BM1706

Name _ Dela Cruz, Shiela Jane L. _ _ _ Section _ BSA-2A _

Date November 06, 2021 _
Exam Reminders: C 6. Which model for subsequent measurement is
• Any form of cheating will result in a score of ZERO. (e.g. described in the statement below?
leaking of exam items and answers on social media, After recognition as an asset, an item of property,
copying from other students, using prohibited plant, and equipment whose fair value can be
resources/cheat sheets, etc.) measured reliably shall be carried at a revalued
• Use black or blue pen only. Pencils and erasable pens are amount, being its fair value at the date of the
not allowed. revaluation less any subsequent accumulated
depreciation and subsequent accumulated
I. (30 points: 10 items x 3 points) impairment losses.
Read and analyze each item. Write the letter of the correct A. Fair value model
answer on the space provided. B. Cost model
A 1. These are depreciable land developments recorded C. Revaluation model
separately from land, such as paved parking fences, D. Equity model
sidewalks, and driveways.
A. Land improvements A 7. It is the present value of the cash flows an entity
B. Building expects to arise from the continuing use of an asset
C. Equipment and from its disposal at the end of its useful life or
D. Furniture and fixtures expects to incur when settling a liability.
A. Entity-specific value
D 2. It is an asset that takes substantial period of time to B. Carrying amount
get ready for its intended use. C. Residual value
A. Wasting asset D. Depreciable amount
B. Inventory
C. Fixed asset B 8. It is the amount by which the carrying amount of an
D. Qualifying asset asset exceeds its recoverable amount.
A. Depreciation expense
C 3. It is the estimated amount that an entity would B. Impairment losses
currently obtain from disposal of the asset, after C. Revaluation surplus
deducting the estimated costs of disposal, if the asset D. Amortization expense
were already of the age and in the condition expected
at the end of its useful life. C 9. It is a financial accounting term, which refers to the
A. Cost higher of a market value of an asset, or the value
B. Carrying amount provided to the company as currently used.
C. Residual value A. Entity-specific value
D. Depreciable amount B. Carrying amount
C. Recoverable amount
A 4. It is the systematic allocation of the depreciable D. Depreciable amount
amount of an asset over its useful life.
A. Depreciation D 10. Which of the following is NOT included in the cost of
B. Revaluation an item of property, plant, and equipment?
C. Impairment A. Its purchase price, including import duties and
D. Allocation non-refundable purchase taxes, after deducting
trade discounts and rebates
B. Any costs directly attributable to bringing the
B 5. Which model for subsequent measurement is asset to the location and condition necessary for
described in the statement below? it to be capable of operating in the manner
After recognition as an asset, an item of property, intended by management
plant, and equipment shall be carried at its cost less C. The initial estimate of the costs of dismantling
any accumulated depreciation and any accumulated and removing the item and restoring the site on
impairment losses. which it is located; and the obligation for which
A. Fair value model an entity incurs either when the item is acquired
B. Cost model or as a consequence of having used the item
C. Revaluation model during a particular period for purposes other than
D. Equity model to produce inventories during that period
D. Accumulated depreciation and accumulated
impairment losses

05 Quiz 1 *Property of STI

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 BM1706
Name _ _ _ _ Section _ _ Date _
II. (10 points: 2 items x 5 points)
Answer the following items.

Use a 10-column worksheet for the solution.

Determine the amount that would be initially recognized for

the property, plant, and equipment item presented in each
scenario.

Scenario 1:
Purchase price P4,000,000
Demolition of building 200,000
Proceeds from sale of salvaged 20,000
materials
Legal fees for purchase contract and 150,000
recording ownership
Title guarantee insurance 50,000
Payment of property taxes in arrears 100,000
Option premium paid for an alternative 30,000
land not acquired
Special assessment for city 120,000
improvements

Requirement 1: Compute for the cost of land.

Answer:

Purchase Price P4,000,000

Add: Legal Fees for Purchase Contract and Recording Ownership 150,000
Title Guarantee Insurance 50,000
Cost of Land P4,200,000

05 Quiz 1 *Property of STI

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 BM1706

Scenario 2:
Cash paid for machine, including VAT P896,000
of P96,000
Cost of transportation 30,000
Cost of installation 50,000
Cost of testing machine 40,000
Cost of safety rails and platform 60,000
surrounding machine
Cost of water device to keep machine 80,000
cool
Cost of adjustment to machine to make 75,000
it operate more efficiently
Cost of repairing damage during 45,000
installation
Cost of spare parts to cover 155,000
breakdowns
Estimated dismantling cost to be 65,000
incurred as required by contract
Insurance cost for the current year 15,000
Cost of training personnel who will use 25,000
the machine

Requirement 2: Compute for the cost of machine.

Answer:

Cash Paid for Machine, including VAT of P96,000 P896,000

Add: Cost of Transportation 30,000
Cost of Installation 50,000
Cost of Testing Machine 40,000
Cost of Safety Rails and Platform Surrounding Machine 60,000
Cost of Water Device to keep machine cool 80,000
Estimated Dismantling Cost to be Incurred as required 65,000
contract
Cost of Machine P1,221,000

05 Quiz 1 *Property of STI

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