Use the following information for the next two questions.

Pugo uses the retail inventory method. The following information is available for the current year:

Cost Retail

Beginning inventory P 1,300,000 P 2,600,000

Purchases 18,000,000 29,200,000

Freight in 400,000

Purchase returns 600,000 1,000,000

Purchase allowances 300,000

Departmental transfer in 400,000 600,000

Net markups 600,000

Net markdowns 2,000,000

Sales 24,700,000

Sales returns 350,000

Sales discounts 200,000

Employee discounts 600,000

Loss from breakage 50,000

8. The estimated cost of inventory at the end of the current year using the conventional (lower of
cost or market) retail inventory method is

a. P3,200,000 c. P3,250,000

b. P3,000,000 d. P3,360,000

9. The estimated cost of inventory at the end of the current year using the average retail inventory
method is

a. P3,200,000 c. P3,250,000

b. P3,000,000 d. P3,584,000
10. The estimated cost of inventory at the end of the current year using the FIFO retail inventory
method is

a. P3,200,000 c. P3,250,000

b. P3,000,000 d. P3,658,480

AGRICULTURE

A herd of 10 2 year old animals was held at 1 January 2012. One animal aged 2.5 years was purchased
on 1 July 2012 for 108, and one animal was born on 1 July 2012. No animals were sold or disposed of
during the period. Per-unit fair values less costs to sell were as follows:

2 - year old animal on January 1, 2012 100

Newborn animal at July 1, 2012 70

2.5 - year old animal on July 1, 2012 108

New born animal on December 31, 2012 72

0.5 - year old animal on December 31, 2012 80

2 - year old animal on December 31, 2012 105

2.5 - year old animal on December 31, 2012 111

3 - year old animal on December 31, 2012 120

11. The carrying amount of biological assets as of December 31, 2012 is

a. P1,292 c. P1,338

b. P1,400 d. P1,320

12. The increase in fair value of biological assets in 2012 due to price change is

a. P 55 c. P 53

b. P222 d. P212

13. The increase in fair value of biological assets in 2012 due to physical change is

a. P 70 c. P237

b. P229 d. P167
PROPERTY, PLANT AND EQUIPMENT ACQUISITION

14. During the current year, Benguet Company purchased a secondhand machine at a price of
P300,000. A cash down payment of P50,000 was made and a two-year, noninterest bearing note was
issued for the balance. Recent transactions involving similar machinery indicate that the used machine
has a cash price of P240,000. A new machine would cost P400,000.

The following costs were incurred on the machine during the year:

Cost of removing the old machine P2,000

Cash proceeds from the sale of the old machine

1,200

General overhaul and repair to recondition the machine prior to use

10,000

Cost of spare parts purchased and set aside for breakdowns during the first two years of normal use of
the machine

20,000

Cost of labor to install the machine 4,000

Cost of the testing the machine prior to use

1,800

Cost of hauling the machine from the vendor's place of business to the company's premises

5,000

Cost of repairing the damage to the machine when it was dropped during installation

3,000

Repairs incurred during the first year of operations

6,000
Safety devices added to the machine to comply with the terms of the collective bargaining agreement
entered into with the employees' union

12,000

Cost of training workers to operate the machine

1,500

Determine the amount to be capitalized as cost of the machine.

a. P262,800 c. P272,800

b. P280,800 d. P292,800

15. During 2012, Cavite Company made the following property, plant and equipment expenditures:

Land and building acquired from Bacoor Company

P9,000,000

Repairs made to the building 300,000

Special tax assessment 50,000

Remodeling of office space including new partitions and walls

400,000

In exchange for the land and building acquired from Bacoor, Cavite issued 60,000, P100 par value,
ordinary shares. On the date of purchase, the shares had a market value of P150 per share and the land
and building had fair value of P2,000,000 and P6,000,000 respectively.

During the year, Cavite also received land from a shareholder to facilitate the construction of a plant in
the city. Cavite paid P100,000 for the land transfer and charged this amount to legal expenses. The land
is fairly valued at P1,500,000.

The cost of the land and building acquired should respectively be

a. P3,800,000, and P7,450,000

b. P3,550,000, and P6,700,000

c. P3,500,000, and P6,400,000

d. P3,500,000, and P6,750,000

GOVERNMENT GRANT

16. Lively Inc. received a consolidated grant of P120 million. Three-fourths of the grant is to be
utilized to purchase a college building for students from underdeveloped or developing countries. The
balance of the grant is for subsidizing the tuition costs of those students for four years from the date of
grant.

The college building, which costs P100 million, will be depreciated using the straight-line method over
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