Professional Documents
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Mixed Sample Problems
Mixed Sample Problems
Mixed Sample Problems
POZORRUBIO
ACC415
Practice Problems: BIOLOGICAL ASSETS
1. Forester company provided the following assets in a forest plantation and farm:
2. Honey Company has a herd of 10 2-year old animals on January 1, 2016. One animal aged 2.5
years was purchased on July 1, 2016 for P108, and one animal was born on July 1, 2016.
No animal were sold or disposed of during the year. The fair value less cost of disposal per unit is
as follows:
3. Bear Company produced milk for sale to local and national ice cream producers. The entity began
operations at the beginning of current year by purchasing 650 milk cows for P8,000,000.
The entity provided the following information for the current year:
4. Salve Company is engaged in raising dairy livestock. The entity provided the following
information during the current year:
5. On January 1, 2017, Farm Company planted trees on its land. The entity purchased the land two
years ago at a cost of P1,000,000. The trees were considered bearer plants and had accumulated
cost of P500,000 on December 31, 2016.
By January 1, 2017, the trees had matured and were expected to bear produce for a period of 5
years.
On December 31, 2017, the trees produced fruit and the fair value less cost of disposal on such
date was P50,000. There was no harvest during 2017.
On December 31, 2018, the fruits were harvested and the fair value less cost of disposal on such
date was P75,000.
a. What is the carrying amount of the property, plant and equipment on December 31, 2017?
1,400,000
b. What is the carrying amount of the biological asset on December 31, 2017? 50,000
c. What is the carrying amount of the biological asset on December 31, 2018? 0
1. On January 1, 2018, She Company received a cash of P4,000,000 from a local government to be
used to defray safety hazard-related costs over a five-year period. It was estimated that such costs
will total P8,000,000 over the next five years. In 2018 and 2019, actual costs of safety and other
hazard-related costs amounted to P1,000,000 and 1,200,000, respectively.
Prepare all necessary journal entries in 2018 and 2019.
Gross Net
Cash 4M Cash 4M
Deferred income-GG 4M Deferred income-GG 4M
3. On January 1, 2019, various properties of Chaos Company were destroyed due to typhoon. It was
estimated that the cost of destroyed properties amounted to P15,000,000. On July 1, 2019, Chaos
received P2,000,000 from LGU Tacloban as a financial aid.
Provide all necessary journal entries in 2019.
4. On January 1, 2017, Love Company was granted by the government a 3-year, zero-interest loan
of P1,000,000 payable on December 31, 2019. Prevailing interest rate of this type of loan is 12%.
Provide all necessary journal entries in 2017.
Cash 1M
Discount on LP
Loan payable 1M
Deferred income – GG
Interest expense
Discount on LP
Deferred income – GG
Income from GG
1. A natural resource property was purchased by Global Company for 5,000,000. The output was
estimated to be 1M tons. Immovable mining equipment was acquired at the cost of P8M and a
movable heavy equipment acquired at 7M with a useful life of 7 years. The immovable
equipment has a useful life of 5 years but is capable of exhausting the resource in eight years.
Production is as follows:
First year 200,000 tons
Second year 250,000 tons
Third year None
Fourth year 100,000 tons
Compute depletion and depreciation for each of the four years
Compute depreciation on the immovable equipment assuming its useful life is 10 years.
1. On January 1, 2019, an entity purchased 40% of the outstanding ordinary shares of another entity
for P5,000,000 when the net assets of the investee amounted to P10,000,000.
At acquisition date, the carrying amounts of the identifiable assets and liabilities of the investee
were equal to their fair value, except for land whose the fair value was P2,000,000 greater than
carrying amount and inventory whose fair value was P1,500,000 greater than cost.
The land was sold in 2019 and one-half of the inventory was sold during 2019. During 2019, the
investee reported net income of P8,000,000, issued 10% stock dividends and paid cash dividends
of P2,500,000.
2. On January 1, 2019, an entity acquired 30% of the outstanding ordinary shares of another entity
for P2,000,000 which was equal to the carrying amount of interest acquired. The investee
reported net income of P800,000 for 2019 and paid dividend of P500,000 on December 31, 2019.
The investee reported net income of P1,000,000 for the six months ended June 31, 2020 and
P2,500,000 for the year ended December 31, 2020 but paid dividend of P1,000,000 on October 1,
2020.
On July 1, 2020, the investor sold half of the investment for P1,500,000. The fair value of the
retained investment is P1,600,000 on July 1, 2020 and P2,000,000 on December 31, 2020. The
retained investment is to be measured at FVPL.
2019
Investment in associate 2,000,000
Cash 2,000,000
2020
Investment in associate (1M x 30%) 6 mo.s 300,000
Investment income 300,000
a. What is the carrying amount of the investment before the disposal on June 30, 2020?
________________. 2.39M
b. What is the gain on sale of investment that should be reported for 2020? ________________.
305K
3. On January 1, 2019, an entity acquired a 10% interest in an investee for P3,000,000. The
investment was accounted for under cost method. During 2017, the investee reported net income
of P4,000,000 and paid dividend of P1,000,000.
On January 1, 2020, the entity acquired a further 15% interest in the investee for P8,500,000. On
such date, the carrying amount of the net assets of the investee was P36,000,000 and the fair
value of the existing 10% interest was P3,500,000. The fair value of the net assets of the investee
is equal to carrying amount except for an equipment whose fair value was P4,000,000 greater
than carrying amount. The equipment had a remaining useful life of 5 years.
The investee reported net income of P8,000,000 for 2020 and paid dividend of P5,000,000 on
December 31, 2020.
2019
Financial asset 3,000,000
Cash 3,000,000
Cash 100,000
Dividend income 100,000
2020
Investment in associate 8,500,000
Cash 8,500,000
Cash 1,250,000
Investment in associate 1,250,000
a. What amount of investment income (income from investment) should be recognized in 2019?
_________. 100K
e. What is the carrying amount of the investment in associate on December 31, 2020?
___________. 12.55M
2. Jasmin Company bought a machine for 900,000 on January 1, 2014. The machine’s useful life is
10 years estimated residual value P0; and is depreciated using the straight-line method.
On January 1, 2016 Jasmin Company adopted the revalued model in reporting its machinery and
equipment. The machine, which was acquired in 2014 was determined to have a sound value of
P960,000. Further analysis indicates that the machine’s remaining useful life was 6 years from
that date.
At the end of 2018, Jasmine Company conducted a recoverability test after receiving information
that there was a reduction in the performance of the machine as reported by the operations
department. Analysis of the market for a similar machine revealed to Jasmin Company that the
net selling price was at P270,000. The value in use of the machine was determined at P288,000.
3. Matt Company has determined that its fine china division is a cash-generating unit. The carrying
amounts of assets at December 31, 2019 are as follows:
Factory P476,000
Land 204,000
Equipment 170,000
Goodwill 50,000
The value in use of the division was 710,000. The fair value less cost to sell the land is P180,000.
a. The amount of impairment charged to Land? 24,000
b. Carrying amount of the Factory account after the allocation of the impairment loss? 390,526
c. The total amount of impairment loss absorbed by the Equipment account is? 30, 526
1. Borrowing costs that are directly attributable to the acquisition, construction or production of
qualifying asset are
a. Capitalized; other borrowing costs are expensed
b. Expensed; other borrowing costs are capitalized
c. Capitalized; other borrowing costs are also capitalized
d. Expensed; other borrowing costs are also expensed
4. Under PAS 23, an entity shall cease capitalizing borrowing costs when
a. Substantially all the activities necessary to prepare the qualifying asset for its intended use or
sale are complete
b. The physical construction of the asset is complete even though routine administrative work
might still continue
c. Any of these
6. On January1, 2019, Jas Inc. had the following borrowings made for general purposes and a part
of proceeds was used to finance the construction of a qualifying asset.
Loan Principal
12% short-term note P40,000,000
14% 3-year bank loan 72,000,000
16% 5-year note payable 88,000,000
Total 200,000,000
The construction of the qualifying asset was started on immediately and expenditures incurred on
the qualifying asset were as follows:
January 1 19,200,000
March 31 8,800,000
July 30 14,000,000
October 1 21,600,000
December 31 1,200,000
a. How much is the capitalizable borrowing cost? ___________. 5,362,427
b. How much interest expense should be reported in Jas’s 2019 income statement? _________
23, 597, 572
c. Use the fact pattern above, except that the total cost of construction was P72,000,000 which
was incurred evenly during the year? ____________. 5,212,800
7. On January 1, 2019, Min Company contracted for the construction of a building for 80,000,000
on a land that it had previously purchased. The building was completed on December 31, 2019.
The following payments were made to the constructor:
January 1 8,000,000
March 31 24,000,000
September 31 40,000,000
December 31 8,000,000
The following represents the borrowing of Min Company as of December 31, 2019.
10%, P28,000,000, 4-year note dated January 1, 2019 with simple interest payable
annually, specifically borrowed to finance the construction project. Interest income
earned on the temporary investment of the proceeds is P480,000.
12.5%, P40,000,000, 10-year note dated January 1, 2019 with interest payable annually.
10%, P60,000,000, 10-year note dated December 31, 2016 with interest payable annually.
a. How much is the capitalizable borrowing cost? _____________. 3.2M
8. Dream Company started construction of a qualifying asset on January 1, 2017. The following
were expenditures incurred on construction:
2017
January 1 P4,000,000
May 1 1,800,000
December 1 2,880,0000
2018
January 1 3,600,000
August 30 1,200,000
2019
July 1 2,400,000
Dream determined the capitalization rate to be 10%. The construction of the qualifying asset was
substantially completed on September 30, 2019.
a. How much is the capitalizable borrowing cost in 2017?_____________. 544,000
b. How much is the capitalizable borrowing cost in 2018? _____________. 1,322,400
c. How much is the capitalizable borrowing cost in 2019? _____________. 1,210,980
d. How much is the total cost of the constructed qualifying asset on September 30, 2019?
_____________. 18,957,380
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