Use the following information for the next five questions:

Entity A acquires equipment on January 1, 20x1. Information on costs is as follows:

Purchase price, gross of trade discount 1,000,000

Trade discount available 10,000
Freight costs 20,000
Testing costs 30,000

Net disposal proceeds of samples generated

during testing 5,000

Present value of estimated costs of dismantling the

equipment at the end of its useful life 6,209
1. How much is the initial cost of the equipment?
a. 1,041,209
b. 1,031,209
c. 1,061,209
d. 1,051,209
2. The equipment has an estimated useful life of 10 years and a residual value of ₱200,000. Entity A uses the straight line
method of depreciation. How much is the carrying amount of the equipment on December 31, 20x3?
a. 788,846
b. 802,846
c. 795,846
d. 764,846
3. On December 31, 20x3, Entity A revalues the equipment at a fair value of ₱820,000. There is no change in the residual value
and the remaining useful life of the asset. How much is the revaluation surplus on December 31, 20x3?
a. 17,154
b. 24,154
c. 55,154
d. 31,154
4. How much is the depreciation expense in 20x4?
a. 102,500
b. 117,143
c. 136,667
d. 88,571
5. Entity A sells the equipment for ₱870,000 on January 1, 20x5. Entity A incurs selling costs of ₱20,000 on the sale. How
much is the gain (loss) on the sale?
a. 118,571
b. 132,500
c. 147,143
d. 152,673
6. Imagine you are an employer (an awesome one). When should you recognize short-term employee benefits?
a. Every 1st day of the month
b. Every 15th and 30th of the month.
c. When the employees have rendered service in exchange for the employee benefits.
d. Never!
7. You are the business owner of Entity A. You have 10 employees, each earning ₱20,000 per month. You pay salaries on a bi-
monthly basis. During the month of April 20x1, none of your employees were absent, late or have rendered overtime service.
When will you recognize the salaries expense (and at what amount) for the first payday in the month of April 20x1?
Timing of recognition Amount recognized

a. April 1 20,000
 b. April 15 20,000
c. April 1 100,000
d. April 15 100,000
8. Entity A has 20 employees who are each entitled to one day paid vacation leave for each month of service rendered. Unused
vacation leaves cannot be carried forward and are forfeited when employees leave the entity. All the employees have
rendered service throughout the current year and have taken a total of 150 days of vacation leaves. The average daily rate of
the employees in the current period is ₱1,000. However, a 5% increase in the rate is expected to take into effect in the
following year. Based on Entity A’s past experience, the average annual employee turnover rate is 20%. How much will
Entity A accrue at the end of the current year for unused entitlements?
a. 0 c. 90,000
b. 150,000 d. 94,500
9. Under a profit-sharing plan, Entity A agrees to pay its employees 5% of its annual profit. The bonus shall be divided among
the employees currently employed as at year-end. Relevant information follows:
Profit for the year ₱8,000,000
Employees at the beginning of the year 8
Average employees during the year 7
Employees at the end of the year 6
If the employee benefits remain unpaid, how much liability shall Entity A accrue at the end of the year?

a. 400,000 c. 200,000
b. 300,000 d. 0
10. You are employed as an accountant. Your company’s retirement plan states that, upon retirement, an employee (not less than
60 years but not more than 65 years of age) is entitled to a lump sum payment equal to the employee’s final monthly salary
level multiplied by the number of years in service (not less than 10 years). At the end of month following the month of
retirement and every month thereafter, the retired employee is entitled to a monthly pension equal to one-eighth (1/8) of the
final monthly salary level. The monthly pensions cease upon death of the retired employee. However, if the employee has
immediate dependent(s) with age of less than 18 years, the dependent(s) will be entitled to the monthly pensions, which will
cease when the dependent(s) reaches 18 years of age. What type of post-employment benefit plan does your company have?
a. Defined contribution plan
b. Defined benefits plan
c. Defined pension plan
d. Cannot be determined; insufficient information!