Name: Date: Financial Accounting and Reporting
Name: Date: Financial Accounting and Reporting
Name: Date: Financial Accounting and Reporting
FINANCIAL ACCOUNTING AND REPORTING 6. On August 1, 2019, Lau Inc. purchased a license with
a cost of P4,212,000 and a useful life of 10 years. At
1. Which of the following properties owned by an entity December 31, 2021, when the carrying value of the
would be classified as an investment property? asset was P3,194,100, the company determined that
A. A property that had been leased to a tenant, but impairment indicators were present. The fair less
which is no longer required and is now being costs to sell the license was estimated to be
held for resale. P2,954,560. The asset's value-in-use is estimated to
B. Land purchased for its investment potential. be P3,042,000. Lau's 2021 income statement will
Planning permission has not been obtained for report Loss on Impairment of
building construction of any kind A. P54,650 C. P149,712
C. A new office building used as entity’s head B. P152,100 D. P636,250
office, purchased specifically in order to exploit
its capital gains potential 7. Compensation from third parties for items impaired,
lost or sequestrated should be recorded as income: A. Physical existence.
A. When the cash is received. B. Claim to a specific amount of cash in the future.
B. When the compensation is receivable. C. Long-lived.
C. When the item is lost. D. Held for resale.
D. When paid.
13. On January 2, 2021, Joey Mining Company (lessee)
8. On January 1, 2021, Sugar Ray Company purchased a entered into a 5-year lease for drilling equipment.
copyright for P1,200,000, having an estimated useful Joey accounted for the acquisition as a finance lease
life of 16 years. In January 2025, Sugar Ray paid for P2,400,000, which includes a P100,000 bargain
P180,000 for legal fees in a successful defense of the purchase option. At the end of the lease, Joey
copyright. Copyright amortization expense for the expects to exercise the bargain purchase option. Joey
year ended December 31, 2025, should be estimates that the equipment’s fair value will be
A. P0 C. P86,250 P200,000 at the end of its 8-year life. Joey regularly
B. P75,000 D. P90,000 uses straight-line depreciation on similar equipment.
For the year ended December 31, 2021, what amount
9. Which of the following statements is true with should Joey recognize as depreciation expense on the
regards to an investment property? leased asset?
A. An investment property generates cash flows A. P480,000 C. P300,000
largely independently of the other assets held by B. P460,000 D. P275,000
an entity.
B. The value in use of investment property is 14. Which characteristic is not possessed by intangible
significantly higher than of owner-occupied assets?
property. A. Physical existence.
C. An investment property unlike owner-occupied B. Identifiable.
property shall not be depreciated over its useful C. Result in future benefits.
life. D. Expensed over current and/or future years.
D. An investment property unlike owner-occupied
property shall always be measured at its 15. A wasting asset corporation has established its
historical cost. depletion cost at P1.20 per unit. At the start of the
year, it has beginning inventory of 100,000 units;
10. Which of the following does not describe intangible during the year it produced 1,500,000 units; and
assets? during the year, It was able to sell 1,400,000
A. They lack physical existence. units. At the end of the year, how much is its
B. They are monetary assets. depletion cost in the Inventory?
C. They provide long-term benefits. A. P1,800,000 C. P240,000
D. They are classified as long-term assets. B. P1,680,000 D. P120,000
11. On January 1, 2020, Kate Company signed a 12-year 16. Costs incurred internally to create intangibles are
lease for warehouse space. Kate has an option to A. capitalized.
renew the lease for an additional 8-year period on or B. capitalized if they have an indefinite life.
before January 1, 2023. During January 2022, Kate C. expensed as incurred.
made a decision to exercise the renewal option and D. expensed only if they have a limited life.
made substantial improvements to the warehouse.
The cost of these improvements was P540,000, with 17. The depletion rate of the entity is P15/ton. During
an estimated useful life of 15 years. Worm has taken the year, 50,000 tons were produced and at the
a full year’s depreciation on this leasehold end of the year, 5,000 tons are unsold. If the total
improvement. In the December 31, 2023, balance production cost is P85/ton before depletion cost,
sheet, the carrying amount of this leasehold how much is the total cost of sale for the year?
improvement should be A. 5,000,000 C. 3,825,000
A. 420,000 C. 504,000 B. 4,500,000 D. 675,000
B. 468,000 D. 510,000
18. Which of the following costs incurred internally to
12. Which of the following characteristics do intangible create an intangible asset is generally expensed?
assets possess? A. Research phase costs.
B. Filing costs.
C. Legal costs. 17. B
D. All of these choices are correct. 18. A
19. B
19. The total original depletable costs of the mining 20. D
entity was P10,525,000. Its original deposit was
42,100,000 tons. After producing 15,000,000 tons,
additional reserves are discovered at cost of
P4,225,000. The additional reserves discovered is
equal to 22,900,000. What is the depletion cost for
the year after adjustment on depletion rate, if the
production for the year is 6,000,000 tons?
A. 1,200,000 C. 1,500,000
B. 1,320,000 D. 1,770,000
---Nothing Follows---
KEY ANSWERS:
1. B
2. D
3. A
4. D
5. D
6. B
7. B
8. D
9. A
10. B
11. B
12. C
13. D
14. A
15. C
16. C