old building 60,000

Salvage value recovered from the old building and sold 5,000
Title insurance and legal fees to purchase land 30,000
Architect’s fees 95,000
New building construction cost (labor and materials) 1,850,000

Savings from insuring the laborer 50,000

Interest incurred based on the weighted capital expenditure 35,000
Actual interest paid 65,000
Building maintenance cost after the construction 15,000

The capitalized cost of the completed factory building should be

a. 2,080,000
b. 2,095,000
c. 2,035,000
d. 20,050,000
 Page 18
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(ftg)

41. ABS-CVN had the following general borrowings during 2020 which were used to finance
the construction of the company’s new building.

Principal Borrowing costs

10% bank loan 1,400,000 140,000
10% short-term note 800,000 80,000
12% long-term loan 1,000,000 120,000

3,200,000 340,000
======= ======

The construction began on January 1, 2020 and the building was completed on December 31,
2020. Expenditures on the building were made as follows:

January 1 200,000
March 31 500,000
June 30 600,000
September 30 500,000
December 31 200,000

2,000,000
=======

The amount of capitalizable borrowing costs is

a. 106,250
b. 340,000
c. 212,500
d. 0

42. On July 1, 2020, one of COBID Company’s delivery vans was destroyed in an accident. On that
date, the van’s accumulated depreciation was P350,000 and the original cost was P600,000. On July 15,
2020, COBID received and recorded a P70,000 invoice for a new engine installed in the van in May 2020,
and another P50,000 invoice for various repairs. In August, COBID received P350,000 under its
insurance policy on the van, which it plans to use to replace the van. The market value of the second
hand van is P360,000. What amount should COBID report as gain (loss) on disposal on the van in its
2020 income statement?
a. 40,000
b. 30,000
c. 0
d. (20,000)
(ftg)

43.On June 30, 2020, a fire in ECQ Company’s plant caused a total loss to a production machine. The
machine was being depreciated at P20,000 annually and had a carrying amount of P160,000 at
December 31, 2019. On the date of the fire the fair value of the machine was P220,000, and ECQ
 Page 19
SET-A

received insurance proceeds of P200,000 in October 2020. In its income statement for the year ended
December 31, 2020, what amount should Pine recognize again or loss on disposition?

a. 0
b. 20,000
c. 40,000
d. 50,000

44. Cutter Enterprises purchased equipment for P72,000 on January 1, 2018. The equipment is expected to have
a five-year life and a residual value of P6,000. Using the double-declining balance method, depreciation for
2018 and the book value on December 31, 2018 would be ______. 
 
A.  P26,400 and P45,600, respectively
B.  P28,800 and P43,200, respectively
C.  P28,800 and P37,200, respectively
D.  P26,400 and P36,600, respectively

45. Cutter Enterprises purchased equipment for P72,000 on January 1, 2018. The equipment is expected to have
a five-year life and a residual value of P6,000. Using the sum-of-the-years'-digits method, depreciation for
2018 and book value on December 31, 2018 would be ______. 
 

A.  P22,000 and P44,000, respectively

B.  P22,000 and P50,000, respectively
C.  P24,000 and P48,000, respectively
D.  P24,000 and P42,000, respectively

46. An asset was acquired on October 1, 2018 for P78,000 with an estimated five-year life and P13,000 residual
value. The company uses units-of-production depreciation and expects the asset to produce 20,000 units.
Calculate the gain or loss if the asset was sold on March 31, 2021 for P58,000. Actual production was: 2018
= 500 units; 2019 = 3,000 units; 2020 = 3,500 units; 2021 = 1,000 units. 
 
A.  P11,200 gain
B.  P19,000 gain
C.  P6,000 gain
D.  P12,500 gain

47. In January 2020 GOLD Mining Corporation purchased a mineral mine for P3,600,000 with removable
ore estimated by geological surveys at 2,160,000 tons. The property has an estimated value of P360,000
after the ore has been extracted. GOLD incurred P1,080,000 of development costs preparing the
property for the extraction of ore. Mining truck incurred cost at P500,000 with salvage value of P50,000.
During 2020, 270,000 tons were removed and 240,000 tons were sold. For the year ended December 31,
2020, GOLD should include what amount of depletion in its cost of goods sold?

a. 405,000
b. 480,000
c. 530,000
d. 540,000

48. June Company acquired property in early 2020 which is believed to include valuable mineral deposit.
The cost of the property was P9,000,000. Geological estimates indicate that approximately 1,000,000
tons of minerals may be economically extracted. It is further estimated that the property can be sold for
P2,500,000 to be used for commercial development following mineral extraction. For P800,000, June
expects to restore the land to a condition appropriate for resale. After initial acquisition, the following
costs were incurred:

Exploration cost 3,500,000

Development cost related to drilling and
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Development of wells 3,200,000

Development cost related to production equipment 4,600,000

The Company extracted 50,000 tons of the mineral in 2020. The company should record 2020 depletion
at

a. 825,000
b. 930,000
c. 700,000
d. 785,000

49. On July 1, 2020, SILVER 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. SILVER expects to extract and sell 25,000 tons per month.
SILVER purchased new equipment on July 1, 2020. 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.

The depreciation of the equipment for 2020 is

a. 400,000
b. 800,000
c. 600,000
d. 300,000

50.On September 10, 2019, AKLAT Co. incurred the following costs for one of its printing presses:
Purchase of stapling attachment P110,000
Installation of attachment 10,000
Replacement parts for renovation of press 36,000
Labor and overhead in connection with renovation of press 14,000
Neither the attachment nor the renovation increased the estimated useful life of the press.
However, the renovation resulted in significantly increased productivity. What amount of the costs
should be capitalized?
a. P0.
b. P134,000.
c. P156,000.
d. P170,000.

END OF EXAMINATION