Quiz On Accounting

Question 1
Statement 1: Equity financial assets at fair value through profit and loss are no longer required by the standards to be
tested for impairment.
Statement 2: Equity financial assets at fair value through other comprehensive income are to be tested for impairment
since the gains or losses associated with the changes in fair values of these assets are not reported in profit or loss.
Both statements are false.
Only statement 1 is true.
Only statement 2 is trueou Answered
Both statements are true.
Question 2
All of the following are characteristics of trading securities, except
It is derivative that is not designated as an effective hedging instrument.
On initial recognition, it is part of a portfolio of financial assets that are managed together and for which there is
evidence of a recent actual pattern of short-term profit taking.
It is acquired principally for the purpose of selling or repurchasing it in the near term.
It is a derivative that is designated as an effective hedging instrument.
Question 3
Transaction costs that are directly attributable to the acquisition of a financial asset shall be
Capitalized as cost of the financial asset other than financial assets held at amortized cost.
Expensed unless the financial asset is held at amortized cost.
Capitalized as cost of the financial asset.Correct!
Capitalized as cost of the financial asset unless the financial asset is carried at fair value through profit or loss.
Question 4
Equity investments irrevocably accounted for at fair value though other comprehensive income arerrect!
Nontrading investments where an entity has holdings of less than 20%.
Trading investments where an entity has holdings of less than 20%.
Investments where an entity has holdings of more than 50%
Investments where an entity has holdings of between 20% and 50%.
Question 5
Shares received in lieu of cash dividends are recorded as
Income at par value of the shares received.orrect!
Income at fair value of the shares received.
Income at the cash dividend that would have been received.
A memorandum entry stating the receipt of the shares.
Question 6
Cash received in lieu of stock dividends is accounted forCorrect!
As if the stock dividends are received and subsequently sold and a gain or loss is recognized
Return of investment
Dividend income
Question 7
Liquidating dividends are recorded as a credit to
Cash
Share premiumCorrect!
Investment account
Retained earnings
Question 8
What is the effect of a split up?
Increase in the cost of the investment and increase in the number of shares.
Increase in the number of shares and an increase in the cost per share.rect!
Increase in the number of shares and decrease in the cost per share.
Increase in the number of shares and no effect in the cost per shares
Question 9
When are dividends considered earned and are recorded in the journal?
Payment daterect!
Declaration date
Distribution date
Record date
Question 10
An investor uses the equity method to account for its 30% investment. Amortization of the investor’s share of the excess
of fair value over carrying amount of depreciable assets at the date of the purchase shall be reported in the investor’s
income statement as part of
Amortization of goodwill
Reduction in dividend income
Other expensesCorrect!
Equity in earnings of investee
Question 11
When an investor uses the equity method to account for investment in ordinary shares, the investment account will be
increased when the investor recognizes.
A cash dividend received from the investee.
Periodic amortization of the goodwill related to the purchase.
Depreciation related to the excess of market value over carrying amount of the investee’s depreciable assets at the
date of purchase by the investor.orrect!
A proportionate interest in the net income of the investee.
Question 12
How is goodwill arising on the acquisition of an associate dealt with in the financial statements?
It is amortized.
It is tested for impairment individually.
It is written off against profit or loss.rrect!
It is not recognized separately within the carrying value of the investment.
Question 13
The share of an investor in the understatement of an investee's land in an investment in associate shall be "expensed" or
amortized ct
! fully upon sale of the land by the invested
over the time the investor expects to hold the investment
fully upon sale of the investment
over the remaining useful life of the asset

Question 14
If share rights were accounted for separately and were not exercised by the investor, the entry to record the expiration
of the rights in the books of the investor will involve a
Credit to Share premium
Debit to Retained Earningsrect!
Debit to Loss on Share Rights
Debit to Investment in Equity Securities

Question 15
Which of the following least likely implies that an entity has a significant influence over another entity?
Representation in the Board of Directors
Frequent transactions between the two entities.rrect!
Ownership of 50% of the preference shares of the other entity.
Ownership of 25% of the ordinary shares of the other entity.
Question 16
Rite Company holds 10,000 shares of Leaf Company acquired at a total cost of P1,800,000. Leaf issued rights to subscribe
to new shares at P150 per share in the ratio of one new share for every five rights held. The share has market value of
P190 and the right has market value of P10. The rights are to be accounted for separately. What is the entry to record
the stock rights?
Memorandum entry only.ct!
Dr. Investment in Stock Rights 100,000 Cr. Investment in Equity Securities 100,000
Dr. Investment in Equity Securities 100,000 Cr. Investment in Stock Rights 100,000
Dr. Investment in Equity Securities 100,000 Cr. Gain on Stock Rights 100,000
Question 17
Rite Company holds 10,000 shares of Leaf Company acquired at a total cost of P1,800,000. Leaf issued rights to subscribe
to new shares at P150 per share in the ratio of one new share for every five rights held. The share has market value of
P190 and the right has market value of P10. The rights are to be accounted for separately. What is the entry to record
the acquisition of the new investment though exercise of stock rights
Dr. Investment in Equity Securities 400,000 Cr. Cash 300,000 Cr. Investment in Stock Rights 100,000
Dr. Investment in Equity Securities 300,000 Cr. Cash 200,000 Cr. Investment in Stock Rights 100,000
Dr. Investment in Equity Securities 400,000 Cr. Cash 400,000
Dr. Investment in Equity Securities 300,000 Cr. Cash 300,000

Question 18
XYZ Company has the following transactions during 2020 for its Investment in Equity Securities:
1. Acquired 10,000 ordinary shares from ABC Company at P50 per share.
2. The ABC Company shares were split 2 for 1.
3. Sold 2,000 shares of ABC Company for P30 per share gross of transaction costs of P10,000.
4. Received preference share dividend of 1 for every 3 ordinary shares held. Ordinary shares are selling ex-
dividend at P20 and preference shares are selling at P15 per share.
5. Received 1,500 shares in lieu of cash dividends of P40,000. The shares of ABC on this date sells for P40 per
share.
6. Received P50,000 in lieu of 10% stock dividends. The shares of ABC Company sell for P35 per share on this
date.
What amount of gain or loss shall XYZ recognize on the sale of investment in no. 3?
P0
P20,000 gain
P5,000 lossou Answered
P10,000 gain

Question 19
XYZ Company has the following transactions during 2020 for its Investment in Equity Securities:
1. Acquired 10,000 ordinary shares from ABC Company at P50 per share.
2. The ABC Company shares were split 2 for 1.
3. Sold 2,000 shares of ABC Company for P30 per share gross of transaction costs of P10,000.
4. Received preference share dividend of 1 for every 3 ordinary shares held. Ordinary shares are selling ex-
dividend at P20 and preference shares are selling at P15 per share.
5. Received 1,500 shares in lieu of cash dividends of P40,000. The shares of ABC on this date sells for P40 per
share.
6. Received P50,000 in lieu of 10% stock dividends. The shares of ABC Company sell for P35 per share on this
date.What is the carrying amount of the investment after transaction #4?ou Answered
P257,143
P90,000
P360,000
P450,000

Question 20
Puti Company’s transactions related to investment during 2020 are as follows:
1. Acquired 2,000 ordinary shares of Puraw Company at P20 per share and incurred transaction costs of
P10,000. These shares are to be held for the realization of short-term profits or for trading purposes.
2. Acquired additional 4,000 ordinary shares of Puraw at P30 per share. These shares are to be held for trading
purposes.
3. Acquired 5,000 preference shares from White Company at P40 per share. Puti incurred transaction costs of
P20,000. These shares are to be held at fair value through other comprehensive income.
4. Sold 3,000 shares of Puraw for P25 per share.
5. At year end, the shares of Puraw are selling at P45 per share while the shares of Puti are selling at P30 per
share.
6. Sold 1,000 shares of Puti for P70 per share.
The gain or loss on sale of investment in #4 using FIFO is
P15,000 gain
P5,000 loss
P10,000 lossrrect!
P5,000 gain
Question 21
Puti Company’s transactions related to investment during 2020 are as follows:
1. Acquired 2,000 ordinary shares of Puraw Company at P20 per share and incurred transaction costs of
P10,000. These shares are to be held for the realization of short-term profits or for trading purposes.
1. Acquired additional 4,000 ordinary shares of Puraw at P30 per share. These shares are to be held for trading
purposes.
2. Acquired 5,000 preference shares from White Company at P40 per share. Puti incurred transaction costs of
P20,000. These shares are to be held at fair value through other comprehensive income.
3. Sold 3,000 shares of Puraw for P25 per share.
4. At year end, the shares of Puraw are selling at P45 per share while the shares of Puti are selling at P30 per
share.
The increase or decrease in net income as a result on remeasurement of the investments at fair value at the end or the
year is
P25,000 increase
P25,000 decrease
P45,000 increase
P5,000 decrease
Question 22
On January 1, 2021, Kim Delikado acquired 10,000 shares of Bin Company and 5,000 shares of Yum Company by paying a
basket price of P 520,000 exclusive of transaction costs of P20,000. These investments are to be classified as
investments at fair value through other comprehensive income. On this date, the shares of Bin Company and Yum
Company are both selling for P35 per share. By what amount shall the investment in Bin Company be initially
recognized?
You Answered
P346,667
P360,000
P333,333
P180,000

Question 23
ABC Company acquired 30% of XYZ Company’s voting share capital for P2,000,000 on January 1, 2019. ABC's 30%
interest in XYZ gave ABC the ability to exercise significant influence over XYZ’s operating and financial policies.
During 2019, XYZ earned P800,000 and paid dividends of P500,000. XYZ reported earnings of P1,000,000 for the six
months ended June 30, 2020, and P2,000,000 for the year ended December 31, 2020.
On July 1, 2021, ABC sold half of its investment in XYZ for P1,500,000 cash. On such date, the investment is measured at
fair value through other comprehensive income. XYZ paid dividends of P600,000 on October 1, 2021. The fair value of
the retained investment is P1,600,000 on July 1, 2021 and P1,800,000 on December 31, 2021.
What amount should be recognized as investment income for 2019 from the investment?rrect!
P240,000
P150,000
P500,000
P800,000

Question 24
ABC Company acquired 30% of XYZ Company’s voting share capital for P2,000,000 on January 1, 2019. ABC's 30%
interest in XYZ gave ABC the ability to exercise significant influence over XYZ’s operating and financial policies.
During 2019, XYZ earned P800,000 and paid dividends of P500,000. XYZ reported earnings of P1,000,000 for the six
months ended June 30, 2020, and P2,000,000 for the year ended December 31, 2020.
On July 1, 2021, ABC sold half of its investment in XYZ for P1,500,000 cash. On such date, the investment is measured at
fair value through other comprehensive income. XYZ paid dividends of P600,000 on October 1, 2021. The fair value of
the retained investment is P1,600,000 on July 1, 2021 and P1,800,000 on December 31, 2021.
In the December 31, 2019 statement of financial position, what is the carrying value of the investment?
Correct!
2,090,000
2,240,000
2,000,000
2,300,000

Question 25
On January 1, 2020, ABC acquired 40% of the outstanding ordinary shares of XYZ Company for P1,200,000 giving ABC
significant influence over XYZ. On this date, all of XYZ's assets approximate their fair values except for an equipment with
a remaining useful life of 5 years which is understated by P500,000. The book value of the net assets of XYZ on this date
is P2,000,000. During 2020, XYZ reported net income of P500,000 and paid dividend of P300,000. What amount of
investment income shall ABC company record from this investment?
P200,000
P160,000u Answered
P120,000
P80,000

Quiz 2 Finals: Investment in Bonds, Investment Property, CSV
Question 1
The effective interest rate on bonds is higher than the stated rate when bonds sell
At face value
Below face value
Above face value
At maturity value
Question 2
The fair value option
May be selected as a valuation method at any time during the first two years of ownership.
Must be applied to all debt instruments.
Is applicable only to bond investmentsorrect!
Reports all gains and losses in income.
Question 3
Which of the following statements is true about the effective interest method of amortization?
The effective interest method applied to bond investment is different from that applied to other debt investments.
Amortization of discount decreases from period to period.
The effective interest method applies the effective interest rate to the beginning carrying amount for each interest
period.ou Answered
Amortization of premium decreases from period to period.
Question 4
The contractual agreement between an investor and the bond issuer is contained in a formal document known asrrect!
Bond indenture
Contract of debt
Bond agreement
Bond certificate
Question 5
An investor purchased a bond as a long-term investment on January 1. Annual interest was received on December 31. The
investor’s interest income for the year would be higher if the bond was purchased atect!
A discount
Par
A premium
face
Question 6
If a 5-year bond matures on October 1, 2010 and interest is payable semiannually, the interest dates are most likely dated
January 1 and July 1 rect!

April 1 and October 1
April 30 and October 31
May 1 and November 1
Question 7
What is the treatment of transaction costs related to bond investment carried at amortized cost.rrect!
Added as part of the investment

Expensed outright
Deducted from the investment
Ignored
Question 8
Which of the following is an investment property?
Property being constructed or developed on behalf of third parties.
Property held for future development and subsequent use as owner-occupied property.Correct!
Property that is being constructed and developed as investment property.
Owner-occupied property awaiting disposal.
Question 9
PAS 40 requires that investment property be accounted for using
Cost, fair value or net realizable value model
Cost model or revaluation model.orrect!
Cost model or fair value model
Cost model or net realizable value model
Question 10
Upon the death of an officer, an entity received the proceeds of a life policy held by the entity on the officer. What amount
of gain should be reported?
Proceeds received less cash surrender value less adjustment for unexpired insurance premium
Proceeds received plus cash surrender value
Proceeds receivedou Answered
No gain is recognized on life insurance policies
Question 11
In life insurance policies with cash surrender value, dividends received are treated in accounting as
Addition to life insurance expense
Miscellaneous Income
Addition to cash surrender valueorrect!
Deduction against life insurance expense
Question 12
Which of the following is not an investment property?orrect!
Machinery being leased out to third parties under operating lease
Land held for undetermined future use
Land held for capital appreciation purposes
Building to be leased out to subsidiary under operating lease (assuming parent reports separately from its
subsidiaries)
Question 13
If an entity carries an investment property using the cost model, changes in the fair market value of the investment property shall
beorrect!
Ignored.
Recognized upon transfer of the property to property, plant and equipment
Recorded every year-end
Recorded whenever available

Question 14
If an entity carries an investment property using the fair value model, depreciation charges shall beCorrect!
Ignored.
Recorded at year-end
Recorded only when the investment property is disposed
Computed using straight line method only

Question 15
An increase in the value of cash surrender value during the year shall be recorded as
An addition to life insurance expenseorrect!
A deduction against life insurance expense
An adjustment of retained earnings
A miscellaneous income
Question 16
BBQ Company insured the life its president for P1,000,000, the entity being the beneficiary. The annual premium is P50,000. The
policy is dated January 1, 2015 and carries the following cash surrender value:
End of policy year Cash surrender value
Dec. 31, 2016 -
Dec. 31, 2017 -

Dec. 31, 2018 P45,000
Dec. 31, 2019 P65,000
Dec. 31, 2020 P105,000
The entity follows the calendar year as its accounting period. The president dies on July 1, 2020 and the face of the policy
is collected on July 31, 2017.
How much shall be reported as insurance expense for the calendar year 2018?You Answered
P5,000
P50,000
P35,000
P65,000
Question 17
In 2015, ABC Company availed of P5,000,000 life insurance policy on its CEO, of which ABC Company is the
beneficiary. Information regarding the policy for the year ended December 31, 2020 follows:
Cash surrender value, 1/1/20 – P435,000;
cash surrender value, 12/31/20 – P540,000;
Annual advance premium paid 1/1/20 – P200,000.
During 2020, dividends of P30,000 were received and appropriately recorded. How much should ABC Company report
as life insurance expense for 2020?
P95,000
P65,000
P105,000You Answered
P200,000
Question 18
BBQ Company insured the life its president for P1,000,000, the entity being the beneficiary. The annual premium is
P50,000. The policy is dated January 1, 2015 and carries the following cash surrender value:
End of policy year Cash surrender value
Dec. 31, 2016 -
Dec. 31, 2017 -
Dec. 31, 2018 P45,000
Dec. 31, 2019 P65,000
Dec. 31, 2020 P105,000
The entity follows the calendar year as its accounting period. The president dies on July 1, 2020 and the face of the policy
is collected on July 31, 2017.
What amount of gain on life insurance settlement shall the company recognize on July 1, 2020?
P845,000
P915,000
Answer: P890,000
P895,000
Question 19
ABC Company acquired an investment property for P2,000,000 on January 1, 2019. The purchase price includes directly
attributable costs of P100,000. The property has a useful life of 20 years with no salvage value. The entity used the fair
value model in carrying this investment property. On December 31, 2019, the property has a fair value of P1,800,000.
What is the carrying value of the investment property as of December 31, 2019?
P2,000,000orrect!
P1,800,000
P1,805,000
P1,900,000
Question 20
attributable costs of P100,000. The property has a useful life of 20 years with no salvage value. The entity used the cost
model in carrying this investment property. On December 31, 2019, the property has a fair value of P1,800,000. What is
the carrying value of the investment property as of December 31, 2019?
P2,000,000
P1,805,000
Answer: 1,900,000
Question 21
attributable costs of P100,000. The property has a useful life of 20 years with no salvage value. The entity used the fair
value model in carrying this investment property. On December 31, 2019, the property has a fair value of P1,800,000.
What amount of gain or loss from change in fair value shall the company recognize on December 31, 2019?
P200,000 gainorrect!
P200,000 loss
zero
P100,000 lose
Question 22
On July 1, 2014, Vicar Company purchased P1,000,000 of 8% bonds for P946,000, including accrued interest. The bonds
were purchased to yields 10% interest. The bonds mature on January 1, 2020 and pay interest annually on January 1. The
entity used interest method of amortization. On December 31, 2014, what is the carrying amount of the bonds?
P953,300 You Answered
P960,600
P916,600
P911,300
Question 23
On January 1, 2013, Venus Company purchased 10% bonds with face value of P5,000,000 and yield rate of 8%. The
bonds pay interest annually every December 31. The bonds also mature every December 31 at the rate of P1,000,000. The
following are the PV factors:
PV of 1 at 8% for 5 periods 0.6806
PV of 1 at 8% for 1 period 0.9259
What is the fair value of the bonds on the date of acquitition?
P5,988,900orrect!
P5,251,670
P5,398,500
P5,129,090
Question 24
On January 1, 2019, DDD Co. acquired bonds with face value of P5,000,000. The face rate is 10% payable annually every
December 31. The bonds mature on January 1, 2023. The bond is selling as of this date to yield 12%. The following are
the present value factors:
PV of an ordinary annuity of 1 at 12% for 4 periods 3.0373
PV of 1 in advance at 12% for 4 periods 3.4018
The bonds are selling at the following fair values:
12/31/2019 105
12/31/2020 110
If the bonds are carried at the books of DDD as investment at amortized cost, what is the carrying value of the bonds as of
December 31, 2020?
P5,500,000
P4,696,150Correct!
P4,830,851
P4,759,688
Question 25
ABC company holds bonds with face value of P1,000,000 acquired at the beginning of the year at P1,100,000. At the end
of the year, the fair value of the bonds is P1,200,000. The bonds bear interest of 10% and discounts or premiums are
amortized over the term of the bonds of 5 years. The entity has elected the fair value option in valuing bond investments.
At the end of the year, the bonds shall be reported at
P1,000,000Correct!
P1,200,000
P1,100,000
P1,080,000
Quiz 3 Finals: PPE, Government Grant, Borrowing Costs, Land and Building, Machinery
Question 1
Which of the following costs is least likely a capitalizable cost in the acquisition of property, plant and equipment?
cost of options for the acquired properties
broker's commission for land and building acquiredCorrect!
insurance for the property for the first year of operations
freight charges going to the buyer

Question 2
In issuing own shares in exchange for a property, which of the following describes the correct way of valuing the property received?
Fair value of the shares issued even if there is a fair value for the property
Fair value of the shares issued if there is no fair value for the property
Fair value of the property if there is no fair value of for the shares issued
Fair value of the property even if there is a fair value for the shares issued
Question 3
In an exchange with commercial substance, which of the following shall be debited to the property received?orrect!
Fair value of the property given plus cash paid or less cash received.
Fair value of the property received plus cash paid or less cash received.
Fair value of the property given plush cash received or less cash paid.
Fair value of the property received plus cash received or less cash paid.
Question 4
What is the treatment of expenses directly related to the donation of a property by a shareholder?
Expensed.
Added to the cost of the property.
Debited to Retained Earnings. rrect!
Deducted from the Donated Capital account.

Question 5
In government grants, how is the Deferred Grant Income realized as income?
For all government grants, the portion of deferred grant income realized is equal to an arbitrary ratio between the
portion of the conditions fulfilled and the total conditions to be fulfilled.
For grants in the form of zero interest loans, the deferred grant income is the supposed interest in the loan and is
realized immediately upon grant of the loan.orrect!
For grants with conditions requiring the acquisition of depreciable properties, the amount of grant income realized is
in proportion to depreciation.
For grants related to income and not to depreciable properties, the deferred grant income is transferred to grant
income in the first year of fulfilling the conditions.
Question 6
In a zero interest loan,
Statement 1: The amount debited to interest expense is equal to the amount credited to grant income account.
Statement 2: The loan amortization involves a debit to discount on notes payable for borrowings secured by a note.
Both statements are true.
Both statements are false.
Question 7
The amount of capitalizable borrowing cost for a specific borrowing isorrect!
The actual interest less any investment income during the construction or development of a qualifying asset.
The actual interest only during the construction or development of a qualifying asset.
The actual interest plus any investment income during the construction or development of a qualifying asset.
The average expenditure multiplied by the average interest rate of all specific borrowings less any investment income
during the period of construction or development of the qualifying asset.
Question 8
The amount of capitalizable borrowing cost for general borrowings is
The actual interest for all general borrowings less any investment income.
The computed general borrowing cost (average expenditure funded by general borrowings multiplied by the
capitalization rate) or the actual interest of all the general borrowings, whichever is higher. rrect!
capitalization rate) or the actual interest of all the general borrowings, whichever is lower.
capitalization rate).
Question 9
In acquiring a land with an old building, what is the rule in allocating the basket price between the land and building
accounts?Correct!
If the old building is still usable, the basket price is allocated between the two properties in proportion to their fair
values.
If the old building is still usable, the fair value of the old building is deducted from the basket price and the excess is
allocated to the land.
If the old building is no longer usable, the fair value of the land is assigned to the land the excess of the basket price
over the fair value of the land is allocated to the building.
Whether the old building is still usable or not, the entire basket price is allocated to the land if the old building is
demolished.
Question 10
Which of the following costs is least likely to be included in the cost of a newly constructed building?
Excavation costsrrect!
Grading costs
Elevators installed during building construction
Parking lots included in the blueprint
Question 11
If tenants were paid to vacate an old building acquired together with the land where it is situated, the payments to tenants
shall be
included as part of the cost of the land if the building is demolished to give way for the construction of a new
building.Correct!
included as part of the cost of the building if the building is demolished to give way for the construction of a new
building.
allocated between the costs of the land and the building if the old building is still usable.
included as part of the cost of the land at all times.
Question 12
Which of the following is least likely a capitalizable cost of a machinery?Correct!
Borrowing costs in connection to the purchase of a machinery.
Professional fees of engineers as consultants in acquiring the machine.
Installation and testing costs for the machinery prior to operation.
Insurance for the machinery while in transit.

Question 13
Which of the following subsequent costs is least likely to be capitalized?
Major Repairs
Additions
Betterments and Improvementsorrect!
Rearrangement cost
Question 14
A subsequent cost is capitalizable if it improves or increases any of the following, except
a. Capacity
b. Efficiency
c. Sustainability
d. Life
Question 15
Fully depreciated properties shall be
Exchanged for another property
Donated to other partiesorrect!
Disposed
Transferred to Fully Depreciated properties or used continuously with disclosure
Question 16
On January 1, 2015 ABC company acquired a machinery to be used in business for P450,000 cash. Aside from this
amount, the company also paid for insurance for P15,000 while the machinery is in transit and another P15,000 as
insurance for the current year. Testing cots total P20,000 and installation costs total P10,000. The trial runs produced
some good which were sold for P5,000. The cost of machinery isCorrect!
P490,000
A) P495,000
P505,000
P510,000
Question 17
ABC company acquired machinery from a vendor in Hong Kong for credit. The terms of the credit were 10% trade
discount and another 10% cash discount if paid within 15 days. The credit is due within 45 days. The invoice price of the
machine was P400,000. The company paid freight of P60,000, installation P15,000 and testing and inspection of the
machine by an engineer of P10,000. The company paid on the 30th What is the carrying amount of machinery prior to
depreciation?
P485,000rect!
P445,000
P405,000
P409,000
Question 18
An equipment was acquired by ABC Company by issuing a Note Payable due 4 years after the issuance. This note will
evidence the payment of the balance of the company after making a down payment of P200,000 for the equipment with an
instalment price of P800,000. The note does not indicate any interest on its face but the implicit rate for this kind of note is
10%. This kind of equipment sells for P600,000 if acquired with straight cash. The present value of 1 at 10% for 4 years is
0.6830 while the present value of an ordinary annuity of 1 at 10% for 4 years is 3.1699. The amount to be debited to
Equipment isCorrect!
P600,000
P409,800
P609,800
P475,485
Question 19
ABC exchanged an old equipment with a new one. The old equipment was originally acquired 3 years ago for P300,000 and was
depreciated using straight line over 5 years with no residual value. The new equipment has a fair value of P200,000 while the old
equipment has a fair value of P150,000. ABC paid a cash difference to equalize the difference in fair values of the properties. The cost
of the new equipment and the amount of gain or loss on exchange, respectively are
P200,000, P80,000 gain
P 200,000, P30,000 gain

P150,000, P80,000 gain
P150,000, P30,000 gain

Question 20
The company was granted by the government P10,000,000, of which, 50% shall be used to construct a building
to serve as a school for the marginalized. The other half shall be used to pay for the expenses of the school for
the next four years. The building was done on January 1, 2015 for a total cost of P7,000,000 and is estimated to
have a useful life of 10 years with no salvage value. The expected expenses of the school for the next four years
are Year 1: P500,000 Year 2: P1,000,000 Year 3: 2,000,000 Year 4: 2,500,000. What is the balance of the
deferred income from government grant account as of December 31, 2016?You Answered
P7,500,000
P7,750,000
P9,083,333
P7,950,000
Question 21ABC Company constructed a building to be used as an investment property. The constructed began on January 1, 2014
with the company spending P600,000. The following were the other actual expenditures of the company:
March 31, 2014 P400,000
July 1, 2014 800,000
October 1, 2014 800,000
October 31, 2014 200,000
The building was completed on December 31, 2014.
The construction of the building was financed by the following borrowings:
Loan – BPI (used solely for the construction) P 1,000,000 at 15% interest per annum.
Loan – BDO (for general purposes) 600,000 at 15% interest per annum.
Loan – RCBC (for general purposes) 900,000 at 10% interest per annum.
The company temporarily invested unused cash funds and earned the following:
From Loan – BPI P10,000
From Loan – BDO 15,000
From Loan – RCBC 5,000
What amount of borrowing cost shall be capitalized for the building?
a. 324,000
b. 204,000
c. 304,000
d. 184,000

Question 22
ABC Company incurred the following costs in connection with a land and an old building acquired for the purpose of putting up a
warehouse for the company:
Purchase price for the land and old building P 1,200,000
Fair value of the land 1,000,000
Cost of demolishing the old building 300,000
Salvage proceeds from the demolition 50,000
Cost of option (50% is for a property not acquired) 40,000
Survey costs 60,000
Grading and leveling costs 80,000
Insurance for the construction 30,000
Excavation costs 90,000
Materials, Labor and Overhead Costs for the construction 2,000,000
Hospitalization bills of workers not covered by insurance 100,000
Parking lots and driveways 400,000
Permanent fence surrounding the new building 600,000
Landscaping and trees 200,000
Pre-operating losses 300,000
Escalator installed after the building was constructed 200,000
What amount shall be capitalized as part of Building?
P2,070,000
P2,620,000 orrect!
P2,370,000
P2,570,000

Question 23
Survey costs 60,000

What amount shall be capitalized as part of Land?ou Answered

a. 1,460,000
b. 1,160,000
c. 1,180,000
d. 1,110,000
Question 24
Survey costs 60,000
What amount shall be capitalized as part of Land Improvements?
P1,280,000
P1,400,000
P1,370,000 Correct!
P1,200,000
Question 25
ABC Company incurred the following subsequent costs:
Replacement of door knobs for a building 5,000
Repainting of old walls and ceilings 20,000
Extension of the main building 800,000
Periodic repairs on machineries 50,000
Replacement of rusty roofing with a better quality roofing 300,000
Rearrangement of furniture inside the building 20,000
Overhaul on another machine 100,000
Replacement of tires and batteries for the delivery vans 60,000
Installation of safety railings in the stairwells 200,000
How much of the above items are capitalizable?
P1,100,000
P1,400,000 You Answered
P1,460,000
P1,480,000

Quiz On Accounting

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Question 1

The gain or loss on sale of investment in #4 using FIFO is

January 1 and July 1 rect!

Added as part of the investment

Recognized upon transfer of the property to property, plant and equipment

Recorded every year-end

Recorded whenever available

Recorded only when the investment property is disposed

Computed using straight line method only

An addition to life insurance expenseorrect!

A deduction against life insurance expense

An adjustment of retained earnings

End of policy year Cash surrender value

Dec. 31, 2016 -

Dec. 31, 2017 -

cost of options for the acquired properties

broker's commission for land and building acquiredCorrect!

insurance for the property for the first year of operations

freight charges going to the buyer

Added to the cost of the property.

Debited to Retained Earnings. rrect!

Deducted from the Donated Capital account.

Borrowing costs in connection to the purchase of a machinery.

Professional fees of engineers as consultants in acquiring the machine.

Installation and testing costs for the machinery prior to operation.

Insurance for the machinery while in transit.

Betterments and Improvementsorrect!

P200,000, P80,000 gain

P 200,000, P30,000 gain

P150,000, P30,000 gain

March 31, 2014 P400,000

July 1, 2014 800,000

October 1, 2014 800,000

October 31, 2014 200,000

The building was completed on December 31, 2014.

The construction of the building was financed by the following borrowings:

From Loan – BPI P10,000

From Loan – BDO 15,000

From Loan – RCBC 5,000

What amount of borrowing cost shall be capitalized for the building?

Purchase price for the land and old building P 1,200,000

Fair value of the land 1,000,000

Cost of demolishing the old building 300,000

Salvage proceeds from the demolition 50,000

Cost of option (50% is for a property not acquired) 40,000

Survey costs 60,000

Grading and leveling costs 80,000

Insurance for the construction 30,000

Excavation costs 90,000

Materials, Labor and Overhead Costs for the construction 2,000,000

Hospitalization bills of workers not covered by insurance 100,000

Parking lots and driveways 400,000

Permanent fence surrounding the new building 600,000

Landscaping and trees 200,000

Pre-operating losses 300,000

Escalator installed after the building was constructed 200,000

What amount shall be capitalized as part of Building?

Purchase price for the land and old building P 1,200,000