CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila
FINANCIAL ACCOUNTING AND REPORTING PREWEEK LECTURE
MAY 2022 CPALE BATCH 91

1. An entity provided the following information on December 31, 2022.

CA Cash in bank, net of bank overdraft of P500,000 in same bank " ✓ 5,000,000 CA
CL
-

Notes receivable, net of discounted note of P500,000 1 U

✓4,000,000 CA
+ , .gm 6,000,000 CA
Inventory, excluding unrecorded purchases on account P400,000 in transit FOB

_
- _

shipping point on December 31, 2022 + took 3,000,000 ca

Suppliers
Bond sinking fund Adv .to 3,000,000

:
"

1- 1M 7,000,000 CL +400k
Porch .

Note payable due December 31, 2024 4,000,000 NU

Bond payable due December 31, 2023 3,000,000 Ct
Claims for wages covered in a pending lawsuit 1,400,000 CONTINGENT HAB .

Estimated expenses in redeeming prize coupons . 600,000

Share dividend payable 2,000,000 EQUITY
Deferred tax liability 1,500,000 NCL
1. What amount should be reported as total current assets on December 31, 2021?
a. 21,400,000
b. 24,900,000
0c. 23,900,000
d. 24,400,000
µ
2. What amount should be reported as total current liabilities on December 31, 2021?
0a. 13,500,000
b. 14,000,000
c. 14,900,000
d. 15,400,000
2. An entity is completing the preparation of the financial statements for 2022. The financial statements are
ADJ authorized for issue on March 31, 2023. On March 15, 2023, a dividend of P3,000,000 was declared and a
" contractual profit share payment of P1,000,000 was made based on the net income for 2022. On February 1,
BDE 2023, a customer went into liquidation having owed the entity P500,000. No allowance had been made against
-
ADA this account. On March 20, 2023, a manufacturing plant was destroyed by fire resulting in a financial loss of
ADA P2,500,000. What amount should be recognized in profit and loss for 2022 to reflect adjusting events after the
end of reporting period? ADJUSTING EVENT
Profit
a. 4,000,000
sharing 1M
/_b¥e Hate
Bankruptcy preexisting condition

b. 3,000,000 #
c. 2,500,000
0
d. 1,500,000
3. An entity provided the following information on December 31, 2022:
CL CL
Accounts payable amounted to P500,000 and accrued expenses totaled P300,000 on December 31, 2022.
-

On December 15, 2022, the entity declared a cash dividend of P7 per share on 100,000 outstanding shares,
=
payable on January 15, 2023. CLIhbi.ly .

On July 1, 2022, the entity issued P5,000,000, 8% bonds for P4,400,000 to yield 10%. The bonds mature
on June 30, 2027 and pay interest annually every June 30.
_

The pretax financial income was P8,500,000 and taxable income was P6,000,000. The difference is due
d) to P1,000,000 permanent difference and P1,500,000 of taxable temporary difference= to reverse in 2023.
The income tax rate is 25%. The entity made estimated income tax payments during the year of
P1,000,000. t-F-ax.AM/-.-DtL:NCL
What amount should be reported as total current liabilities on December 31, 2022?
a. 3,200,000 C) Faaval 5M .

6M
b. 2,825,000
.

✗ 8%

c. 2,400,000 ✗
6112
✗25%_
①
d. 2,200,000
int pay # CL
Itxpay I -5M .

payment (
.

sooooo CL
 Page 2

4. On April 1, 2022, an entity had a machine with cost of P8,000,000 and accumulated depreciation of
P6,000,000. On April 1, 2022, the entity classified the machine as held for sale and decided to sell the machine
within one year. On April 1, 2022, the machine had an estimated selling price of P800,000 with estimated
NOAH's
cost of disposal of P100,000 and remaining useful life of 2 years. On December 31, 2022, the estimated selling
price of the machine had increased to P1,200,000 with estimated cost of disposal of P150,000. What amount
should be recognized as gain on reversal of impairment on December 31, 2022?
a. 550,000 4/1/22 SP
12/31/22
b. 400,000 ""
%%, FUAD 700k FVCTD
I. 2M-150k
1050k

c. 300,000 * ftp.wssi?MmTEmit Cv took

g
d. 350,000 ↑ 350k

5. An entity provided the following information pertaining to revenue earned by operating segments for the
current year:
Segment Sales to unaffiliated customers Intersegment sales Total revenue
Alo 5,000 3,000 8,000
Bix 8,000 4,000 12,000
Cee 4,000 - 4,000
Dil 43,000 16,000 59,000
Combined 60,000 23,000 83,000
Elimination - (23,000) (23,000)
of Consolidated 60,000 -
What is the minimum amount of external revenue to be disclosed by reportable segments?
60,000
E
N O
a. 45,000
75% ✗ 60k
☆ 45,000 =

b. 38,250 reportable segments

c. 53,250 atleast 75% total external
revenue

§ d. 62,250

§ 6. An entity had three lines of business, each of which was determined to be reportable segment. The entity sales
aggregated P7,500,000 in the current year, of which Segment No. 1 contributed 40%. Traceable costs were
- -

É P1,750,000 for Segment No. 1 out of a total of P5,000,000 for the entity as a whole. For external reporting,
-
_

costs to the total income before common costs. What amount should be reported as net income for Segment
No. 1? ""
sales 31000,000 7. 5M
a. 1,250,000 % Allocation
b. 1,000,000
traceable cost
NI b4 CC 1257¥ 50%
c. 650,000 Alwc Common lost
. (750000)
I. SMX 50%

① 500,000
d. _

NET INCOME 500000

7. The entity had the following account balances on December 31, 2022:
CCE Petty cash fund 50,000 -10k 40k a-

Philippine Bank current account 4,000,000 + 4001<=4 -4M

Manila Bank current account (overdraft) CL (1,200,000)
Cash on hand 500,000 look 400k - =

Asia Bank savings account for plant addition in 2023 × 1,500,000

Treasury bills 1,000,000 CCE
Treasury bonds 10 yrs 't
700,000
The petty cash fund included unreplenished December 2022 petty cash expense vouchers P5,000 and
employee IOU P5,000. The cash on hand included a P100,000 customer check payable to the entity dated
*. January 15, 2023. In exchange for a guaranteed line of credit, the entity had agreed to maintain a minimum
balance of P500,000 in the unrestricted current bank account. Check of P400,000 drawn against Philippine
Bank current account dated and recorded on December 31, 2022 was mailed to creditor on January 15, 2023. :*
.
What total amount should be reported as cash and cash equivalents on December 31, 2022?
I a. 5,840,000
b. 5,440,000
c. 6,540,000
d. 7,340,000
 Page 3

8. An entity provided the following information on December 31, 2022:

CASH Checking account at Bank A (overdraft) CL ( 500,000)
Checking account at Bank B 3,000,000 cash
Rec 120,000
.

Foreign bank account unrestricted and in equivalent pesos

- -
2,500,000 cash
IOU from company president Rec 500,000 .

Money order 250,000 cash

NSF customer check Rec 100,000
.

Payroll account 1,000,000 cash

Petty cash fund, expense receipts P40,000 -
40k 50,000 Cash
Postage stamps supplies 10,000
600,000 cash
Treasury bonds NCA 500,000
Value added tax account 1,500,000 cash
What amount should be reported as unrestricted cash on December 31, 2022?
a. 9,360,000
b. 8,900,000
0
c. 8,860,000
d. 7,360,000
9. On December 1, 2022, an entity established a petty cash fund of P40,000. On December 31, 2022, the petty
ice
=
cash fund was examined and revealed expenses amounting to P37,000. In addition, there was cash amounting
to P4,000. What entry should be made on December 31, 2022 to record the replenishment of petty cash fund?
a. Debit petty cash and credit cash P37,000 Van
.EU/Pj,pgTth37k
Exp 37000
b. Debit expenses and credit cash P37,000 CIB
cash outer 1k
.

T.com#
0
c. Debit expenses P37,000 and credit cash P36,000, credit cash short or over P1,000 40€
d. Debit expenses P37,000 and credit petty cash P36,000 and credit cash short or over P1,000 Deposit
1k in Bank
overage
10. An entity provided the following information on December 31:
PROOF Credit memo for November recorded in December 600,000
OF
Credit memo for December not yet recorded 800,000
Deposit in transit December 31 1,500,000
cnidt -•
Erroneous bank charge in December corrected by bank in December 200,000

samamam±↳•
Dit =
Erroneous receipt by the entity in December not corrected until the following year 100,000
Total book receipts for December 8,500,000
not yet
Total bank credits in December 8,000,000
What amount should be reported as deposit in transit on November 30? Dit 11130 700k

#tpndEmousÑ¥Éb
a. 600,000 current period error
.
Receipts £5M -600k 78M

↑
•
over Book look
±
-

b. 500,000 corrected in ATE _

Receipts
over corrected
8M -800k
(7M)
c. 700,000 Erroneous Receipt Bank -200k

d. 900,000 ASE -
± Dit 12131 75M

11. An entity provided the following information for October and November:
0C Checks and charges recorded by bank in November, including a November service
- - -

charge of P5,000 and NSF customer check of P20,000 Current Period Debit Memos
_
550,000
Service charge made by bank in October and recorded by depositor in November -
10,000
but
Total credits to cash in all journals during November 620,000
if recorded
Customer NSF check returned in October and redeposited in November but no entry
made by depositor in either October or November
-

'#
.
part40,000 ←
Outstanding checks on October 31 that cleared in November 230,000
What amount should be reported as outstanding checks on November 30?
a. 275,000 230k
0C Oct 31 .

b. 300,000
Dish 670k-10k 610k
c. 315,000
.

Books
d. 290,000 Dibb .
550h -5k ( 525k )
Bank -
20k

0C NOV 30 . 315000
 Page 4

12. From inception of operations, an entity carried no allowance for doubtful accounts. Uncollectible accounts were
=
-

expensed as written off and recoveries were credited to income as collected. During 2022, management
AR - _

recognized that the accounting policy with respect to doubtful accounts was not correct and determined that an
Direct allowance for doubtful accounts was necessary. A policy was established to maintain an allowance for doubtful
#
method accounts based on historical bad debt loss percentage applied to year-end accounts receivable. The historical bad
-

↓ debt loss percentage is to be recomputed each year based on all available past years up to a maximum of five
- -
Allowance years.
Method
-

Year Credit sales Writeoffs Recoveries

2018 1,500,000 15,000 0
2019
2020
2021
2,250,000
2,950,000
3,300,000
from
38,000
52,000
65,000
170k
2,700 wk
2,500
4,800
f. )
2022 4,000,000 83,000 5,000
The entity reported accounts receivable of P1,250,000 on December 31, 2021 and P2,000,000 on December 31,
2022. What amount should be reported as doubtful accounts expense for 2022?
-

wpff£k#aohy
a. 97,000 %wss=w/off
%Ñ=t6%
recoveries
-
'
= 2'
b. 78,000 credit sales

".÷÷
c. 83,000
0
d. 92,000 =2t3¥m=k7% '
22

13. An entity used the net price method of accounting for cash discounts. In one of its transactions on December
- - -

Net 26, 2022, the entity sold merchandise with a list price of P1,000,000 to a client who was given a trade discount -

=
_
seller
price of 20%, 10% and 5%. Credit terms were 4/10, n/30. The goods were shipped FOB destination, freight collect.buyer
_
method Total freight charge paid by the client was P25,000. On December 27, 2022, the client returned damaged
-

.is?-1MXi80X.9OX.95=
goods originally billed at P100,000. What is the net realizable value of the accounts receivable on December
=
31, 2022?
684000 Invoice Price
a. 559,000 ( 100000 ) sales Return
b. 584,000 584000 Gross
①
c. 535,640 ✗ -96
d. 560,640 560640 Net

freight ( 25000 ) /535640 NRV

14. An entity provided the following information relating to current operations:

Accounts receivable, January 1 4,000,000 Inventory, January 1 4,800,000
Accounts receivable collected 8,400,000 Inventory, December 31 4,400,000
Cash sales
Gross margin on sales
2,000,000
4,200,000
Purchases
cos
(&4÷8,000,000

What is the balance of accounts receivable on December 31?

- -
GM 4.2M

a. 8,200,000
◦
4mtt-f.cm
b. 6,200,000
c. 2,000,000
d. 4,200,000
10.6M

←
credit ,es%%_m
15. Security Bank granted a 10-year loan to borrower in the amount of P1,500,000 with stated interest rate of 6%.
Payments are due monthly and are computed to be P16,650. The bank incurred P40,000 direct loan origination
_

LOAN - _

cost and P20,000 of indirect loan origination cost. The bank charged the borrower a 4-point nonrefundable
REC
loan origination fee. -pñipa
.

1. What is the carrying amount of the - loan receivable to be reported initially by Security Bank?
a. 1,440,000 Principal 1.5m
-BAʰcash 40k
40k
①b. 1,480,000

""""
Direct orig Cost .40k
unearned "5M 1440k 20k
Admin EXP
c. 1,500,000
46401¥41
✗
orig Fee
.
.

UR 60k 20k
cash
d. 1,550,000 CV

2. What is the carrying amount of the loan payable to be reported initially by the borrower?
- _

a. 1,500,000
Principal 1.5M LOAN RECEIVABLE @ FV + Txn Cost
0
-

b. 1,440,000
c. 1,560,000 origination Fee Indirect Expense
origination cost - :

d. 1,590,000 CV
Direct Txncost
_
:

BORROWER : capitalized
cash 1440k
Origination Fees charge to BORROWER
-

Disc LP 60k
to origination cost
.
•
recover
1.5M
Loans Pay .
 Page 5

16. An entity used the perpetual method to record inventory transactions for the current year.
INVTY Inventory 1,900,000
Sales 6,500,000
Sales return 150,000
Cost of goods sold 4,600,000
if NORMAL losses COGS
Inventory losses if silent 200,000
-

ABNORMAL
LOSS : In the latter part of the year, the entity recorded a P150,000 credit sale of goods costing P100,000. These
-

separately goods were sold on FOB destination terms and were in transit at year-end. The goods were--
-

included in the
part of physical count. The inventory at year-end determined=
-

by physical count had a cost of P2,000,000 and a net

-

-
"" "" - -

realizable value of P1,700,000. Any inventory writedown is not yet recorded. What amount should be
_

°%°ⁿᵈᵈÉ
reported as cost of goods sold for the current year? "" "
46M NRV ( 1.7M)
a. 5,100,000
b. 4,800,000 COGS , credit sales ( 100k) wDownÑk
Invty 300k
c. 4,500,000 . WDOWN

① thirty
520¥
loss
d. 5,000,000 .

COGS , adj .

17. An entity reported accounts payable on December 31, 2022 at P900,000 before any necessary year-end
adjustments relating to the following:
Goods were in transit from a vendor on December 31, 2022. The invoice cost was P50,000 and the goods
buyer were shipped FOB shipping point on December 29, 2022. The goods were received on January 4, 2023.
- -

Goods shipped FOB shipping point on December 20, 2022 from a vendor were lost in transit. The invoice
buyer cost was P25,000. On January 5, 2023, the entity filed a P25,000 claim against the common carrier.
Goods shipped FOB destination on December 21, 2022 from a vendor were received on January 6, 2023.
buyer The invoice cost was P15,000.
What amount should be reported as accounts payable on December 31, 2022?
a. 925,000
unadjo 900k
b. 940,000 FOBSP JOK
c. 950,000

*intratk
"
0 d. 975,000
adj ¥ .

18. During a move to a new location, the inventory records of an entity were misplaced. The bookkeeper had been
able to gather some data for the July purchases.
Units Unit cost Total cost
July 5 10,000 65 650,000
10
15
12,000
15,000
70
60
840,000
900,000 ↑
25 14,000 55 770,000
"
On July 31, 17,000 units were on hand. The sales for July amounted to P6,000,000 or 60,000 units at P100
per unit at 40% gross profit. The entity used= a perpetual FIFO inventory costing. What amount was reported
as cost of inventory on July 1?
BI 1390k
a. 1,390,000
%%%
"

↑
"

b. 2,400,000 TGAS 4550k

-141<+55 770k =

c. 900,000 Ak -
zkxuo -180k
-

d. 760,000 COS 3.6M Tok

19. On July 1, 2022, Loveluck Company, a manufacturer of office furniture, supplied goods to Kaye Company
for P6,000,000 on condition that this amount is paid in full on July 1, 2023. Kaye Company had earlier rejected
-

an alternative offer from Loveluck Company whereby it could have bought the same goods by paying cash of
-

P5,400,000 on July 1, 2022. What amount should Loveluck Company recognize as sales revenue on July 1,
2022 and interest income for 2022 respectively? sales
cash basis ( sales Rev )F
a. 5,400,000 and 600,000 5.4M .

>
Diff :

b. 6,000,000 and
c. 5,400,000 and 300,000
0 Interest 600k£
↓
6M deferred basis
*
INTEREST

d. 6,000,000 and 600,000

✗
6/12
mt.me -300k .

2022
CPAVE Page 6
CASH SURRENDER VALUE

☆ 20. An entity insured the life of its president for P6,000,000. The entity is the beneficiary of the ordinary insurance

÷+i÷¥
=
policy. The premium is P400,000. The policy is dated January 1, 2018. The cash surrender values on
December 31, 2021 and 2022 are P120,000 and P160,000, respectively. The entity follows the calendar year
-

=
as its fiscal year. The president died on October 1, 2022 and the policy was collected on December 31, 2022.
No premium was refunded on the insurance settlement. What is the gain on life insurance settlement?
-2022 Expense Method
1431 Cash
a. 5,620,000 6M
111 Exp 400k
①
b. 5,780,000 [items Cash Sur .VaI 150k
. .
.

cash 400k Life his .E✗p .

look
c. 5,740,000 NOT dated
400k ✗ 3112

]•Mᵈ
-

10/31 Cash surrenderVal 30k

Gainor settlement 5750kt 30k
"
"
d. 5,580,000
.

30k been
Life his .Exp .

4012×9/12

.ir#-----------
21. An entity acquired at the beginning of 2022 nontrading equity instrument for P5,000,000 with transaction cost
of P550,000 and irrevocably designated as financial asset at fair value through other comprehensive income.
The fair value was P5,900,000 at December 31 and the transaction cost that would be incurred on the sale of
the investment is estimated at P500,000. What amount of unrealized gain should be recognized in OCI for
¥ 2022? °
FVPL
a. 900,000 12/31/22 FV 5.9M
txnwst Expensed :

b. 350,000 initial cost CA 5M -

outright
c. 400,000 pf-ttxnwbtu.GW.in µ
d. 950,000
22. On January 1, 2022, an entity purchased nontrading equity securities designated irrevocably at fair value
through other comprehensive income. On December 31, 2022, the cost and market value were:
Cost Market
Security One 2,000,000 2,400,000
Security Two 3,000,000 3,500,000
Security Three 5,000,000 4,900,000
On December 31, 2023, the entity sold Security One for P2,500,000. What amount should be recognized
- -
#
directly in retained earnings as a result -
of sale of financial asset in 2023? FVOCI
a. 100,000 credit Gain / loss on Disposal
security One cost 2M
•

b. 100,000 debit SP 2.5M Cr Dr

sc%↑ÉÉ←¥
""m \ 1
°
c. 500,000 credit CA 2- 4M
cum
400k
Retained Earnings -

'

d. 500,000 debit Gain #

"
"
cum.ca/LIdassity
500,000
.
•

23. o
and liabilities at that date were:
- -

iɥ
Carrying amount Fair value
Cash 1,000,000 1,000,000
pÑN Accounts receivable
Inventory FIFO
4,000,000
8,000,000
4,000,000
11,000,000 3M
40%
1.2M

' Land 5,500,000 7,000,000 1. 5M 600k

4M
Plant and equipment net 14,000,000 24,000,000 10M

¥ Liabilities

=%
7,000,000 7,000,000¢0M
The plant and equipment have a 10-year remaining useful life. The inventory was sold during 2022. The - -

investee reported net income of P9,000,000 for 2022 and paid P2,000,000 cash dividend on December 31,
↓ -

2022.
15M
compute 1. What amount should be reported as investment income for 2022? Price paid 16M
GOODWILL FVNA 40M ✗40%
=
-

or
a. 3,000,000 Gain
GAIN ( INV INC ) ☒ .
.

GAIN b. 3,600,000 SINI 9M ✗ 404 3.6M .

Invest .hn ' -2m "

Invest .in Assoc IM
c. 2,000,000 pmort.uvynupy.4.am)
.

I -2M
lnv.in Assoc .

1M
Amort PPE 4m40 lnvinc

INVEST INC -14¥

d. 2,500,000
.

. -

. .

2. What is the carrying amount of the investment in associate on December 31, 2022?
0 investmeÉÉQuM METHOD
- _

a. 17,200,000
b. 18,000,000 Price Paid 15M Amort Uvtnvty
1.2M
- .
.

c. 17,800,000 Gain 1M Amort PPE cash 800k

400k
.

d. 16,200,000 D.iv. Assoc 401 ✗ 2M Invest .in Assoc 800k -

.

SINI 3.6M 800k F.

.

CA 12/31/22 17.2M
 do NOT consider :
Residual
:
✗ dlpibelowpu
value
✓
DOUBLE DECLINING CA X DD %
METHOD
=
Page 7
1¥
24. On January 1, 2022, an entity purchased a large quantity of personal computers. The cost of these computers
was P6,000,000. On the date of purchase, the management estimated that the computers would last
""
approximately 4 years and would have a residual value of P600,000. The entity used the double declining
balance method. During January 2023, the management realized that technological advancements had made
the computers virtually obsolete and that they would have to be replaced. The residual value did not change.
Change in Management proposed changing the remaining life of the computers to 2 years. What amount should be
Acctg.

Estimate reported as depreciation for 2023?

-

prospectivelya. 3,000,000
AD 12/31/22
C) b. 2,400,000 2/4=501 6M (
3M )
✗
✗ beyond
.

c. 1,500,000 CA 1/1/23 % 3M Deep RV

= .

> CA 12/31/23
d. 1,200,000
¥¥epJ
25. At the beginning of the current year, an entity purchased two machines for P1,000,000 each. The machines
- -

R&D were put into use immediately. Machine A has useful life 5 years and can be used only in one research project.
Machine B will be used for 2 years on a research and development project and then used by the production
"""" division for an additional 8 years. The entity used the straight line method of depreciation. What amount

_
should be recognized as research and development expense for the current year?
a. 2,000,000 machine A / ooo ooo

b. 1,500,000 BIM / to I
,%O÷
machine ✗ =

c.
0 1,100,000 R&D Exp
.

d. 1,200,000
26. On January 1, 2022, an entity purchased a machine for P5,000,000. The entity paid shipping expenses P50,000

estimated residual =
as well as installation cost of P120,000. The machine was estimated to have useful life of 10 years, an
- value of P300,000 and the straight line method is used. In January 2023, additions costing
P360,000 were made to the machine in order to comply with pollution control ordinances. These additions
¥:* .

neither prolonged the life of the machine nor did they have any residual value. What amount should be

www.3ook:48704/044g8g7goo0#
recorded as depreciation for 2023? µ , ,m , , , , ,,
g. µ ,
a. 557,000 AD 12131 /
b. 517,000 CA 1/1/23
c. 487,000 9mi Dep
Additions
s?%É Look -4743k
.

①
d. 527,000 1/1/23 9=527000
-

CA ÷

27. An entity commenced construction of a building on March 1, 2022. The construction was completed on

µµuµxPi
-

BORROWING #
September 1, 2022. The cost of the building P30,000,000 was paid in full to the contractor on March 1, 2022.
-

⊖
-

cost The entity had outstanding during 2022 P16,000,000 note payable bearing interest at
-
- -
10% and P20,000,000
- _

note payable bearing interest at ⊖ 5.5%. None of the borrowings were specified for the construction of the
General building. What amount of interest should be capitalized for 2022?
_ - -

GENERAL SPECIFIC
Borrowing a. 1,125,000 10% Note 16M 1- 6M
,

watxp Interest Capitalized .

= __

31, 30m ✗ % -30m ✗ 7.51=22504 .% in

b. 2,250,000 Cap
.

✗
5.5% Note 20M t.IM ✗ 6/12 Full

¥Én!¥nt
↳
c. 2,700,000 ANNUAL -36m 77M interest 2022 -1125000
.

d. 1,350,000 CAP RATE

.

7.5% =

28. An entity had outstanding during 2022 8% specific construction loan P5,000,000 and 10% general purpose
General loan P20,000,000. The entity =
_
began the construction of a building on January 1, 2022 and the building was _

& completed on December 31, 2022. The expenditures during 2022 were January 1, P3,000,000, July 1 -

=
-

specific = P6,000,000 and November 1 P9,000,000.

-

1. What amount should be reported as total cost of the building on December 31, 2022? -

a. 18,000,000 EXP + CAP INT TOTAL COST

.
WA Exp 5134GB 7 -5M
. =
.

b. 18,400,000 2112 specific B-

]
'
117 3m ✗ 3M =

①c. 18,650,000 7/1 6M ✗ 412 3M

waE×psB WAEXP GB
= '

d. 18,750,000 1111 ✗ 412=1

.FM/7.g-m&B Cap %
× .

2. What amount should be reported as interest expense for 2022? CAP.INT -613 250k _
.

-
a. 2,000,000 CAP INT SB 400k 5MX8% .
.
-

b. 2,400,000 ACTUAL INT -613 .

-

20m ✗ 10%
2m
T.CAP.INT 650k
c. 1,350,000
EXP t 18M
0d. 1,750,000
%}o
.

CAP .INT -613 .

INTEXP
'
22
T.WS/- ¥0k
 Page 8

29. During the current year, an entity is a defendant in a lawsuit disputing the validity of copyright held by the
PROVISION entity. On December 31, 2022, the entity determined that the plaintiff would probably be successful against
=
the entity for an estimated amount of P2,000,000. Appropriately, a P2,000,000 loss was accrued by a charge
_

to income for 2022. On December 31, 2023, the entity and plaintiff agreed to a settlement providing for cash
payment of P1,250,000 by the entity and transfer of the copyright to plaintiff. The carrying amount of the
copyright was P250,000. What would be the effect of the settlement of the copyrig
income before tax in 2023?
a. 750,000 increase 12/31/23 Estohab 2M
12/31/22 Loss
'

2M 1250k
cash
b. 750,000 decrease ESA Liat 2M
copyright 250k
-
.

①c. 500,000 increase Gain 500k ↑

d. 250,000 decrease

30. An entity leased equipment to a lessee on January 1, 2022 for an eight-year period. Equal payments under the
-
LEASES lease are P500,000 and are # due on January 1 of each year. The= -
first payment was made -
on January 1, 2022.
=
The selling price of the equipment is P2,900,000 and the carrying amount is P2,000,000. The lease is
- -

appropriately accounted for as a- sales type lease. The lessor incurred an initial direct cost of P100,000. The
present value of the lease payments at an implicit interest rate D
of 12% is P2,780,000.=
-

1. What amount should be reported as gross profit for 2022? LESSOR FV Asset
/
sales / SPLIT¥27801T
-

a. 900,000 sales : LOWER -

pv of
b. 800,000
÷
COS 2Mt look min.LT
c. 780,000 GP

gd. 680,000
2. What amount should be reported as interest revenue for 2022?
a. 333,600
b. 348,000
c. 273,600
2780k -500k
É2ÉA Xl2%-
'
1/1/22

Interest Revenue 22 273600

d. 288,000

31. On December 31, 2022, an entity leased a machine for a five-year period. Equal annual payments under the

*
lease are P1,050,000 including P50,000 annual executory cost and are due on December 31 of each year. The
first payment was made on December 31, 2022, and the second payment was made on December 31, 2023.
→
-

The five lease payments are discounted at 10% over the lease term. The present value of minimum lease

fd
payments at the inception of the lease and before the first annual payment was P4,170,000. On December 31,
2022, what amount should be reported as current lease liability? wlinlgr.afkrr.to . .

a. 1,000,000 12/31/22 4170k -1M =

317012×1.10 -1mi 2487000 12/31/23
→ NCL
b. 1,050,000 12/31/22 Adj Amort Table
.
-

c. 683,000 :*. *.
d. 738,000

32. On January 1, 2022, an entity entered into an 8-year lease of a floor of a building with useful life of 15 years
- -

with the following terms:

Annual rental for the first three years payable at the end of each year 300,000
Annual rental for the next five years payable at the end of each year 400,000
Implicit interest rate 10%
PV of an ordinary annuity of 1 at 10% for three periods 2.49
PV of an ordinary annuity of 1 at 10% for five periods 3.79
PV of 1 at 10% for three periods 0.75

→
The lease provides for neither a transfer of title to the lessee nor a purchase option. What amount should be
=
reported as lease liability on December 31, 2022?
-

a. 1,516,000 300k ✗ 2.49=747000 747k

b. 1,137,000 y , -43
400k ✗ 379 =
1516000×0.75 =
1137k
c. 1,884,000 yy.gg
-1884k
◦
d. 1,772,400
✗ 1.10

End Y?÷oo