1. On September 1, 2015, Ron Company issued 100,000 treasury 8.

Bertz Company exchanged a delivery truck costing P1,000,000 for

shares with P25 par value for a parcel of land to be held as a parcel of land. The truck had a carrying amount of P650,000 and a
investment property. The treasury shares were acquired at a cost fiar values P500,000. The entity gave P600,000 in cash in addition to
of P30 per share. The share had a fair market value of P40 on the truck as part of this transaction. It is expected that the cash
September 1, 2015. flows from the assets will be significantly different. The previous
The entity received P50,000 from the sale of scrap when an existing owner of the land had listed the land for sale at P1,200,000.
structure on the site was immediately razed. At what amount should Bertz record the land?
What is the initial cost of the land? 9. Taiwan Company fabricated equipment for office use during the
2. Naku Naku Company received a grant of P600,000 related to current year. The following data were taken from the accounting
depreciable asset acquired on January 1, 2015 for P6,000,000 . This records:
grant was deducted from the cost of the asset with a useful life of 10                   Materials      Direct labor
years and residual value of P500,000 . On January 1, 2017 , the grant Finished goods             1,000,000      1,500,000
became fully repayable due to noncompliance with conditions . Office equipment      600,000            500,000
- What is the loss on repayment on 2017 ? Factory overhead ammounted to P1,200,000. Normal production of
- What is depreciation for 2016 ? finished goods is 50,000 units. Due to the fabrication of the office
- What is the carrying amount of the asset on December 31, 2017 if equipment, finished goods produced totaled 35,000 units only in the
deferred income approach is used ? current year.
3. Cory Company owned a parcel of real estate condemned by the The offie equipment is to be charged with the overhead which
city government. would have been apportioned to the 15,000 units which were not
The entity received P7,500,000 for this property which had a produced.
carrying amount of P5,750,000. What is the total cost of office equipment af ter the apportionment
The following costs were incurred as a result of the condemnation: of factory overhead?
Appraisal fee to support a P7,500,000 value            25,000 10. Parke Company replaced on old boilder with a more efficient
Attorney fee for the closing with the city governmern      35,000 one.
Attorney fee to review contract to acquire Purchase price of a new boiler            6,000,000
      replacement property                        30,000 Carrying amount of old boiler            500,000
Title insurance on replacement property                  40,000 Fair value of old boiler                  200,000
What amount should be reported as gain on the condemnation? Installation cost of new boiler            800,000
4. Marjorie Company acquired a machine for P3,200,000 on August What amount should be capitalized a cost of the new boiler?
31, 2012. the machine had a 5-year life, P500,000 residual value, and 11. Bell Company exchanged an old machine, with a carrying
was depreciated uing the straight line method. On May 31, 2015, a amount of P390,000 and a fair value of P350,000, and paid P100,000
test for recovrability revealed that the expected net future cash for a similar used machine having a list price of P500,000. The
undiscounted cash inflows related to the continued use and transaction has commercial substance.
eventual disposal of the machine amounted to P1,080,000. The fair At what amount should the machine acquired in the exchange be
value on same date was P1,350,000 with no residual value. recorded?
- What is the impairment loss that hould be recognized on May 31, 12. Isabela Company incurred the following costs during the current
2015? year:
- What is the depreciation for June 2015? Option fee for the land acquired                  10,000
- What is the depreciation for 2017 ? Option fee for the land not acquired                  10,000
5. On January 1, 2015, Leah Company owned a machine having a Taxes in arreas on land                              50,000
carrying amount of P2,400,000. The machine was purchased four Payment for land                              1,000,000
years earlier for P4,000,000. The straight line depreciation is used. Architect fee                                    230,000
During December 2015, the entity determined that the machine Payment to city hall for approval of building construction      120,000
suffered permanent impairment and will not be economically useful Contract price for factory building                  5,000,000
after December 31, 2015. The entity sold the machine for P650,000 Safety fnece around construction site                  35,000
on January 5, 2016. Safety inspection on building                        30,000
What amount should be recognized as impairment loss in 2016? Removal of safety fence after completion of building      20,000
6. At the beginning of current year, Feld Company traded a delivery New fence surrounding the factory                  80,000
truck and paid P100,000 cash for a tow truck owned by Baker Driveway, parking bay and safety lighting            550,000
Company. The delivery truck had an original cost P1,400,000, Trees, shrubs and other landscaping                  200,000
accumulated dapreciation P800,000 and an estimated fair value What is the cost of land improvements?
P900,000. Feld estimated the fair value of Baker's tow truck at 13. Slad Company exchanged similar productive assets with Gil
P1,000,000. The transaction had commercial substrance. Company and in addition paid Gil cash of P900,000. The transaction
What amount of gain should be recognized by Feld? lacked commercial substance. The following pertaines to this
7. On December 31, 2015, a building owned by Pink Company was exchange:
totally destroyed by fire. The building had fire insurance coverage up                   Carrying amount      Fair value
to P5,000,000. Relinquished by Slad      400,000                  500,000
Other pertinent information on December 31, 2015 Relinquished by Gil      750,000                  1,400,000
Building, carrying amount            5,200,000 The asset acquired should be recorded at what amount by Slad
Buidling, fair value                  5,700,000 Company?
Removal and clean-up cost            100,000 14. On July 1, 2012, Rey Company purchased computer equipment
During January 2016, before the 2015 financial statements were at a cost of P3,600,000. The equipment had a six-year life with no
issued, the entity received insurance proceeds of P5,000,000. residual value determined that this equipment had been
What amount should be reported as gain or loss on involuntary permanently impaired, and that P700,000 could be recovered over
conversion? the remaining useful life of the equipment.
What is the carrying amount of the equipment on December 31, 110,000
2015? Quality control during commercial production including routine
15. On January 1, 2015, Melancholy Company reported the following testing of products      150,000
property, planted, plnt and equipment: Laboratory research for discovery of new knowledge                             
Land                               3,500,000 180,000
Land improvements                  900,000 What is the total research and development expense ?
Building                              6,000,000 20. Clark Oil and Gas incurred costs of $20.50 million for the rights to
Machinery                        1,500,000 extract resources from a natural gas deposit. The company expects
Transactions during the current year to extract 8.20 million cubic feet of natural gas during a six-year
• A tract of land was acquired for P1,250,000 and period. Natural gas extracted during years 1 and 2 were 820,000 and
intended definitely for use as future building site. 1,620,000 cubic feet, respectively. What was total depletion for year
• A plant facility consisting of land and building was acquired from 1 and year 2, assuming the company uses the units-of-production
another entity in exchange for 100,000 Melancholy Company's method?
shares. 21. You noted the following items relative to the company's
On the acquisition date, the share had a closing market price of P45 Intangible assets in connection with your audit of the Paete
on a stock exchange. Corporation's financial statements for the year 2010.
The plant facility was carried at P1,000,000 for land and P3,000,000 •      Paete incurred P624,000 of experimental and development
for the building at the exchange date. costs in its laboratory to develop a patent which was granted on
Current appraised values for the land and building, respectively, are January 2, 2010. Legal fees and other costs associated with the
P1,200,000 and P2,400,000. registration of the patent totaled P131,200. Paete estimates that the
• Expenditures totaling P750,000 were made in January for new useful life of the patent will be eight years.
parking lot, street and sidewalk at the entity's varios plant locations. •      A trademark was purchased from Tsek Company for P320,000
These expenditures had an estimated useful life of fifteen years. on July 1, 2007. Expenditures for successful litigation in defense of
• Machine was purchased at a cost of P3,000,000. Freight and the trademark totaling P80,000 were paid on July 1, 2010. Paete
unloading charge of P50,000, and installation cost of P350,000 were estimates that the trademark's usefull life will be indefiniteBased on
incurred. the above and the result of your audit, determine the following:
• A machine was sold for P175,000 on July 1, 2015. Original cot of (Round off present value factors to 4 decimal places)
machine was P500,000 on January 1, 2013 and it was depreciated on - Carrying amount of trademark as of December 31, 2010
the straight line basis over an estimated useful life of five years and - Carrying amount of patent as of December 31, 2010
no residual value. 22. During the current year , Makinig Ka Inc. incurred the following
What is the total cost of machinery at year-end? costs:
16. On June 30, 2015, a fine in Pine Company's plant caused a total Research and development services performed by Key Company for
loss to a production machine. The machine was depreciated at Orr            150,000
P200,000 annually and had a carrying amount of P1,600,000 on Design, construction and testing of preproduction prototypes           
January 1, 2015. 200,000
On the date of the fire, the fair value of the machine was Testing in search for new products or process alternatives                 
P2,200,000, and the entity received insurance proceeds of 175,000
P2,000,000. What is the total research and development expense ?
What amount should be recognized as gain on disposal? Faith Company incurred the following costs during the current year :
17. On April 1, 2015 , Kew Company purchased new machinery for Laboratory research aimed at discovery of new knowledge      20,000
P3,300,000 . The machinery has an estimated useful life of 5 years Cost of testing prototype but economic viability not achieved     
with residual value of P300,000 . Depreciation is computed by the 50,000
SYD Method. Quality control during commercial production                  300,000
- What is the depreciation for 2015 ? Construction of research facility having an estimated useful life
- What is the depreciation for 2016 ? Of 5 years but no alternative future use                        400,000
18. CML Company provided the following information on January 1, What is the total research and development expense ?
2015 : 23. At the beginning of current year, Break up Company purchased
Vehicle cost                               5,000,000 two machines for P1,000,000 each. The machines were put into use
Useful life in years                        5 immediately. Machine A has a useful life of 5 years and can be used
Useful life in miles                        100,000 only in one research project. Machine B will be used for 2 years on a
Residual value                              1,000,000 research and development project and then used by the production
Actual miles driven division for an additional 8 years. The entity used the straight line
      2015                              30,000 method of depreciation.
      2016                              20,000 What amount should be recognized as research and development
      2017                              15,000 expense for the current year ?
- What is the depreciation for 2017 using the SYD method ? 24. On January 2, 2002, Squid Game Company spent P480,000 to
- What is the accumulated depreciation on Dec. 2016 using double apply for and obtain a patent on a newly developed product. The
declining balance method ? patent had an estimated useful life of 10 years. At the beginning of
- What is the accumulated depreciation on Dec. 31, 2017 using the 2006, the company spent P144,000 in successfully prosecuting an
miles driven ? attempted patent infringement. At the beginning of 2007, the
19. Patience Company incurred the following costs during the company purchased for P280,000 a patent that was expected to
current year: prolong the life of its original patent by 5 years. Questions:
Routine on-going efforts to refine, enrich or otherwise improve an Based on the above and the result of your audit, determine the
existing product      125,000 following:
Design , construction and testing of preproduction models                  Amortization of patent in 2007
25. On January 1. 2010 , Hope Company purchased a new building at Equipment acquired for use in various R and D projects      975,000
a cost of P6,000,000 . Depreciation was computed on the straight Depreciation on the above equipment                  135,000
line basis at 4% per year. On January 1, 2015 , the building was Materials used                                    200,000
revalued at a fair value of P8,000,000. Compensation costs of personnel                  500,000
Before income tax, what is the revaluation surplus on Dec. 31, Outside consulting fees                              150,000
2015 ? Indirect costs appropriately allocated                  250,000
What is the depreciation for 2015 - What total amount of research and development costs should be
26. Divine Company provided the following information relating to recognized as expense for the current year ?
the revaluation of an equipment on January 1,2015. 32. During the current year , Di ko Alam Company incurred the
                  Cost            Replacement cost following costs to develop and produce a computer software
Equipment            6,500,000      9,200,000 product:
Residual value            500,000            200,000 Completion of detailed program design                  1,300,000
Useful life            12      Costs incurred for coding and testing to establish
Age of the equipment      2      Technological feasibility                              1,000,000
Accumulated depreciation      ?      ? Other coding costs after establishment
The equipment was sold on December 31, 2015 for P8,000,000 . of technological feasibility                        2,400,000
- What is the gain on sale of equipment on December 31,2015? Other testing costs after establishment
- What is the revaluation surplus on December 31, 2015 ? Of technological feasibility                        2,000,000
- Before income tax , what is the revaluation surplus on January 1, Costs of producing product masters for training
2015? Materials                                    1,500,000
What is the depreciation for 2015 ? Duplication of computer software and training
27. On January 1, 2010 , Naku Company acquired a building at cost Materials from product masters                        2,500,000
of P5M. The building has been depreciated on the basis of a 20 year Packaging product                              900,000
life. On January 1, 2015 , an appraisal of the building showed - What amount should be capitalized as software cost ?
replacement cost of 8,000,000 with no change in useful life. - What amount should be reported as inventory at year end ?
- What is the depreciation for 2015 ? - What total amount of the costs incurred should be expensed
- Before income tax, what amount should be credited to revaluation immediately ?
surplus on January 1, 2015 ? 33. On April 23, 2021, Trevors Mining entered into an agreement
- What is the revaluation surplus that should be reported in the with the state of California to obtain the rights to operate a mineral
December 31, 2015? mine in California for $13.4 million. Additional costs and purchases
28. On March 31, 2021, M. Belotti purchased the right to remove included the following:
gravel from an old rock quarry. The gravel is to be sold as roadbed After the minerals are removed from the mine, the equipment will
for highway construction. The cost of the quarry rights was be sold for an estimated residual value of $61,800. The structures
$216,000, with estimated salable rock of 27,000 tons. During 2021, will be torn down. The mine is expected to produce 1,540,000 tons
Belotti loaded and sold 4600 tons of rock and estimated that 22,400 of ore. After the ore is removed, the land will revert back to the
tons remained at December 31, 2021. At January 1, 2022, Belotti state of California. During 2021, Trevors extracted 350,000 tons of
estimated that 9200 tons still remained. During 2022, Belotti loaded ore from the mine. What total amount would be charged to
and depletion of the mine and depreciation of the mining equipment
       sold and structures for 2021, assuming that Trevors uses the units-of-
Preparation of site for excavation $ 4,618,000   production method for both depletion and depreciation? (Do not
Mining equipment   416,000   round your intermediate calculations.)
Construction of various structures on site   269,500   34. Standard Company spent P9,000,000 on a new software package
13,800 tons. Belotti uses the units-of-production method. that is to be used only for internal use. The amount was spent after
 - Belotti would record depletion in 2021 of: (Do not round depletion the application development stage . The economic life of the
rate per ton.) product is expected to be three years. The equipment on which the
- Belotti would record depletion in 2022 of: (Round cost per ton to package is to be used is being depreciated over five years.
two decimal places.) What amount of expense should be reported for the first full year ?
29. On January 2, 2002, Squid Game Company spent P480,000 to 35. On February 12, 2021, Forest Incorporated purchased the right
apply for and obtain a patent on a newly developed product. The to remove timber from a 19,000-acre tract of land over the next
patent had an estimated useful life of 10 years. At the beginning of three years, and the company estimates no residual value. The
2006, the company spent P144,000 in successfully prosecuting an timber is to be sold as lumber for new home construction. The cost
attempted patent infringement. At the beginning of 2007, the of the timber rights was $168,000, with estimated salable timber
company purchased for P280,000 a patent that was expected to feet of 840,000. During 2021 and 2022, Forest harvested and sold
prolong the life of its original patent by 5 years. Questions: 700,000 feet of timber. What is the book value of the timber rights
Based on the above and the result of your audit, determine the at the end of 2022, assuming the company uses the units-of-
following: production method?
- Carrying amount of patent as of December 31, 2006 36. Foreman Mining purchased land containing a copper deposit for
30. CM Company made the following expenditures during the $2,640,000 on January 7, 2021. The company expects to mine
current year : 770,000 tons of copper over the next 10 years, and the land is
Costs to develop computer software for internal use             expected to have a residual value of $1,408,000. The company has
9,000,000 also purchased mining equipment for $570,000 that will be used
Cost of market research activities                        1,000,000 only at this site over the 10 years with an estimated residual value of
What is the research and development expense ? $54,100. By the end of the first year, the company has mined and
31. Move on incurred the following research and development costs sold 61,000 tons of copper. What is the cost attributed to copper
in a current year :
inventory for 2021, assuming the company uses the units-of- 44. Lax Company recently acquired two items of equipment.
production method? • Acquried a press at an invoice price of P3,000,000 subject to a 5%
37. Archie Co. purchased a framing machine for $64,000 on January cash discount which was taken.
1, 2021. The machine is expected to have a four-year life, with a Costs of freight and insurance during shipment were P50,000 and
residual value of $8000 at the end of four years. installation cost amounted to P200,000.
- Using the double-declining-balance method, depreciation for 2021 • Acquired a welding machine at an invoice price of P2,000,000
and book value at December 31, 2021, would be: subject to a 10% csh dicount which was not taken.
38. Jedidiah Company has received a donation of land from one of Additional welding supplies were acquired at a cost of P100,000.
its shareholders . The land originally had a cost of P1,000,000. On What is the total increase in the equipment account as a result of
the date of donation, the land had a market value of P1,500,000 and the transactions?
an assessed value of P1,200,000 . 45. Solomon Company purchased land. The carrying amount of the
- What amount of income should be recognized from donation? land was P1,305,000. In exchange for the land , the entity issued
39. Just hope Company determined that the electronics division is a 30,000 ordinary shares with par value of P120 and market value of
cash generating unit. The entity calculated the value in use of the P140 per share. The shares are traded in an established stock
division to be P8,000,000. exchange. What amount should be recorded as cost of the land ?
The assets of the cash generating unit at carrying amount are as 46. Marjorie Company acquired a machine for P3,200,000 on August
follows : 31, 2012. the machine had a 5-year life, P500,000 residual value, and
Building      5,000,000 was depreciated uing the straight line method. On May 31, 2015, a
Equipment      3,000,000 test for recovrability revealed that the expected net future
Inventory      2,000,000 undiscounted cash inflows related to the continued use and
      10,000,000 eventual disposal of the machine amounted to P1,080,000. The fair
The entity also determined that the fair value less cost to sell of the value on same date was P1,350,000 with no residual value.
building is P4,500,000. What is the depreciation for June 2015?
- What is the impairment loss allocated to equipment ? 47. Mamhie Company and Dadhie Company agreed to exchange
- What is the impairment loss allocated to inventory ? tractor trailers. Information relating to these assets is as follows:
- What is the total impairment loss ?                               Mamhie      Dadhie
- What is the impairment loss allocated to building ? Original acquisition cost                  1,500,000      800,000
40. Gei Company determined that, due to obsolescene, equipment Acc. Depreciation                  700,000            720,000
with an original cost of P9,000,000 and accumulated depreciation on Fair value on the date of exchange      900,000            1,100,000
January 1, 2015, of P4,200,000 had suffered permanent impairment, In accordance with the agreement, Mamhie will pay P200,000 in
and as a result should have a carrying amount of only P3,000,000 as cash to Dadhie which is the difference in fair value. Assuming the
of the beginning of the year.In addition, the remaining useful life of transaction lacks commercial substance.
the equipment was reduced from  years to 3. What amount should Mamhie Company recorded as cost of the
On December 31, 2015, what amount should be reported as asset received in exchange ?
accumulated depreciation? 48. On August 1, 2015 , Bamco Company purchased a new machine
41. Genuine Love Company acquired a machine for P3,200,000 on on a deferred payment basis . A downpayment of P100,000 was
August 31, 2012 . The machine had  5 year life, P500,000 residual made and 4 monthly instalments of P250,000 each are to be made
value and was depreciated using the straight line method . On May beginning on September 1, 2015 . The cash equivalent price of the
31, 2015, a test for recoverability revealed that the expected net machine was P950,000 . The entity incurred and paid installation
future undiscounted cash inflows related to continued use and costs amounting to 50,000 . What is the amount to be capitalized as
eventual disposal of the machine amounted to P1,080,000. The fair cost of the machine ?
value on the same date was P1,350,000 with no residual value. 49. On January 1, 2015, Leah Company owned a machine having a
- What is the impairment loss that should be recognized on May 31, carrying amount of P2,400,000. The machine was purchased four
2015 ? years earlier for P4,000,000. The straight line depreciation is used.
- What is the depreciation for June 2015 ? During December 2015, the entity determined that the machine
42. On January 1, 2011, Walton Company purchased a machine for suffered permanent impairment and will not be economically useful
P2,000,000 and established an annual straight line depreciation rate after December 31, 2015. The entity sold the machine for P650,000
of 10%, with no residual value. on January 5, 2016. What amount should be recognized as
During 2015, the entity determined that the machine will not be impairment loss in 2016?
economically useful in production process adter December 31, 2015. 50. White Airline sold a used jet aircraft to Brown Company for
The entity estmated that the machine had no residual value on P10,000,000 accepting a 5 year 6% note for the entire amount (in
December 31, 2015 and would be disposed of in early 2016 at a cost equal payment). The present value of an ordinary annuity of 1 at 8%
of P50,000. for five periods is 3.99 and the Pv of 1 is .6805 . The aircraft should
- In the income statement for 2015, what amount of impairment loss be capitalized at what amount ?
should be reported? 51. On July 1, 2012, Rey Company purchased computer equipment
43. In January 2014, Winn Company purchased equipment at a cost at a cost of P3,600,000. The equipment had a six-year life with no
of P5,000,000. The equipment had an estimated residual value of  residual value determined that this equipment had been
P1,000,000, an estimated 8-year useful life, and was being permanently impaired, and that P700,000 could be recovered over
depreciated by the straight line method. Two years later, it became the remaining useful life of the equipment. What is the carrying
apparent that this equipment suffered permanent impairment of amount of the equipment on December 31, 2015?
value. In January 2016, management determined the carrying 52. Abigail Company acquired land  and paid in full by issuing
amount should be only P1,750,000 with 2-year remaining useful life, P600,000 of its 10% bonds payable and 40,000 ordinary shares with
and the residual value should be reduced to P250,000. par value of P10 and the bonds were trading at 101 . What amount
What is the impairment loss for 2015? should be recorded as cost of the land ?
53. Minahal Company purchased an office building and the land on payable on an office building. At the end of the current year, average
which it is located for P7,000,000 cash and assumed an existing accumulated expenditures on the new warehouse totaled
P2,000,000 mortgage . For realty tax purposes , the property is P4,750,000.
assessed at P9,600,000, 60% of which is allocated to building . At What amount should be capitalized as interest for the current year?
what amount should be the building be recorded ? 61. On January 1, 2015, Cagayan Company tool out a loan of
54. Clay Company started construction of a new office building on P24,000,000 in order to finance specifically the renovation of
January 1, 2015, and moved into the finished building on July 1, building. The renovation work started on the same date. The loan
2016. Of the P25,000,000 total cost, P20,000,000 was incurred in carried an nual interest at 10%. Work on the building was
2015 evenly throughout the year. The incremental borrowing rate substantially complete on October 31, 2015. The loan was repaid on
was 12% throughout 2015, and the total amount of interest incurred december 31,2015 and P200,000 investment income was earned in
was P1,020,000. What amount should be reported as capitalized the period to October 31 on the proceeds of the loan not yet used
interest on December 31, 2015? for the renovation.
55. Neglected Corporation purchased land for P6,000,000 . The What is the amount of borrowing cost to be included in the cost of
company expected to extract 2 million tons of mine from this land the building?
over the next 20 years at which time, residual value shall zero. 62. Rabiya Mateo Enterprises purchased equipment for $54,000 on
During the first 2 years of the mine's operations; 30,000 tons were January 1, 2021. The equipment is expected to have a five-year life
mined each year a sold for P100 per ton. The estimate of the total and a residual value of  $4000.
remaining lifetime capacity of the mine was raised to 1,500,000 tons Using the double-declining-balance method,  the book value at
at the start of the third year and the residual value was estimated to December 31, 2021, would be:
P480,000. During the third year, 40,000 tons were mined and sold 63. On January 1, 2002, Dean Company purchased a new machine
for P85 per ton. How much would be the depletion tor the third for P4,000,000.  The new machine has an estimated useful life of
year?   eight years and the salvage value was estimated to be P400,000. 
56. In December 2002, WestLer Company exchanged an old packing Depreciation was computed on the sum-of-the-years-digits method. 
machine, which cost P120,000 and was 50% depreciated, for a What amount should be shown in Dean's balance sheet at
dissimilar used machine and paid a cash difference of P16,000.  The December 31, 2003, net of accumulated depreciation for this
market value of the old packaging machine was determined to be machine?
P70,000.  For the year ended December 31, 2002, what amount of 64. Sun Company was constructing an asset that quialified for
gain should West recognize on this exchange? interest capitalization. The entity had outstanding notes payable
57. On January 1, 2015 Cruise Company borrowed P30,000,000 during the entire year of cpnstruction comprising P6,000,000 8%
evidenced by a 3-year 10% note payable and began construction of a interest and P9,000,000 9% interest. None of the borrowings were
cruise ship. Annual payments of principal and interest in the amount specified for the construction of the qualified asset. What interest
P13,000,000 are due every December 31. The entity used all rate should be used to calculate capitalized interest on the
proceeds as down payment for construction. What amount should constuction?
be reported as interst expense related to the note in the income 65. The third year of a construction project of Jilliane Company
statement for 2016? began with a P3,000,000 balance in construction in progres.
58. Binance Company received a grant of P600,000 related to Included in that figure is P600,000 of interest capitalized in the first
depreciable asset acquired on January 1, 2015 for P6,000,000. The two years. Construction expenditures during the third year were
asset has a useful life of 5 years and residual value. On January 1, P8,000,000 which were incurred evenly throughout the entire year.
2017 , the grant became fully repayable due to noncompliance with The entity had P30,000,000 in interest-bearing debt outstanding in
conditions . the third year at an interest rate of 9%.
What is the carrying amount of the asset on December 31, 2017 if What amount of interest for the third year is capitalized?
deferred income approach is used ? 66. Wicker Corporation operates a manufacturing plant in California.
59. ABC Company had the following general borrowing during 2015 Due to a change in business climate, an impairment test is deemed
which were used to finance the construction of a new building. appropriate. Management has acquired the following information
                  Principal      Borrowing cost for the assets at the plant:
10% bank loan            2,800,000      280,000 Cost      $58,500,000
10% short-term note      1,600,000      160,000 Accumulated depreciation      26,400,000
12% long-term loan      2,000,000      240,000 Wicker's estimate of the total cash flows to be generated
                  6,400,000      680,000 by selling the products manufactured at its California plant,
The construction began on January 1, 2015 and the building was not discounted to present value      30,000,000
completed on December 31, 2015. The fair value of the California plant is estimated to be $24,000,000.
In the first phae of the constuction, there were idle funds which the Required:
entity invested and earned insterest income of P100,000. Determine the amount of impairment loss, if any.
Expenditures on the building were made as follows: 67. Camiller Company received a grant of P500,000 related to
January 1            400,000 depreciable asset acquired on January 1, 2015 for P5,500,000. This
March 31            1,000,000 grant was deducted from the cost of the asset with a useful life of 9
June 30                  1,200,000 years and residual value of P500,000 . On January 1, 2017 , the grant
Septmeber 30            1,000,000 became fully repayable due to noncompliance with conditions .
December 31            400,000 Round off your answers to whole number.
- What interest rate should be used to calcute capitalizable - What is the loss on repayment on 2017 ?
borrowing cost? - What is the depreciation for 2017 ?
- What is the amount of capitaizable borrowing cost? - What is depreciation for 2016 ?
60. Moses Company borrowed P4,000,000 on a 10% note payable to 68. Marian Company borrowed P20,000 at 10% partly for general
finance a new warehouse which the entity is constructing for own purpose and partly to finance the construction of a building on
use. The only other debt of the entity is a P6,000,000, 12% mortage January 1, 2015. The loan shall be repaid commencing the month
following completion of the building. Expenditures incurred evenly with the results of other methods.  You are to assume that the
during the year for the completed building totaled P12,000,000 on following schedules have been correctly prepared for this asset
December 31, 2015. the entity earned interest of P200,000 for the using the straight-line method (SL) and the double declining balance
year on the unexpended porion of the loan. (DDB).
What amount of interest is capitalized on December 31,2015?                   Year                   SL                  DDB
69. On January 1, 2014 , Samar Company paid P5,000,000 for                      1                  P6,000                  P13,200
property containing natural resource of 2,500,000 tons of ore. The                      2                    6,000                      7,920
present value of the estimated cost of restoring the land after the                      3                     6,000                      4,752
resource is extracted is P400,000 and the land will have a value of                      4                     6,000                      2,851
P400,000 after it is restored for suitable use.                      5                    6,000                 1,277
Tunnels , bunk houses and other fixed installations are constructed                                     P30,000             P30,000
at a cost of P8,000,000 and such expenditures are charged to mine      The acquisition cost of the plant asset was:
improvements. 76. On January 1, 2015, Hamlet Company borrowed P6,000,000 at
Operations began on January 1,2015 and resources removed totaled an annual interest rate of10% to finance specifically the cost of
640,000 tons. During 2016 , a discovery was made indicating that building an electricity generating plant. Construction commenced on
available resource after 2016 will total 1,500,000 tons. January 1, 2015 with a cost P6,000,000. Not all the cash borrowed
At the beginning of 2016 , additional bunk houses were constructed was used immediately, so interrest income of P80,000 was
in the amount of P770,000 . In 2016, only 400,000 tons were mined generated by temporarily investing some of the borrowed funds
because of a strike. prior to use. The project was completed on November 30, 2015.
- What amount should be recorded as depletion for 2016 ? What is the carrying amount of the plant on November 30, 2015?
- What amount should be recorded as depletion for 2015 ? 77. On June 30, 2021, Running After Equipment purchased a
 70. Bright Company purchased factory equipment which was precision laser-guided steel punch that has an expected capacity of 
installed and put into service January 3, 2002 at a total cost of 319,000 units and no residual value. The cost of the machine was 
P1,280,000.  Salvage value was estimated at P80,000.  The $414,700 and is to be depreciated using the units-of-production
equipment is being depreciated over 8 years by the double declining method. During the six months of 2021,  43,000 units of product
balance method.  For the year 2003, how much depreciation were produced. At the beginning of 2022, engineers estimated that
expense should Bright record on this equipment? the machine can realistically be used to produce only another 
 71. On March 31, 2002, Win Company traded in an old machine 224,250 units. During 2022,  80,000 units were produced.
having a carrying amount of P168,000 and paid a cash difference of Running After would report depreciation in 2022 of:
P60,000 for a new machine having a total cash price of P205,000.  78. Creamy White Corporation provided the following information
On March 31, 2002, what amount of loss should Win recognize on with respect to its building: The building was acquired January 1,
this exchange? 2008 at a cost of P7,800,000 with an estimated useful life of 40 years
72. In January 2014, Taken Corporation paid the national and salvage value of P200,000.  Yearly depreciation was computed
government a fee jn the amount of P120,000,000 for an area of on the straight-line method. The building was renovated on January
interest with removable ore estimated by geological surveys at 1, 2010 at a cost of P760,000.  This was considered as improvement. 
4,300,000 tons. Taken Company is required by the national Salvage value did not change.
government to restore the specific area of interest after the On January 1, 2013, the management decided to change the total
extraction of the estimated units of reserves. On January 1, 2014 the life of the building to 30 years.
present value of restoration costs discounted at 10% based on the - What is the depreciation on the building for 2013?
expected 10 years the mineral reserves are extracted, is
P3,850,000 .The company incurred P2,100,000 of development costs
in preparing the property for the extraction of ore. During 2014,
500,000 tons were removed. For the year ended December 31,
2014, how much amount of amortization should the company
recognize?
73. The following expenditures relating to the plant building were
made by Pine Company during the year ended December 31, 2020:
Replacement of a broken gear on a machine                  P1,500
      Replacement of tiles on a portion of the roof            4,500
      Overhaul of machinery that is expected to extend its
            useful life for another three years                          7,500
How much should be charged to expense in 2020?
74. On June 30, 2021, He is Faithful Inc. acquired a precision laser-
guided steel punch that has an expected capacity of  300,000 units
and no residual value. The cost of the machine was  $360,000 and is
to be depreciated using the units-of-production method. During the
six months of 2021,  32,000 units of product were produced. At the
beginning of 2022, engineers estimated that the machine can
realistically be used to produce only another  238,000 units. During
2022,  78,000 units were produced.
He is Faithful would report depreciation in 2021 of:
75. Pike Company acquired a plant asset at the beginning of year 1. 
The asset has an estimated useful service life of 5 years.  An
employee has prepared depreciation schedules for this asset using
two different methods to compare the results of using one method