1st Monthly Pre-Board Examination

June 25, 2018

FAR

1. During 2018, Miles Corporation disposed of Pine Division, a major component of its business. Miles
realized a gain of P1,200,000, net of taxes, on the sale of Pine’s assets. Pine’s operating losses, net of
taxes, were P1,400,000 in 2018. How should these facts be reported in Miles income statement for
2018?
Total Amount to be Included in
Income from Results of
Continuing Operations Discontinued Operations
a. P1,400,000 loss P1,200,000 gain
b. 200,000 loss 0
c. 0 200,000 loss
d. 1,200,000 gain 1,400,000 loss

2. Company O is a supplier of industrial products, in 2018, the company purchased a plot of land on the
outskirts of a major city. The land was originally acquired at a cost of P15,000,000. the area has
mainly low-cost public housing and very limited public transport facilities. The national government
has plans to develop the area as an industrial park in five years time and land is expected to greatly
appreciate in value if the government proceeds with the plan. Company O’s management has not
decided what to do with the property. On December 31, 2019, the property has the current fair
value of P15,400,000. How should the company classify the property in its December 31, 2019
statement of financial position?
a. As land at its historical cost of P15,000,000.
b. As land at its current fair value of P15,400,000.
c. As investment property at its current fair value of P15,400,000.
d. As inventory at the lower of cost of P15,000,000 or current fair value of P15,400,000.

3. The balance in Moon Co.’s accounts payable account at December 31, 2018 was P700,000 before any
necessary year-end adjustments relating to the following:
 Goods were in transit to Moon from a vendor on December 31, 2018. The invoice cost was
P40,000. The goods were shipped f.o.b. shipping point on December 29, 2018 and were received
on January 4, 2019.
 Goods shipped f.o.b. destination on December 21, 2018 from a vendor to Moon were
received on January 4, 2019.
 On December 27, 2018, Moon wrote and recorded checks to creditors totaling P30,000 that
were mailed on January 6, 2019.

In Moon’s December 31, 2018 balance sheet, the accounts payable should be
a. P730,000. c. P765,000.
b. P740,000. d. P770,000.

4. Eastern Co. provided the following information about the composition of its cash on December 31,
2018:
 Commercial savings account of P600,000 and a commercial checking account balance of
P900,000 are held at BPI.
  Money market fund account held by Citibank that permits Eastern to write checks in this
balance, P5,000,000.
 Travel advances of P180,000 for executive travel for the first quarter of next year (employee to
pay through salary deduction.)
 A separate cash fund on the amount of P1,500,000 is restricted for the retirement of long term
assets.
 Petty cash fund, P10,000.

What is the correct amount of cash and cash equivalents Eastern Company should report in its
December 31, 2018 statement of financial position?
a. P610,000 c. P6,400,000
b. P1,510,000 d. P6,510,000

5. At the close of its first year of operations, December 31, 2018, Ming Company had accounts
receivable of P540,000, after deducting the related allowance for doubtful accounts. During 2018,
the company had charges to bad debt expense of P90,000 and wrote off, as uncollectible, accounts
receivable of P40,000. What should the company report on its balance sheet at December 31, 2018,
as accounts receivable before the allowance for doubtful accounts?
a. P670,000 c. P490,000
b. P590,000 d. P440,000

6. During 2018 the PIC Company had a net income of P500,000. In addition, selected accounts showed
the following changes:

Accounts Receivable P30,000 increase

Accounts Payable 10,000 increase
Building 40,000 increase
Depreciation Expense 15,000 increase
Bonds Payable 80,000 increase

What was the amount of cash provided by operating activities?

a. P495,000 c. P515,000
b. P500,000 d. P595,000

7. Net income for Trex Outdoors in 2019 was P9,154 (in thousands). There was an addition to net
income on the statement of cash flows for P2,106 (in thousands) for the change in accounts
receivable. The accounts receivable balance on December 31, 2018 was P20,851 (in thousands). How
much was the accounts receivable balance on December 31, 2019?
a. P11,260 (in thousands) c. P22,957 (in thousands)
b. P18,745 (in thousands) d. P20,851 (in thousands)

8. Boxer Inc. uses the conventional retail method to determine its ending inventory at cost. Assume the
beginning inventory at cost (retail) were P65,500 (P99,000), purchases during the current year at
cost (retail) were P568,000 (P865,600), freight-in on these purchases totaled P26,500, sales during
the current year totaled P811,000, and net markups were P69,000. What is the ending inventory
value at cost?
a. P222,600 c. P142,241
b. P174,366 d. P152,308
9. Wand Company has 40,000 shares of unquoted equity instrument of Sand Corporation. These shares
were acquired at P40 per share on January 2, 2018. On December 31, 2018, Wand Company sold
30,000 shares of its investment in Sand Corporation for P50 per share. The remaining securities were
sold on December 15, 2019 for P60 per share. Market value of Sand’s shares is not determinable or
cannot be measured reliably. If the company uses the cost recovery method, what amount realized
gain or loss should Wand Company recognize in 2019 from selling those shares?
a. P100,000 c. P500,000
b. P400,000 d. P600,000

10. On January 2, 2018, Paragon Company acquired 16,000 ordinary shares of Hexagon Company at P50
per share. On July 1, 2018, the Hexagon ordinary share was spilt 5 to 1.

On October 2, 2018, Paragon received from Hexagon a preference share dividend of one share for
every 10 ordinary shares held. On this date, the market price of Hexagon ordinary is P15 per share
and preference, P10 per share.

On December 31, 2018, Paragon received from Hexagon a dividend in kind of one share of Octagon
Company ordinary share for every 4 Hexagon ordinary shares held. The market price of Octagon
ordinary is P5 per share.

In its 2018 statement of comprehensive income, how much should Paragon report as dividend
revenue?
a. None c. P100,000
b. P40,000 d. P150,000

11. Roller Company has acquired 30,000 shares of the 100,000 shares outstanding Coaster Company for
P2,700,000 on January 2, 2018. Coaster Company’s net asset at the time of acquisition was
P9,000,000. For the year ended December 31, 2018, Coaster Company reported a net income of
P1,200,000 and paid dividends of P600,000. On January 2, 2019, Coaster Company issued addition
50,000 shares at the prevailing market price of its shares at P120 per share. All the newly issued
shares were sold to new investors. What amount dilution gains or losses should Roller Company
recognize?
a. None c. P360,000
b. P240,000 d. P480,000

12. On July 1, 2018, Granny Company purchased an 8%, 4-year, P4,000,000 face value bonds for
P3,746,400. The bonds are dated July 1, 2018 and pays interest very June 30. Effective rate of the
bonds is 10%. What is the total amount of interest income that Granny should report in its
December 31, 2019 profit or loss?
a. P320,000 c. P377,372
b. P374,640 d. P380,104

13. On December 1, 2018. Keso Company acquired a new delivery truck in exchange for an old delivery
truck that it had acquired in 2015. The old truck was purchased for P1,400,000 and had a book value
of P600,000. On the date of the exchange, the old truck had a fair value of P560,000. In addition,
Keso paid P1,820,000 cash for the new truck, which had a list price of P2,520,000. The exchange
 lacked commercial substance. At what amount should Keso record the new truck for financial
accounting purposes?
a. P1,820,000 c. P2,420,000
b. P2,380,000 d. P2,520,000

14. Straight Industries purchased a large piece of equipment from Curvy Company on January 2, 2017.
Straight Industries signed a note agreeing to pay Curvy Company P400,000 for the equipment on
December 31, 2019. The market rate on interest for similar notes was 8%. The present value of
P400,000 discounted at 8% for three years is P317,520. On January 2, 2017, Straight recorded the
purchase with a debit to equipment for P317,520 and a credit to notes payable for P317,520.
Accrued interest was recorded annually. On December 31, 2019 the due date of the note, Straight
paid the amount due and recorded the transaction with a
a. Debit to notes payable P400,000 c. Credit to notes payable for P400,000
b. Credit to notes payable P317,520 d. Credit to notes payable for P317,520

15. Balcony Corporation acquires a coal mine at a cost of P500,000. Intangible development costs total
P120,000. After extraction has occurred, Balcony must restore the property (estimated fair value of
the obligation is P60,000), after which it can be sold for P170,000. Balcony estimates that 5,000 tons
of coal can be extracted. If 900 tons are extracted the first year, which of the following would be
included in the journal entry to record depletion?
a. Debit to Accumulated Depletion for P91,800
b. Debit to Inventory for P91,800
c. Credit to Inventory for P90,000
d. Credit to Accumulated Depletion for P153,000

16. Ecker Company purchased a new machine on May 1, 2009 for P880,000. At the time of acquisition,
the machine was estimated to have a useful life of ten years and an estimated salvage value of
P40,000. The company has recorded monthly depreciation using the straight-line method. On March
1, 2018, the machine was sold for P120,000. What should be the gain of loss recognized from the
sale of the machine?
a. P0 c. P40,000
b. P18,000 d. P58,000

17. On January 1, 2016 Gordon Company purchased a patent for P420,000 from an inventor who had
developed a new manufacturing process. At the time of the purchase, the patent had a remaining
legal life of 10 years. At the end of 2019 after amortization had been recorded through December 31,
2018, Gordon Company concluded that the estimated discounted future cash flows from the patent
to be P200,000 as required to test for impairment. By how much should the revenue in year 2019 be
charged related to the patent?
a. None c. P52,000
b. P42,000 d. P94,000

18. In January, 2011, Findley Corporation purchased a patent for a new consumer product for P720,000.
At the time of purchase, that patent was valid for fifteen years. Due to the competitive nature of the
product, however, the patent was estimated to have a useful life if only ten years. During 2016 the
product was permanently removed from the market under governmental order because of a
potential health hazard present in the product. What amount should Findley charged to expense
during 2016, assuming amortization is recorded at the end of each year?
 a. P480,000 c. P288,000
b. P360,000 d. P 72,000

19. Lopez Corp. incurred P420,000 of research and development costs to develop a product for which a
patent was granted on January 2, 2011. Legal fees and other costs associated with registration of the
patent totaled P80,000 on March 31, 2016, Lopez paid P150,000 for legal fees in a successful defense
of the patent. The total amount capitalized for the patent through March 31, 2016 should be
a. P80,000 c. P230,000
b. P150,000 d. P650,000

20. On December 31, 2017, Irey Co. has P2,000,000 of short-term notes payable due on February 14,
2018. On January 10, 2018, Irey arranged a line of credit with County Bank which allows Irey to
borrow up to P1,500,000 at one percent above the prime rate for three years. On February 2, 2018,
Irey borrowed P1, 200,000 from County Bank and used P500,000 additional cash to liquidate
P1,700,000 of the short-term notes payable. The amount of the short-term notes payable that
should be reported as current liabilities on the December 31, 2017 balance sheet which is issued on
March 5, 2018 is
a. P0 c. P500,000
b. P300,000 d. P800,000

21. Fuller Food Company distributes to consumers coupons which may presented (on or before a stated
expiration date) to grocers for discounts on certain products of Fuller. The grocers are reimbursed
when they send the coupons to Fuller. In Fuller’s experience, 50% of such coupons are redeemed,
and generally one month elapses between the date a grocer receives a coupon from a consumer and
the date Fuller receives it. During 2018 Fuller issued to separate series of coupons as follows:

Consumer Amount Disbursed

Issued On Total Value Expiration Date as of 12/31/18
1/1/18 P375,000 6/30/18 P177,000
7/1/18 540,000 12/31/18 225,000

The only journal entries to date recorded debits to coupon expense and credits to cash of P536,000.
The December 31, 2018 balance sheet should include liability for unredeemed coupons of
a. P0 c. P 93,000
b. P45,000 d. P270,000

22. Mott Co. includes one coupon in each bag of cog food it sells. In return for eight coupons, consumers
receive a leash. The leashes cost Mott P2.00 each. Mott estimates that 40 percent of the coupons
will be redeemed. Data for 2018 and 2019 are as follows:
2018 2019
Bags of dog food sold 500,000 600,000
Leashes purchased 18,000 22,000
Coupons redeemed 120,000 150,000

The premium expense for 2018 is

a. P25,000 c. P35,000
b. P30,000 d. P50,000
23. During 2018, Eaton Co. introduces a new product carrying a two-year warranty against defects. The
estimated warranty costs related to dollar sales are 2% within 12 months following sale and 4% in
the second 12 months following sale. Sales and actual warranty expenditures for the years ended
December 31, 2018 and 2019 are as follows:
Actual Warranty
Sales Expenditures
2018 P 800,000 P12,000
2019 1,000,000 30,000
P1,800,000 P42,000

At December 31, 2019, Eaton should report an estimated warranty liability of

a. P0 c. P30,000
b. P10,000 d. P66,000

24. The 10% bonds payable of Nixon Company had a net carrying amount of P570,000 on December 31,
2018. The bonds, which had a face value of P600,000, were issued at a discount to yield 12%. The
amortization of the bond discount was recorded under the effective-interest method. Interest was
paid on January 1 and July 1 of each year. On July 2, 2019, several years before their maturity, Nixon
retired the bonds at 102. The interest payment on July 1, 2019 was made as scheduled. What is the
loss that Nixon should record on the early retirement of the bonds on July 2, 2019? Ignore taxes.
a. P12,000. c. P33,600.
b. P37,800. d. P42,000.

25. On January 1, 2018, Jason Company issued P5 million of 10-year bonds at a 10% stated interest rate
to be paid annually. The following present value factors have been provided to answer the
subsequent questions

Time periodInterest PV of P PV of an Annuity

10 10% .386 6.145
10 8% .463 6.710
10 12% .322 5.650

Calculate the issuance price if the market rate of interest is 12%.

a. P4,427,500 c. P4,435,000
b. P4,447,500 d. P5,000,000

26. Welch Co. purchased a put option on Reese common shares on July 7, 2018, for P215. The put
option is for 300 shares, and the strike price is P51. The option expires on July 31, 2018. The
following data are available with respect to the put option:

Date Market Price of Reese Shares Time Value of Put Option

March 31, 2018 P48 per share P120
June 30, 2018 P50 per share 54
July 6, 2018 P46 per share 16

If the change in the value of the put option was properly recorded on June 30, 2018, what amount of
gain or loss should Welch Company recognized on July 6, 2018 due to the further change in the value
of the derivatives?
 a. P38 c. P1,162
b. P666 d. P1,200

27. Torrents Co. manufactures equipment that is sold or leased. On December 31, 2018, Torrents leased
equipment to Dalton for a five-year period ending December 31, 2023, at which date ownership of
the leashed asset will be transferred to Dalton Equal payments under the lease are P220,000
(including P20,000 executory costs) and are due on December 31 of each year. The first payment was
made on December 31, 2018. collectibility of the remaining lease payments is reasonably assured,
and Torrents has no material cost uncertainties. The normal sales price of the equipment is
P770,000, and cost is P600,000. For the year ended December 31, 2018, what amount of income
should Torrents realize from the lease transaction?
a. P170,000 c. P230,000
b. P220,000 d. P330,000

28. Harter Company leased machinery to Stine Company on July 1, 2018, for a ten-year period expiring
June 30, 2019. Equal annual payments under the lease are P75,000 and are due on July 1 of each
year. The first payment was made on July 1, 2018. The rate of interest used by Harter and Stine is 9%.
The cash selling price of the machinery is P525,000 and the cost of the machinery on Harter’s
accounting records was P465,000. Assuming that the lease is appropriately recorded as a sale for
accounting purposes by Harter, what amount of interest revenue would Harter record for the year
ended December 31, 2018?
a. P47,250 c. P23,625
b. P40,500 d. P20,250

Items 29 and 30 are based on the following information:

On January 2, 2018, Hernandez, Inc. signed a ten-year noncancelable lease for a heavy-duty drill
press. The lease stipulated annual payments of P150,000 starting at the end of the first year, with
title passing to Hernandez at the expiration of the lease. Hernandez treated this transaction as a
capital lease. The drill press has an estimated useful life of 15 years, with no salvage value.
Hernandez uses straight-line depreciation for all of its plant assets. Aggregate lease payments were
determined to have a present value of P900,000, based on implicit interest of 10%.

29. In its 2018 income statement, what amount of interest expense should Hernandez report from this
lease transaction?
a. P0 c. P75,000
b. P56,250 d. P90,000

30. In its 2018 income statement, what amount of depreciation expense should Hernandez report from
this lease transaction?
a. P150,000 c. P90,000
b. P100,000 d. P60,000

31. Presented below is information related to Jensen Inc. pension plan for 2018.
Service cost P900,000
Actual return on plan assets 210,000
Interest on projected benefit obligation 390,000
Amortization of actuarial net loss 90,000
Amortization of prior service cost due to increase in benefits 165,000
 Expected return on plan assets 180,000

What amount should be reported for pension expense in 2018?

a. P1,365,000 c. P1,515,000
b. P1,335,000 d. P1,155,000

Use the following information for questions 32 and 33.

At the beginning of 2018, Pitman Co. purchased an asset for P600,000 with an estimated useful life
of 5 years and an estimated salvage value of P50,000. For financial reporting purpose the asset is
being depreciated using the straight-line method; for tax purposes the double-declining-balance
method is being used. Pitman Co.’s tax rate is 40% for 2018 and all future years.

32. At the end of 2018, what are the book basis and the tax basis of the asset?
Book basis Tax basis
a. P440,000 P310,000
b. P490,000 P310,000
c. P490,000 P360,000
d. P440,000 P360,000

33. At the end of 2018, which of the following deferred tax accounts and balances is reported on
Pitman’s balance sheet?
Account Balance
a. Deferred tax asset P52,000
b. Deferred tax liability P52,000
c. Deferred tax asset P78,000
d. Deferred tax liability P78,000

34. For calendar year 2018, Kane Corp. reported depreciation of P1,200,000 in its income statement. On
its 2018 income tax return, Kane reported depreciation of P1,800,000. Kane’s income statement also
included P225,000 accrued warranty expense that will be deducted for tax purposes when paid.
Kane’s enacted tax rates are 30% for 2018 and 2019 and 24% for 2020 and 2021. The depreciation
difference and warranty expense will reverse over the next three years as follows:

Depreciation Difference Warranty Expense

2019 P240,000 P 45,000
2020 210,000 75,000
2021 150,000 105,000
P600,000 P225,000

These were Kane’s only temporary differences. In Kane’s 2018 income statement, the deferred
portion of its provision for income taxes should be:
a. P200,700 b. P112,500 c. P101,700 d. P109,800

35. Canary Corporation started business in 2013 by using 200,000 shares of P20 par common stock for
P36 each. In 2018, 20,000 of these shares were purchased for P52 per share by Canary Corporation
and held as treasury stock. On June 15, 2019, these 20,000 shares were exchanged for a piece of
property that had an assessed value of P810,000. Canary’s stock is actively traded and had a market
piece of P60 on June 15, 2019. The cost method is used to account for treasury stock.
 The amount of share premium form treasury stock transactions resulting from the above events
would be
a. P800,000 b. P480,000 c. P390,000 d. P160,000

36. On December 1, 2018, Abel Corporation exchanged 20,000 shares of its P10 par value common stock
held in treasury for a used machine. The treasury shares were acquired by Abel at a cost of P40 per
share, and are accounted for under the cost method. On the date of the exchange, the common
stock had a market value of P55 per share (the shares were originally issued at P30 per share). As a
result of this exchange, Abel’s total stockholder’s equity will increase by
a. P200,000 b. P800,000 c. P90,0000 d. P1,100,000

37. On July 1, 2018, Ellison Company granted Sam Wine, an employee, an option to buy 400 shares of
Ellison Co. stock for P30 per share, the option exercisable for 5 years from date of grant. Using a fair
value option pricing model, total compensation expense is determined to be P1,800. Wine exercised
his option on October 1, 2018 and sold his 400 shares on December 1, 2018. Quoted market prices
of Ellison Co. stock in 2018 were:

July 1 P30 per share

October 1 P36 per share
December 1 P40 pre share

The service period is for three years beginning January 1, 2018. as a result of the option granted to
Wine, using the fair value method, Ellison should recognize compensation expense on its books in
the amount of
a. P1,800 b. P600 c. P450 d. 0

38. McGuire Company had the following stockholders’ equity selection:

Share capital, par P10 (20,000 shares issued, P200,000; Share premium reserve, P15,000; Retained
earnings balance, January 1, 2018, P80,000; Revenues earned during 2018, P400,000; Expenses
(excluding income tax) incurred during 2018, p320,000; Cash dividends declared and paid during
2018, P30,000; Treasury stock (2,000 shares at cost), P25,500; Income tax rate throughout the year
2018, 30%. At what amount per share was the treasury stock purchased?
a. P17.00 b. P10.00 c. P12.75 d. P15.00

39. Mann Co. has outstanding 50,000 share of 8% preferred stock with a P10 par value and 125,000
shares of P3 par value common stock. Dividends have been paid every year except last year and the
current year. If the preferred stock is cumulative and nonparticipating and P250,000 is distributed,
the common stockholders will receive
a. P0 b. P170,000 c. P210,000 d. P250,000

40. At the beginning of 2018, Hamilton Company had retained earnings of P150,000. During the year
Hamilton reported net income of P75,000, sold treasury stock at a “gain” of P27,000, declared a cash
dividend of P45,000 and declared and issued a small stock dividend of 1,500 shares (P10 par value)
when the market value of the stock was P30 per share. The amount of retained earnings available for
dividends at the end of 2018 was:
a. P184,500 b. P162,000 c. P157,500 d. P135,000
41. The Candle Barn has the following classes of books: Preferred stock, 8%, P100 par, 100,000 shares
issued and outstanding, cumulative; Common stock, par P5, 100,000 shares issued 500,000 shares
outstanding. It paid no dividends in its first year of existence. In 210, its second year of existence, the
board of directors of The Candle Barn declared a total dividend of P1,800,000 that was paid to the
holders of preferred and common stock. What was the amount of the dividend paid in 2018 on each
share of preferred stock?
a. P16.00 b. P8.00 c. P12.00 d. P12.50

42. The following information is available for the Davidson Company. They have 10,000,000 common
shares issued, 500,000 million shares held in treasury, par value of P2 per share, and current market
price of P25 per share. They declare a 15% stock dividend. Which of the following is true?
a. Retained earnings will decrease and common stock will increase by P3 million
b. Retained earnings will decrease and common stock will increase by P2.85 million
c. Retained earnings will decrease and common stock will increase by P35.625 million
d. Retained earnings will decrease and common stock will increase by P36.0 million

43. Foyle, Inc., had 560,000 shares of common stock issued and outstanding at December 31, 2018. On
July 1, 2019, an additional 40,000 shares of common stock were issued for cash. Foyle also had
unexercised stock options to purchase 32,000 shares of common stock at P15 per share outstanding
at the beginning and end of 2019. The average market price of Foyle’s common stock was P20 during
2019. What is the number of shares that should be used in computing diluted earnings per share for
the year ended December 31, 2019?
a. 580,000 b. 588,000 c. 608,000 d. 612,000

44. At December 31, 2018, Halley Company had 1,200,000 shares of common stock outstanding. On
September 1, 2019, an additional 400,000 shares of common stock were issued. In addition, Halley
had P12,000,000 of 6% convertible bonds outstanding at December 31, 2018, which are convertible
into 800,000 shares of common stock. No bonds were converted into common stock in 2019. The net
income for the year ended December 31, 2019, was P4,500,000. Assuming the income tax rate was
30%, what should be the diluted earnings per share for the year ended December 31, 2019, rounded
to the nearest penny?
a. P2.11 b. P3.38 c. P2.35 d. P2.45

45. Hudson, Inc. is a calendar year corporation. Its financial statements for the years 2019 and 2018
contained errors as follows:
2019 2018
Ending inventory P3,000 overstated P8,000 overstated
Depreciation expense P2,000 understated P6,000 overstated

Assume that the proper correcting entries were made at December 31, 2018. By how much will 2019
income before taxes be overstated or understated?
a. P1,000 understated c. P2,000 overstated
b. P1,000 overstated d. P5,000 overstated

46. An inventory loss from market decline of P1,600,00 occurred in May 2018, after its March 31, 2018
quarterly report was issued. None of this loss was recovered by the end of the year. How should this
loss be reflected in the company’s quarterly income statement?
 Three Months Ended
3/31/18 6/30/18 9/30/18 12/31/18
a. –0- -0- -0- P1,600,000
b. –0- P 533,333 P533,333 P 533,333
c. –0- P1,600,000 -0- -0-
d. P400,000 P 400,000 P400,000 P 400,000

47. Creep Company purchased 100 beef cattle at an auction for P800,000 on July 1, 2018. Transportation
costs were P8,000. Creep Company would have to incur the same transportation costs if it had sold
its cattle in the auction. In addition there would be a 2% auctioneer’s fee on the market price of the
cattle payable by the seller. Creep Company also incurred P4,000 veterinary expenses. On December
31, 2018, the fair value of the cattle in the most relevant market increase to P880,000. On May 2,
2019, Creep Company sold 18 cattle at auction for P160,000 and incurred transportation charges of
P1,200

On June 15, 2019, The fair value of the remaining cattle was P662,560 but on the same day, 42 cattle
were slaughtered with total cost of P33,600. The fair value of the carcasses on that day was
P386,400 and the estimated transportation cost to sell the carcasses is P3,360. No other selling costs
are expected

On June 30, 2019, the fair value of the remaining 40 cattle was P358,400. The estimated
transportation cost is P3,200

What amount of gain as a result in the change in value of the biological asset to be reported in the
statement of comprehensive income for the year ended December 31, 2018?
a. None b. P78,400 c. P80,000 d. P96,000

48. Newton Company reported total sales revenue of P55,000 total expenses of P45,000 and net income
of P10,000 on its income statement for the year ended December 31, 2018. During 2018, accounts
receivable by P4,000 merchandise inventory decreased by P6,000 accounts payable increased by
P2,000 and depreciation of P8,000 was recorded. Therefore, based only on this information, the net
cash flows from operating activities for 2018 was:
a. P10,000 b. P18,000 c. P19,000 d. P30,000

49. Canadian Beer reported they sold equipment for P222 million and purchased P1,515 million of new
equipment. The equipment sold had a net book value of P150 million. Cash flow from investing
activities would show:
a. Inflow of P222 million and outflow of P1,515 million
b. Inflow of P150 million and outflow of P1,515 million
c. Net outflow of P1,293 million
d. Net outflow of P1,365 million

50. Milliken Company paid P2.2 million to purchase stock in another company, P1.0 million to
repurchase treasury shares, P.5 million to buy short-term investments, sold used equipment for P.8
million when its book value was P.6 million and purchased new equipment for P3.4 million. How
much will be reported as net investing cash flow?
a. P6.3 million net outflow
b. P5.3 million net outflow
c. P5.1 million net outflow
d. P4.8 million net outflow