HOLY NAME UNIVERSITY

COLLEGE OF BUSINESS AND ACCOUNTANCY

ACCTG. 105 – INTERMEDIATE ACCOUNTING PART 2

MIDTERM EXAMINATION

Prof. Leomar B. Virador, CPA, MSA-MA, CMITAP

October 22, 2021

Part 1. Multiple Choice (30 marks). Write only the letter of your best choice.

1. If an entity purchased a lot and an old building and demolished the old building to make room for
the construction of a new building, the proper accounting treatment of the fair value of the old
building would depend on
a. The significance of the cost allocated to the old building
b. The length of time for which the old building was held prior to demolition
c. The contemplated future of the old building
d. The intention of management when the new building was constructed

2. An entity purchased land to be used as an investment property. Timber was cut from the site so
the development of the land could begin. The proceeds from the sale of the timber should be
a. Recognized as other income
b. Credited to retained earnings
c. Deducted from the cost of land
d. Added to the cost of the land

3. Which two of the following statements are correct per PAS 16 Property, plant and equipment?
A Assets are depreciated even if their fair value exceeds their carrying amount.
B Land and buildings are accounted for separately, even when acquired together.
C A non-current asset acquired as the result of an exchange of assets is not recognized
D A gain on disposal of a non-current asset is classified as revenue
a. A and C
b. A and B
c. A and D
d. B and D

4. For a non-monetary exchange of plant assets, accounting recognition should not be given to:
a. a loss when the exchange has no commercial substance
b. a gain when the exchange has commercial substance
c. a loss when the exchange has commercial substance
d. a gain when the exchange has no commercial substance

5. If there is a change from the sum of years digits method to the straight-line method of
depreciation
a. The accumulated depreciation balance is not adjusted, but the remaining book value is
allocated over the original life using the straight line method
b. The accumulated depreciation balance is not adjusted, but the remaining book value is
allocated over the remaining life using the straight line method
c. The accumulated depreciation is adjusted to its appropriate balance through net income
based on the straight line method
d. The accumulated depreciation is adjusted to its appropriate balance through retained
earnings based on the straight line method

ACCTG 105 MIDTERM EXAMINATION 1

6. What is the measurement basis of an asset that is acquired in non-monetary exchange?
a. With commercial substance (Carrying amount of asset received);
With no commercial substance (Fair value of asset received)
b. With commercial substance (Fair value of asset given up);
With no commercial substance (Fair value of asset given up)
c. With commercial substance (Fair value of asset given up);
With no commercial substance (Carrying amount of asset given up)
d. With commercial substance (Carrying amount of asset given up);
With no commercial substance (Carrying amount of asset received)

7. According to PAS 16, Property, plant and equipment includes all of the following, except
a. Property used for extraction of minerals, oil, or natural gas
b. Biological assets related to agricultural activity and mineral rights
c. Property for rental purposes and administrative purposes
d. Property used in production or supply of goods and services

8. The straight-line method of depreciation is not appropriate for

a. Equipment on which the amount of maintenance and repairs increase substantially with age.
b. Equipment that is used consistently every period.
c. Equipment with a useful life that is not affected by the amount of use.
d. A company that is neither expanding nor contracting its investments in equipment because it
is replacing equipment as the equipment is required.

9. According to PAS 36 Impairment of Assets, the recoverable amount of an asset

a. is determined only if there are indications that the asset is impaired.
b. is determined at least annually.
c. need not be determined if there are no indications for impairment, except for intangible assets
with an indefinite useful life, intangible assets not yet available for use, and goodwill acquired
in a business combination which are required to be tested for impairment at least annually.
d. a and c

10. It is the present value of estimated future cash flows expected to arise from the continuing use of
an asset (or CGU) and from its disposal at the end of its useful life.
a. Use in value
b. Fair value less costs to sell
c. Recoverable amount
d. Value in use

11. The gain on impairment loss reversal of an asset which is recognized in profit or loss is computed
as
a. the difference between the recoverable amount on date of reversal and the carrying amount
on date of reversal
b. the difference between the recoverable amount on date of reversal and carrying amount of the
asset had no impairment loss been recognized previously
c. the difference between the carrying amount of the asset had no impairment loss been
recognized previously and the carrying amount of the asset on the date of reversal
d. the difference between the carrying amount of the asset had no impairment loss been
recognized previously and the recoverable amount on the date of the previous impairment
testing.

ACCTG 105 MIDTERM EXAMINATION 2

12. Which of the following analysis on asset impairment is correct?
(Where: RA = recoverable amount; FVLCD = fair value less costs of disposal; VIU = value
in use; CA = carrying amount; IL = impairment loss; > = greater than; < = less than)
a. if “FVLCD > CA,” then, “IL = 0”
b. if “FVLCD < VIU,” then, IL = > 0”
c. if “FVLCD > VIU,” then, “RA = FVLCD,” now, if “CA > RA,” then “IL = RA – CA”
d. if “FVLCD > VIU,” then, “RA = VIU,” now, if “CA < RA,” then “IL = RA – CA”

13. According to PAS 20 Accounting for Government Grants and Disclosure of Government
Assistance, which of the following is a government grant?
a. Tax benefits
b. Free technical or marketing advice
c. Public improvements that benefit the entire community
d. Provision of guarantees
e. Noninterest-bearing loan from the government

14. According to PAS 20 Accounting for Government Grants and Disclosure of Government
Assistance, which of the following is not a government grant?
a. Aid from the government to compensate for casualty losses already incurred.
b. Cash received from the government to be used to acquire land.
c. Government procurement policy that is responsible for a portion of the entity’s sales.
d. Aid from the government to defray expenses which are yet to be incurred.

15. Which of the following statements best describes residual value?

a. The estimated net amount currently obtainable if the asset were at the end of its useful life
b. The present value of estimated future cash flows expected to arise from the continuing use of
the asset and from its ultimate disposal.
c. The amount at which the asset could be exchanged between knowledgeable, willing parties in
an arm’s length transaction.
d. The amount of cash or cash equivalents that could currently be obtained for cost of an asset
less its residual value.

16. Which of the following expenditures would never qualify as an exploration and evaluation asset?
a. Expenditure for the acquisition of rights to explore
b. Expenditure for explanatory drilling
c. Expenditures related to the development of mineral resource
d. Expenditures for activities in relation to evaluating the technical feasibility and commercial
viability of extracting a mineral resource

17. Does PFRS 6 require an entity to recognize exploration and evaluation expenditure as an asset?
a. Yes, but only to the extent, such expenditure is recoverable in future periods.
b. Yes, but only to the extent the technical feasibility and commercial viability of extracting the
associated mineral resource have been demonstrated.
c. Yes, but only to the extent required by the entity’s accounting policy for recognizing
exploration and evaluation asset.
d. No, such expenditure is always expensed in profit or loss as incurred.

18. An entity is required to consider which of the following in developing accounting policies for
exploration and evaluation activities?
a. The requirements and guidance in Standards and Interpretations dealing with similar and
related issues

ACCTG 105 MIDTERM EXAMINATION 3

 b. The definitions, recognition criteria, and measurement concepts for assets, liabilities, income,
and expenses in the Framework
c. Recent pronouncement of standard-setting bodies, accounting literature, and accepted
industry practices
d. Whether the accounting policy results in information that is relevant and reliable

19. Which of the following most accurately describes the generally accepted accounting principle
regarding the accounting for the costs of drilling dry wells in the oil and gas industry?
a. Only the successful effort method may be used.
b. Only the full cost method may be used.
c. Both the successful effort and full cost methods may be used.
d. Neither the successful effort nor the full cost methods may be used pending the promulgation
by the Securities and Exchange Commission of its own approach to accounting for the costs
of drilling dry wells.

20. Which statement is incorrect concerning the class of property, plant and equipment to be
revalued?
a. When an item of property, plant and equipment is revalued, the entire class of property, plant
and equipment to which that asset belongs should be revalued.
b. A class of property, plant and equipment is a grouping of assets of a similar nature and use in
an enterprise’s operations.
c. The items within a class of property, plant and equipment are revalued selectively.
d. A class of assets may be revalued on a rolling basis provided revaluation of the class of assets
is completed within a short period of time and provided the revaluations are kept up to date.

21. If a depreciation property is revalued at the middle of the current fiscal year, how is the
depreciation expense for the year determined?
a. Depreciation for the entire year is based on cost.
b. Depreciation for the entire year is based on revalued amount.
c. Depreciation for the first half of the year is based on cost and for the second half on the
revalued amount.
d. Depreciation for the year is based on the average of the depreciation based on cost and on
revalued amount of the property.

22. Which of the following shall not be disclosed when items of property, plant and equipment are
stated at revalued amounts?
a. method and significant assumptions applied in estimating the fair value
b. the effective date of revaluation
c. name of the independent valuer involved
d. historical cost and the carrying amount of each class of revalued property, plant, and
equipment

23. A revaluation increase should be recognized as income

a. always.
b. when the revalued asset is non-depreciable.
c. when it reverses a revaluation decrease of the same asset previously recognized as an expense.
d. when the revalued asset is depreciable.

24. Which of the following is true concerning revaluation?

a. Revaluation surplus is the difference between replacement cost and carrying amount.
b. Sound value is not equal to the depreciated replacement cost.
c. Changes in revaluation surplus are recognized in profit or loss.

ACCTG 105 MIDTERM EXAMINATION 4

 d. A revaluation decrease is charged against any previous revaluation surplus, and the balance
is charged to expense.

25. Which of the following statements is incorrect?

a. Frequent or annual revaluations are necessary for items of property, plant equipment with
only significant movements in fair value.
b. A class of assets may be revalued on a rolling basis provided revaluation of the class of assets
is completed within a short period of time and provided the revaluations are kept up to date.
c. When an item of property, plant equipment is revalued, the entire class of property, plant
equipment to which that asset belongs should be revalued.
d. The items within a class of property, plant equipment are revalued simultaneously in order to
avoid selective revaluation of assets and the reporting of amounts which are a mixture of costs
and values at different dates.

26. Which of the following statements best describes the term “impairment loss”?
a. The removal of an asset from an entity’s statement of financial position.
b. The amount by which the carrying amount of an asset exceeds its recoverable amount.
c. The systematic allocation of an asset’s cost less residual value over its useful life.
d. The amount by which the recoverable amount of an asset exceeds its carrying amount.

27. What is the recoverable amount of an asset?

a. Fair value less cost to sell
b. Value in use
c. Fair value less cost to sell or value in use, whichever is higher
d. Fair value less cost to sell or value in use, whichever is lower

28. Which statement is incorrect concerning the recognition and measurement of an impairment loss?
a. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of
the asset should be reduced to its recoverable amount.
b. Impairment loss is the amount by which the carrying amount of an asset exceeds its
recoverable amount.
c. An impairment loss should be recognized as an expense in the income statement immediately.
d. After the recognition of an impairment loss, the depreciation charge for the future periods
should be adjusted to allocate the revised carrying amount, less its residual value, on a
systematic basis over its original useful life.

29. What is the best depreciation method for wasting assets?

a. Straight line method
b. Production method
c. Sum of years’ digit method
d. Declining balance method

30. After recognition, exploration and evaluation assets are accounted for under the
a. Cost model
b. Revaluation model
c. Fair value model
d. a or b

ACCTG 105 MIDTERM EXAMINATION 5

Part 2. Application (70 marks). Show your computations in good form and encircle your final
answer.

Problem 1 (10 marks)

The following transactions occurred during 2020 in relation to Love Company’s property, plant, and
equipment.
a. Lot 1 was acquired for P12,750,000. Love incurred the following expenses in connection with
the acquisition: commission to a real estate broker, P765,000; option paid to the unpurchased
lot, P2,500; and clearing costs, P525,000. During cleaning, Love recovered timber and gravel
and sold for P159,000.

b. Lot 2 with an old building was purchased for P7,500,000. On the purchase date, the fair values
of the land and the building were P4,200,000 and P1,800,000, respectively. Shortly after
acquisition, the old building was demolished at a cost of P516,000. A new building was
constructed to be used as owner-occupied property. The following was incurred:
Construction cost P4,950,000
Excavation fees 570,000
Architectural design fees 165,000
Building permit fee 37,500
Imputed interest on funds specifically used during the
construction (stock financing) 127,500
The building was completed and occupied on December 31, 2020.

c. Lot 3 was acquired for P9,570,000 with the intention of selling it within 12 months from the
date of purchase.

d. During December 2020, Love incurred P1,335,000 to improve leased office space. The related
lease will terminate on December 31, 2022, and is not expected to be renewed.

e. A group of machines was acquired under a royalty agreement that provides payment of
royalties based on units of production for the machines. The invoice price of the machines
was P1,305,000, freight costs were P54,900, installation costs were P26,000, and royalty
payments for 2020 were P226,500.

f. The following are the balances as of December 31, 2019:

Land P 4,350,000
Buildings 13,530,000
Leasehold improvements 9,900,000
Machinery and equipment 13,512,000

Based on the above information, calculate the balances of the following as of December 31, 2020:
31. Land
32. Buildings
33. Leasehold improvements
34. Machinery and equipment
35. Loss, if any

Problem 2 (10 marks)

BFF Company provided you the following transactions pertaining to the different acquisitions of
newly acquired PPE for the year 2019:

ACCTG 105 MIDTERM EXAMINATION 6

A. On January 1, 2019, BFF purchased several office machineries that will be used in the production
of goods at a purchase price of P1,000,000. BFF paid import duties of P10,000 and non-refundable
purchase taxes of P5,000. BFF also incurred a P30,000 installation cost. The company expects
that it will incur a dismantling cost amounting to P132,275 at the end of the 5-year useful life.
The prevailing market interest rate during the transaction date was 12%. The present value factor
of 1 at 12% for 5 periods is 0.567. The present value factor of an ordinary annuity at 12% for 5
periods is 3.605.

B. On May 1, BFF issued 300,000 shares for factory machinery having a fair value of P5,000,000
on the date of acquisition. The par value per share is P10, and the fair value per share on December
31, 2019 is P15.

C. BFF owns a tract of land, which it purchased in 2016 for P1,000,000. The land is held as a plant
site and has a fair market value of P1,500,000 on July 1, 2019. On this date, BFF exchanged its
land for a new land and paid P500,000 cash. The expected cash flows from the asset received
differ from the cash flows expected from the asset transferred, and the difference is significant
relative to the fair value of the land given up.

D. Various Furniture and Fixtures were acquired at the beginning of 2019 from a single supplier with
the following terms of payments:
Down payment P1,300,000
3-year non-interest bearing note 2,400,000
10,000 shares at par P50 300,000
It was ascertained that the total cash price of the various furniture and fixtures was at P3,500,000.

E. BFF constructed its own factory building. The company had a P2,000,000 one-year 12% loan
specifically obtained to finance the asset construction. The construction began on August 1, 2019
and the building was completed on December 31, 2019. Expenditures on the building were made
as follows:
August 1 400,000 November 1 1,000,000
September 30 1,000,000 December 31 400,000

36. How much is the total initial cost of machinery?

37. How much is the initial cost of the new land?
38. How much is the initial cost of the furniture and fixtures?
39. How much is the initial cost of the self-constructed building?
40. How much is the total initial cost of the PPE acquired and constructed?

Problem 3 (10 marks)

JARAN CO. started operations on September 1, 2014. Jaran’s accounts at December 31, 2017
included the following balances:
Machinery (at cost) P 910,000
Accumulated depreciation – machinery 482,000
Vehicles (at cost; purchased November 21, 2016) 468,000
Accumulated depreciation – vehicles 196,000
Land (at cost; purchased October 25, 2014) 810,000
Building (at cost; purchased October 25, 2014) 1,857,200
Accumulated depreciation – building 286,140

ACCTG 105 MIDTERM EXAMINATION 7

Details of machines owned at December 31, 2017, are as follows:

Machine Purchase Date Cost Useful Life Residual Value

1 10/07/2014 P430,000 5 years P25,000
2 2/04/2015 P480,000 6 years P30,000

Additional information:
• Jaran calculates depreciation to the nearest month and balances the records at month-end. The
reporting date is December 31.
• Jaran uses straight-line depreciation for all depreciable assets except vehicles, which are
depreciated on the diminishing balance at 40% per annum.
• The vehicle’s account balance reflects the total paid for the two identical delivery vehicles,
each of which cost P234,000.
• On acquiring the land and building, Jaran estimated the building’s useful life and residual
value at 20 years and P50,000, respectively.

The following transactions occurred from January 1, 2018:

2018
Jan. 03 Bought a new machine (Machine 3) for a cash price of P570,000. Freight changes of
P4,420 and installation costs of P17,580 were paid in cash. The useful life and residual
value were estimated at five years and P40,000, respectively.

June 22 Bought a second-hand vehicle for P152,000 cash. Repainting costs of P6,550 and four
new tires costing P3,450 were paid for in cash.

Aug. 28 Exchanged Machine 1 for office furniture that had a fair value of P125,000 at the date
of exchange. The fair value of Machine 1 at the date of exchange was P115,000. The
office furniture originally cost P360,000 and, to the date of exchange, had been
depreciated by P241,000 in the previous owner’s books. Jaran estimated the office
furniture’s useful life and residual value at eight years and P5,400, respectively.

Dec. 31 Recorded depreciations.

2019
April 30 Paid for repairs and maintenance on the machinery at a cash cost of P9,280.

May 25 Sold one of the vehicles bought on November 21, 2016, for P66,000 cash.

June 26 Installed a fence around the property at a cash cost of P55,000. The fence has an
estimated useful life of 10 years and zero residual value. (Debit at cost to a land
improvements asset account.)

Dec. 31 Recorded depreciations.

2020
Jan. 05 Overhauled Machine 2 at a cash cost of P120,000, after which Jaran estimated its
remaining useful life at one additional year and revised its residual value to P50,000.

June 20 Traded in the remaining vehicle bought on November 21, 2016, for a new vehicle. A
trade-in allowance of P37,000 was received, and P233,000 was paid in cash.

ACCTG 105 MIDTERM EXAMINATION 8

Oct. 04 Scrapped the vehicle bought on June 22, 2018, as it had been so badly damaged in a
traffic accident that it was not worthwhile repairing it.

Dec. 31 Recorded depreciations.

Based on the above information, calculate the following:

41. Total depreciation expense for 2018

42. Total depreciation expense for 2019
43. Total depreciation expense for 2020
44. The gain (loss) on the sale of the vehicle on May 25, 2019
45. Total carrying amount of the property, plant, and equipment in the statement of financial position
as of December 31, 2020

Problem 4 (6 marks)

Situation 1: On January 1, 2018, an entity purchased a machine for P5,400,000. The entity received
a government grant of P400,000 toward this capital cost. The machine is to be depreciated using the
SYD method over 5 years. The estimated residual value is P200,000. The accounting policy is to treat
the government grant as a reduction in the cost of the asset. On January 1, 2020, the entity repaid the
grant due to noncompliance with conditions.

Situation 2: The third year of a construction project of an entity began with a P3,000,000 balance in
construction progress. Included in that figure is P500,000 of interest capitalized in the first two years.
Construction expenditures during the third year were P10,000,000 which were incurred evenly
throughout the entire year. The entity had P30,000,000 in interest bearing debt outstanding in the
third year at an interest rate of 9%.

46. What is the depreciation of the machinery for 2020?

47. Deferred grant income as of the date of grant, January 1, 2018.
48. How much is the capitalizable interest for the third year of the construction project?

Problem 5 (6 marks)

On April 1, 2021, ABC Company entered into an agreement with a contractor to construct a building
worth P20,000,000. ABC is required to make five payments in 2021 with the last payment scheduled
on the date of completion, which is March 31, 2022. The entity made the following payments:
April 1, 2021 P2,000,000
June 30, 2021 4,000,000
Sept 30, 2021 6,100,000
Dec 31, 2021 4,400,000
March 31, 2022 3,500,000

The entity had the following outstanding borrowings on March 31, 2022:
• P8,500,000, 12% 4-year note dated April 1, 2021, with interest compounded quarterly. Both
principal and interest are due on March 31, 2025. This borrowing is related specifically to the
project.
• P6,000,000, 10% 10-year note dated March 31, 2021. Interest is payable annually. This
borrowing was originally borrowed specifically for the project; however, due to cash shortage,
a portion of the amount was used for administrative purposes.
• P7,000,000, 12% 5-year note dated March 31, 2021. Interest is payable annually.

ACCTG 105 MIDTERM EXAMINATION 9

49. What total amount of interest should be capitalized as the cost of the building on December 31,
2021?
50. What total amount of interest should be capitalized as the cost of the building for the year 2022?
51. What is the initial cost of the building upon completion?

Problem 6 (4 marks)

XYZ Corporation bought a machine on January 1, 2020. In purchasing the machine, the company
paid P50,000 cash and signed a 2-year interest-bearing note for P100,000. The interest of the note is
10%, payable annually. The estimated useful life of the machine is five years, after which time the
residual value is expected to be P15,000.
On December 31, 2020, a decision was made to change the depreciation method from SYD to the
double declining balance method. Moreover, the management determined that the original useful life
of the asset was 9 years. The residual value remained unchanged.

52. How much is the depreciation expense for the year ending December 31, 2021?
53. How much is the carrying amount of the machinery as of December 31, 2022?

Problem 7 (8 marks)

In 2013, GREEN CORPORATION acquired a silver mine in Benguet. Because the mine is located
deep in the Benguet mountains, Green was able to acquire the mine for the low price of P50,000.
Geologists estimated that 4 million tons of silver ore could be removed from the mine refining. In
2014, Green constructed a road to the silver mine costing P5,000,000. Improvements to the mine
made in 2014 cost P750,000. Because of the improvements to the mine and the surrounding land, it
is estimated that the mine can be sold for P600,000 when the mining activities are complete. Also,
the discounted restoration cost is P800,000. The present value interest factor is 6.1446. During 2015,
five buildings were constructed near the mine site to house the mine workers and their families. The
total cost of the five buildings was P2,250,000. The estimated residual value is P250,000.

During 2016, the first year of operations, only 500,000 tons of silver ore were removed from the mine.
However, in 2017, workers mined 1 million tons of silver. During the same year, geologists
discovered that the mine contained 3 million tons of silver ore in addition to the original 4 million
tons. Improvements of P275,000 were made to the mine early in 2017 to facilitate the removal of the
additional silver. Early in 2017, an additional building was constructed at the cost of P850,000 to
house the additional workers needed to excavate the added silver. This building is not expected to
have any residual value. In 2018, 2.5 million tons of silver were mined, and costs of P1,100,000 were
incurred at the beginning of the year for improvements to the mine.

Based on the above, calculate the following:

54. Depletion for 2017
55. Depletable amount of the wasting asset as of December 31, 2017
56. Depreciation expense for 2017
57. Carrying amount of the building as of December 31, 2017

Problem 8 (4 marks)

On December 31, 2020, Hong Co. identified that its building with a carrying amount of P2,400,000
had been impaired. In estimating the recoverable amount, Hong has determined that the fair value
less costs of disposal of the asset is P1,600,000.

In estimating the value in use, Hong determined the following:

ACCTG 105 MIDTERM EXAMINATION 10

 Year Future cash inflows Future cash outflows
2020 1,200,000 400,000
2021 1,120,000 400,000
2022 1,040,000 320,000

Additional information:
• Each year’s estimated future cash flows include P40,000 representing cash outflows from future
restructuring not yet committed and P20,000 representing cash outflows on planned improvement
and enhancement of the asset.
• Not included in the estimated future cash flows are costs of day-to-day servicing of the asset
amounting to P8,000 per year.
• The discount rate is 10%. (use 6 decimal places for PVIF)

58. How much is the recoverable amount?

59. How much is the impairment loss?

Problem 9 (4 marks)

On January 1, 2020, Khel Company acquired a factory equipment at a cost of P150,000. The
equipment is being depreciated using the straight-line method over its projected useful life of 10
years. On December 31, 2021, a determination was made that the assets’ recoverable amount was
only P96,000. On December 31, 2022, the asset’s recoverable amount was determined to be
P110,000, and management believes that the impairment loss previously recognized should be
reversed.

60. What is the carrying value of the asset as of December 31, 2022?
61. How much impairment recovery should be reported in the 2022 income statement?

Problem 10 (8 marks)

The statement of financial position as of December 31, 2019 of Bea Company shows the following
information:
Equipment (at cost) P1,500,000
Accumulated depreciation (450,000)
Carrying amount P1,050,000

The equipment consisted of Machine 1 and Machine 2. As of December 31, 2019, Machine 1 had a
book value of P540,000 (cost, P900,000), while Machine 2 was carried at P510,000 (cost, P600,000).
Bea depreciated its equipment over a 10-year period.

On June 30, 2020, Bea decided to change the basis of measuring the equipment from the cost model
to the revaluation model. Machine 1 was revalued to P540,000 with an expected useful life of six
years, and Machine 2 was revalued to P465,000 with an expected useful life of five years.

On December 31, 2021, Machine 1 was assessed to have a fair value of P489,000 with an expected
useful life of five years, while Machine 2’s fair value was P409,500 with an expected useful life of
four years.

62. What amount of revaluation increase (decrease) should be recognized for Machine 1 on June 30,
2020?
63. What amount of revaluation increase (decrease) should be recognized for Machine 2 on June 30,
2020?

ACCTG 105 MIDTERM EXAMINATION 11

64. What amount of depreciation expense should be reported on Bea’s income statement for the year
ended December 31, 2021?
65. What total amount of revaluation increase (decrease) should be recognized for Machine 1 and 2
on December 31, 2021?

End of Midterm Examination

PERSEVERANCE: Let us not become weary in doing good, for at the proper time, we will
reap a harvest if we do not give up. – Galatians 6:9

ACCTG 105 MIDTERM EXAMINATION 12