Chapter 19 22 With Answer PDF
Chapter 19 22 With Answer PDF
Chapter 19 22 With Answer PDF
Problem 5
Zambia Company purchased four convenience store buildings on January 1, 2014 for a
total of P25,000,000. The buildings have been depreciated using the straight-line method
with 20-year useful life and 10% retained value.
On January 1, 2020 the entity converted the buildings into a hotel and restaurant.
Because of the change in the use of the buildings, the entity is evaluating the buildings
for possible impairment.
The entity estimated that the buildings have a remaining useful life of 10 years with no
residual value.
The undiscounted net cash inflows from the buildings will total P1,500,000 per year and
the current fair value of the four buildings totals P10,000,000.
The appropriate discount rate is 12%. The present value of an ordinary annuity of 1 at
12% for 10 periods is 5.65.
Problem 6
On January 1, 2020 Zimbabwe Company has a machinery with cost of P5,000,000 and
accumulated depreciation of P1,500,000.
The Machinery was acquired January 1, 2017 and had been depreciated using the
straight line method with useful life of 10 years and no residual value.
On January 1, 2020 the entity has properly tested the machinery to be impaired.
The machinery has a remaining life of 5 years and is expected to generate undiscounted
net cash inflows of P800,000 per year. The fair value of the machinery on January 1, 2020
is P3,000,000.
The appropriate discount rate is 8%. The present value of an ordinary annuity of 1 at 8%
for 5 periods is 3.99.
Machinery 5,000,000
Accumulated depreciation 1,500,000
Carrying amount - January 1, 2020 3,500,000
Present value of net cash inflows or value in use - higher 3,192,000
Impairment loss 308,000
Problem 7
At the beginning of current year, Jolo Company acquired all the assets and liabilities of
another entity. The acquire has a number of operating divisions, including one whose
major industry is the manufacturer of toy train. The toy train division is regarded as a cash
generating unit.
The assets and liabilities acquired are measured at fair value at acquisition date. At year-
end, the carrying amounts of the assets of the toy train division were:
Building 2,000,000
Inventory 1,000,000
Trademark 1,000,000
Goodwill 500,000
There is a declining interest in toy train because of the aggressive marketing of computer-
based toys.
The entity measured the value in use of the toy train division at year-end at P3,600,000.
1. What is the impairment loss on goodwill?
a. 140,000 c. 500,000
b. 250,000 d. 0
Question 1 Answer C
Question 2 Answer A
Question 3 Answer B
Question 4 Answer C
CHAPTER 20
Problem 2
Mariz Company acquired a trademark relating to the introduction of a new manufacturing
process. The entity incurred the following costs:
What total cost should be capitalized as intangible non current asset in respect of the new
process?
a. 3,750,000 c. 3,500,000
b. 3,700,000 d. 3,550,000
What total amount should be reported as research and development expense for the
current year?
a. 125,000 c. 235,000
b. 160,000 d. 285,000
Problem 7
1. Which condition must be met for an item to be recognized as an intangible asset
other than goodwill?
a. The fair value can be measured reliably
b. The item is part of an activity aimed at gaining new scientific or technological
knowledge
c. The item is expected to be used in the production or supply of goods or
services
d. The item is nonmonetary, identifiable and lacks physical substance
3. Which statement is true in relation to control by the entity of the intangible asset?
a. The capacity of the entity to control the economic benefits from an intangible
asset would normally stem from legal rights that are enforceable in a court
of law.
b. The skill of employees arising out of the benefit of training costs cannot be
recognized as intangible asset.
c. Market share and customer loyalty cannot normally be recognized as
intangible asset because and entity cannot control the actions of customers.
d. All of these statements are true
4. An intangible asset shall be recognized if
a. It is probable that future economic benefits attributable to the asset will flow
to the entity.
b. The cost of the intangible asset can be measured reliably.
c. It is possible that future economic benefits attributable to the asset will flow
to the entity and the cost of the intangible asset can be measured reliably.
d. It is probable that future economic benefits attributable to the asset will flow
to the entity and the cost of the intangible asset can be measured reliably.
6. The cost of a separately acquired intangible asset comprises the purchase price
and
a. Cost of introducing a new product or service
b. Cost of conducting a business in a new location
c. Administration and other general overhead cost
d. Directly attributable cost of preparing the asset for the intended use
7. Directly attributable costs of preparing the intangible asset for the intended use
include all of the following, except
a. Cost of employee benefit arising directly from bringing the asset to the
working condition
b. Professional fee arising directly from bringing the asset to the working
condition
c. Cost of testing whether the asset is functioning properly
d. Initial operating loss
10. The cost of an internally generated intangible asset includes all of the following
except
a. Cost of materials and services used in generating the intangible asset.
b. Compensation costs of personnel directly engaged to generating asset.
c. Fee to register a legal right
d. Expenditure on training staff to operate the asset.
Problem 8
1. After initial recognition, an intangible asset shall be measured using
a. Cost model
b. Revaluation model
c. Cost model or revaluation model
d. Cost model or hair value model
2. An entity that acquired an intangible asset may use the revaluation model for
subsequent measurement only when
a. The useful life of the intangible asset can be reliably determined
b. An active market exists for the intangible asset
c. The cost of the intangible asset can be measured reliably
d. The intangible asset is a monetary asset.
6. The residual value of an intangible asset with a finite useful life shall be
assumed zero except
a. When there is a commitment by a third party to purchase the asset at
the end of the useful life
b. When there is an active market for the asset
c. When there is a commitment by a third party to purchase the asset at
the end of useful life or a there is an active market for the asset and it is
probable that such market will exist at the end of the month.
d. There are no exceptions.
7. One factor that is not considered in determining the useful life of an intangible
asset is
a. Residual value
b. Provision for renewal or extension
c. Legal Life
d. Expected action of competitors
8. Factors in determining the useful life of an intangible asset include all of the
following except
a. The expected use of the asset
b. Any legal or contractual provision
c. Any provision for renewal or extension of the legal life
d. The amortization method
Problem 1
Galore Company ventured into construction of a condominium in Makati which is rated as
the largest state-of-the-art structure.
The board of directors decided that instead of selling the condominium, the entity would
hold this property for purposes of earning rentals by letting out space to business
executives in the area.
The construction of the condominium was completed and the property was placed in
service on January 1, 2020.
The cost of the construction was P50,000,000. The useful life of the condominium is 25
years and the residual value is P5,000,000.
AN independent valuation expert provided the following fair value at each subsequent
year-end:
1. Under the cost model, what amount should be reported as annual depreciation of
investment property?
a. 1,800,000 c. 2,200,000
b. 2,000,000 d. 0
2. Under the fair value model, what amount should be recognized as gain from
change in fair value in 2022?
a. 5,000,000 c. 7,000,000
b. 3,000,000 d. 0
Question 1 Answer A
Annual depreciation
(45,000,000 / 25) 1,800,000
Question 2 Answer C
Problem 2
Eragon Company and its subsidiaries own the following properties at year-end:
1. What is the total investment property that should be reported in the consolidated
statement of financial position of the parent and its subsidiaries?
a. 12,000,000 c. 10,500,000
b. 15,500,000 d. 9,500,000
2. What total amount should be included in property, plant, and equipment in the
consolidated statement of financial position?
a. 11,000,000 c. 10,500,000
b. 13,000,000 d. 8,500,000
Question 1 Answer B
Land for undetermined use 5,000,000
Vacant building to be leased out under an operating lease 3,000,000
Building owned and for which the subsidiary provides security and
maintenance services to the lessees 1,500,000
Property under construction for use as investment property 6,000,000
Total investment property 15,500,000
Question 2 Answer A
Problem 9
1. When the entity uses the cost model, transfers between investment property,
owner-occupied property and inventory shall be made at
a. Fair value c. Cost
b. Carrying amount d. Assessed Value
Problem 1
Forester company provided the following assets in a forest plantation and farm:
Question 1 Answer D
Question 2 Answer B
One animal aged 2.5 years was purchased on July 1 for P108, and one animal was born
on July 1
Question 1 Answer A
Question 2 Answer B
Question 3 Answer D
Price change 55
Physical change 237
Total gain from change in fair value 292
Problem 9
Farmland Company has different kinds of farm animals at the beginning of current year
During the current year, several acquisitions occurred related to these farm animals.
There were no famr animals sold during the year and neither were there any newborns
nor deaths.
Question 3 Answer C