Far Compre Draft

9/19/22, 10:07 AM Compre 2022: Financial Accounting and Reporting
Compre 2022: Financial Accounting and Reporting

Instruction:
1. For multiple choice questions, please choose the best answer.
2. For supply the answer questions, please be reminded of the correct way how to input the amounts
(example: P1,234,567 with capital P as the peso sign, comma sign to separate values, no space in between,
and no decimal points because final answers need to be rounded off to the nearest peso) unless specified in
the question the required format of the answer. If your answer is zero, just put P0 (capital P and zero, no
space in between). Students who will not follow the said format will automatically receive no point for the
said answer even though he/she got the correct answer.
God bless!
Hi, Beau Steffi. When you submit this form, the owner will see your name and email address.
* Required
In accounting for plant assets, which of the following outlays made subsequent to acquisition
should be fully expensed in the period the expenditure is made? * (1 Point)
Expenditure made to increase the efficiency or effectiveness of an existing asset
Expenditure made to extend the useful life of an existing asset beyond the time frame originally
anticipated
Expenditure made to maintain an existing asset so that it can function in the manner intended
Expenditure made to add new asset services
General-purpose financial statements are the product of * (1 Point)
financial accounting.
managerial accounting.
both financial and managerial accounting.

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neither financial nor managerial accounting.
Match the investment accounting approach with the correct valuation approach: Not held for
collection and Held for collection, respectively. * (1 Point)
Amortized cost; Amortized cost
Fair value; Fair Value
Fair value; Amortized cost
Amortized cost; Fair value
Brown Company constructed a building for its own use. Construction started on January 3,
2021 and the building was completed on December 31, 2021. Costs incurred during the year
were as follows:
January 1 - P400,000
April 1 - 500,000
August 1 - 480,000
December 1 - 180,000
To help finance the construction of the building, the company obtained a two-year, 10% loan
of P800,000. Prior to the disbursement of the loan proceeds, it was temporarily invested and
earned interest income of P12,000.
During the year 2021, the company has also general borrowings as follows:
10% Notes Payable, due March 1, 2023 - P1,000,000
12% Notes Payable, due Dec. 31, 2024 - 1,500,000
How much interest is capitalized? * (2 Points)
P89,280
Red Company acquired a building on January 1, 2021 for P20,000,000. At that date, the
building had an estimated useful life of 40 years. The building was appropriately classified as
investment property and accounted for using the fair value model. Red uses straight-line
method to depreciate its property, plant and equipment. The fair value of the building was
P23,000,000 on December 31, 2021. What amount shall be presented in the statement of
financial position at December 31, 2021 as investment property and recognized in profit or loss
for the year 2021 respectively? * (2 Points)
P19,500,000 and depreciation expense of P500,000
P20,000,000 and depreciation expense of P500,000
P20,000,000 and P3,000,000 gain
P23,000,000 and P3,000,000 gain
What is the amortized cost of accounts receivable at December 31, 2021? * (2 Points)
P2,150,550
For the year ended December 31, 2021, White Company reported pretax financial income of
P5,000,000, while It’s taxable income amounts to P4,928,000. For the year 2021, the company’s
book depreciation was P 268,000, while for tax purposes, the depreciation taken was P340,000.
This temporary difference will reverse over the years 2022 through 2024 as follows: 2022-
P28,000; 2023-P 25,000; 2024- P19,000. The enacted tax rates are as follows:
2021: 30%
2022: 32%
2023: 34%
2024: 36%
How much deferred tax asset/deferred tax liability was reported by White Company on
December 31, 2021? * (2 Points)
Deferred tax asset o P24,300
Deferred tax asset o P21,600
Deferred tax liability of P24,300
Deferred tax liability of P21,000
On January 1, 2021, Green company issued P1,000,000, 12% bonds for P1,065,000, a price that
yields 10%. The bonds pay interest semi-annually every January 1 and July 1. Green Company
uses the effective interest method of amortizing bond premium/discount. What was the
carrying value of the bonds payable at December 31, 2021? * (2 Points)
P1,000,000
P1,051,163
P1,075,000
P1,065,000
The June 30, 2022 statement of financial position of Red Corporation shows a cash balance of
P1,350,700.
Included in the said amount were the following items: Petty cash fund (including expense
receipts of P3,150)-P5,000; Sinking fund cash-P350,000; Payroll fund maintained with
Metrobank- P275,000 ; Savings account at Banco de Oro-P120,800; Un-deposited collections
P36,420; Cash in foreign bank (in equivalent pesos)-P72,000; Customer’s check on hand:
Traveler’s check-P40,450; certified check-P17,120; customer’s check dated July 10, 2022,
P26,450; 90-day BSP treasury bonds- P 150,000; 120-day BSP treasury bills-P250,000.
What is the correct amount of cash and cash equivalents of Red Corporation at June 30,
2022? * (2 Points)
P997,550
P750,700
P725,700
P721,100
10
The reported financial income of Blue Company is P1,800,000. Assume the following
differences between the financial income and taxable income for the year. The income tax rate
is 30%.
a. Fines paid for late payment of taxes, P15,000.
b. Premium paid on life insurance policies of officers, P200,000. Beneficiary named in the

policies is Blue company.
c. Impairment loss recognized on goodwill, P90,000.
d. Excess of tax depreciation over book depreciation, P30,000.
e. Excess of estimated uncollectible accounts for financial reporting over the accounts actually
written off for tax reporting, P12,000.
f. Rent collected in advance of period earned, P35,000.
How much is the Taxable income of Blue Co.? * (2 Points)
P1,922,000
11
In a debt settlement in which the debt is continued with modified terms, a gain should be
recognized at the date of settlement whenever the * (1 Point)
carrying amount of the debt is less than the total future cash flows.
carrying amount of the debt is greater than the present value of the future cash flows.
present value of the debt is less than the present value of the future cash flows.
present value of the debt is greater than the present value of the future cash flows.
12
MT Corporation, a manufacturer of spice foods, contracted in 2021 to purchase 500 pounds of

a chile mixture at P5.00 per pound, delivery to be made in 2022. By 12/31/21, the price per
pound of the chile mixture had risen to P5.60 per pound. In 2021, MT Corporation should
recognize * (1 Point)
a loss of P2,500.
a loss of P300.
no gain or loss.
a gain of P300.
13
Which of the following is a characteristic of a perpetual inventory system? * (1 Point)
Inventory purchases are debited to a Purchases account.
Inventory records are not kept for every item.
Cost of goods sold is recorded with each sale.
Cost of goods sold is determined as the amount of purchases less the change in inventory.
14
When inventory is misstated, its presentation lacks? * (1 Point)
Relevance.
Faithful representation.
Comparability.
All of the choices are correct.
15
Orange Corp.’s accounts payable at December 31, 2021, totaled P800,000 before any necessary
year-end adjustments relating to the following transactions:
· On December 27, 2021, Orange wrote and recorded checks to creditors totaling P350,000
causing an overdraft of P100,000 in Orange’s bank account at December 31, 2021. The checks
were mailed out on January 10, 2022.
· On December 28, 2021, Orange purchased and received goods for P150,000, terms 2/10,
n/30. Orange records purchases and accounts payable at net amounts. The invoice was
recorded and paid January 3, 2022.
· Goods purchased on December 20, 2021, shipped f.o.b. destination, were received
January 2, 2022. The invoice cost was P65,000. Terms 2/10, 2/30
What was the correct balance of accounts payable at December 31, 2021? * (2 Points)
P950,000
P1,050,000
P1,297,000
P1,362,000
16
Operating segments that do not meet any of the quantitative thresholds * (1 Point)
Cannot be considered reportable.
May be considered reportable if the information is for internal use only.
May be considered reportable and separately disclosed if management believes that information

about the segment would be useful to the users of the financial statements.
May be considered reportable and separately disclosed if this is the practice within the economic
environment in which the entity operates.
17
On January 5, 2021, Red Company was organized and registered at the Securities and
Exchange commission with 100,000 authorized ordinary shares of P100 par value. During the
year 2021, the following transactions occurred: 40,000 shares were sold and issued at P105 per
share. Purchased 600 shares of its ordinary share capital at P110 per share. 400 treasury shares
were sold at P95. Declared and paid cash dividends of P200,000 and made profit of P830,000.
What is the total shareholders’ equity of Red at December 31, 2021? * (2 Points)
P10,602,000
P4,820,000
P4,802,000
P4,352,000
18
Which of the following statements is/are true
I. Depreciation is based on the decline in the fair value of the asset.
II. Recoverable amount is defined as the higher of fair value less costs to sell or value-in-use.
III. The declining-balance method does not deduct the residual value in computing the
depreciation base.
* (1 Point)
all statements are true
all statements are not true
only statements I and II are true
only statements II and III are true
19
What could be a valid reason for transfer from investment property to property, plant and
equipment? * (1 Point)
when the entity adopts the fair value model
when there is a decrease in the fair value of the asset.
when there is a change in use.
based on the accountant’s discretion.
20
A company has a performance obligation when it agrees to * (1 Point)
Perform a service for a customer and receives cash payment.
Sell a product to a customer after receiving payment.
Perform a service or sell a product to a customer.
Received discount on collection.
21
Black Company purchased P400,000 of 10% bonds of White Co. on January 1, 2021, paying
P376,100. The bonds mature January 1, 2031; interest is payable each July 1 and January 1. The
discount of P23,900 provides an effective yield of 11%. Black Company uses the effective-
interest method and holds these bonds for collection. For the year ended December 31, 2021,
the amount of interest revenue reported by Black Company from its investment in White
Company was * (2 Points)
P40,000
P41,368
P41,409
P42,392
22
During the year 2021, Bong Company was involved in a lawsuit. Bong was sued by an
employee for illegal dismissal from employment. Legal proceedings started and owing to the
developments in the case, as of December 31, 2021, Bong’s lawyer believes that an unfavorable
outcome was probable and a reasonable estimate of damages was P5,000,000 but could be as
much as P6,500,000. Before the 2021 financial statements were issued, the employee accepted
a cash settlement of P6,000,000 from Bong.
In its December 31, 2021 financial statements issued in March 2022, what amount of liability
would Bong have reported? * (2 Points)
P6,000,000
23
On July 1, 2021, Orange Company, purchased 10,000 ordinary shares of Juce Corporation at
P150 per share. At the time of the purchase, Juce Corporation has 50,000 outstanding shares
with a total shareholders’ equity of P7,500,00. With this purchase, Orang has the ability to
exercise significant influence over Juce. During the year 2021, Juce reported profit of
P3,000,000 and declared and paid cash dividends of P50 per share. The fair value of Juce
Corporation’s ordinary share at December 31, 2021 was P170 per share. At its December 31,
2021 statement of financial position, what amount of investment in Juce Corporation was
reported by Orange company? * (2 Points)
P1,600,000
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24
The following information relates to the pension plan of Brown company.
Defined benefit obligation, January 1, 2020 - P 4,000,000
Fair value of plan assets, January 1, 2020 - 3,600,000
The following information is for the year 2021:
Contributions to the plan - P1,000,000
Benefits paid - 500,000
Discount rate - 10%
Service cost for year 2021 - 1,200,000
Actual return on plan assets - 400,000
Actuarial loss on defined benefit obligation - 150,000

How much is the retirement benefit expense for the year 2021? * (2 Points)
P1,240,000
25
On January 1, 2021, Blue company purchased P1,000,000, 12% bonds for P1,065,000, a price
that yields 10%. The bonds pay interest semi-annually every January 1and July 1. At December
31, 2021, each bonds is selling at P1,075. The debt investment is classified as at FVPL. What was
the carrying value of the debt investment at December 31, 2021? * (2 Points)
P1,051,163
26
Green Corporation began operations in 2021. An analysis of Green’s equity investments

portfolio acquired in 2021 shows the following totals at December 31, 2021 for trading and
non-trading investments:
Trading Investments:
Aggregate cost - P90,000
Aggregate fair value - P110,000
Non-trading Investments:
Aggregate cost - P110,000
Aggregate fair value - P95,000
What amount should Valet report in its 2021 income statement for unrealized holding loss? *
(2 Points)
P20,000
27
The purpose of the International Accounting Standards Board is to * (1 Point)
issue enforceable standards which regulate the financial accounting and reporting of multinational
corporations.
develop a uniform currency in which the financial transactions of companies through-out the world
would be measured.
develop a single set of high-quality IFRS.
arbitrate accounting disputes between auditors and international companies.
28
Biological assets are measured in the statement of financial position at * (1 Point)
fair value
fair value less estimated cost to sell
purchase price plus transaction costs
Cost less accumulated depreciation and accumulated impairment loss.
29
In January 1,2020, Orange Corporation leased a building to Juce Company under a four-year
operating lease. The monthly rentals for 2020, 2021, 2022 and 2023 are as follows: P100,000,
P150,000, P200,000 and P250,000, respectively. Rentals are payable at the end of each month.
All rental payments within the year were made when due. What amount should Orange
Corporation report as rent receivable on December 31, 2020? * (2 Points)
P600,000
P900,000
P1,000,000
P1,200,000
30
On December 31, 2021, the cash account of Brown Company showed a balance of P391,480.
The bank statement on that date showed a balance of P409,500. Upon examining the cash
records and the bank statement, the following information were determined.
a. There was a bank service charge of P 1,500 for the month of December 2021.
b. There was a credit memo for a note collected by the bank for Brown Co. The customer’s
note is P90,000 with interest of P2,600. The bank charged a collection fee of P550
c. December 31, 2021 receipts for P289,000 were deposited only on January 2, 2022
d. Checks issued which have not yet cleared the bank as at December 31,2021 amounts to
P186,610
e. There is a debit memo for P45,320 for a customer’s check returned marked “DAIF”
f. A receipt of P90,000 had been entered as P60,000 in the cash book. Check # 12345 issued
amounting to P49,100 was erroneously recorded as P41,900 and check # 12346 issued in the
correct amount of P5,820 had been taken up as P58,200.
What is the correct amount of cash at December 31, 2021? * (2 Points)
P511,890
31
Equity securities acquired by a corporation which are accounted for by reporting unrealized
holding gain/loss in the equity section of the statement of financial position. * (1 Point)
Investment at FVPL where a company has holdings of less than 20%
Investment at FVOCI where a company has holdings of less than 20%
Investment where a company has holdings of between 20% and 50%
Investment where a company has holdings of more than 50%
32
For each unit of computer sold, Blue Company sells a service contract. The contract provides
that the computers sold will be repaired by the company within a period of three years from
the date of sale. Based on company’s experience, 10% of repairs are done in the 1st year from
the date of sale, 30% in the 2nd year and 60% in the 3rd year. Sale of service contracts for the
year 2019, 2020 and 2021 are; P500,000; P600,000 and P700,000 respectively. Sale of service
contracts and repairs are made evenly throughout the year. How much is the unearned service
contract revenue at December 31, 2021? * (2 Points)
P1,265,000
33
What is the amount of goodwill? * (2 Points)
P900,000
34
Under the allowance method of recognizing uncollectible accounts, the entry to write off an
uncollectible account * (1 Point)
increases the allowance for uncollectible accounts.
has no effect on the allowance for uncollectible accounts.
has no effect on net income.
decreases net income.
35
When a noncurrent asset is classified as held for sale * (1 Point)
depreciation ceases at the date it is classified as held for sale
depreciation continues until the asset’s actual sale
depreciation continues until its carrying value exceeds its fair value less cost to sell
it is almost certain that the asset will be sold in a short period of time.
36
On January 1, 2020, Green Corporation granted share options to its employees with a fair value
of P4,500,000. The options vest in three years and are exercisable starting January 1, 2023 until
Dec. 31, 2023. On December 31, 2020, it was estimated that 5% of the employees will leave the
Company. This estimate was revised to 6% during the year 2021. On December 31, 2022, it was
determined that 90% of the employees remained in the company.
What is the amount charged to compensation expense in year 2020? * (2 Points)
Enter your answer
37
A cash equivalent is a short-term, highly liquid investment that is readily convertible into
known amounts of cash and * (1 Point)
is acceptable as a means to pay current liabilities.
has a current market value that is greater than its original cost.
bears an interest rate that is at least equal to the prime rate of interest at the date of liquidation.
is so near its maturity that it presents insignificant risk of changes in interest rates.
38
A contingent liability * (1 Point)
always exists as a liability but its amount and due date are indeterminable.
is accrued even though not probable.
is always the result of a loss contingency.
is not reported as a liability if not probable.
39
Blue Corp., provides a noncontributory defined-benefit pension plan for its employees. The
company's actuary has provided the following information for the year ended December 31,
2021:
Defined benefit obligation, Dec.31, 2021 - P600,000
Fair value of plan assets, Dec.31, 2021 - 825,000
Service cost - 240,000
Interest on defined benefit obligation - 24,000
Past service cost - 60,000
Expected return and interest revenue on plan assets - 33,000
In its December 31, 2021 statement of financial position, Blue Corporation reported a pension
asset/ liability of * (2 Points)
Pension liability of P600,000
Pension asset of P824,000
Pension asset of P225,000
Pension liability of P525,000
40
What would be an advantage of having all countries adopt and follow the same accounting
standards? * (1 Point)
Consistency.
Comparability.
Lower preparation costs.
Comparability and lower preparation costs
41
The following information is made available by Purple Farms in relating to its dairy livestock
during the year 2021.
Carrying amount at January 1, P1,000,000
Fair value less cost to sell of livestock purchased during the year, 280,000
Fair value less cost to sell of livestock Born during the year, 60,000
Increase in FV less cost to sell due to price change, 180,000
Increase in FV less cost to sell due to physical change, 40,000
FV less cost to sell of livestock sold during the year, 890,000
How much biological assets was reported by Purple Farms at December 31, 2021? *
(2 Points)
P670,000
42
A soundly developed conceptual framework of concepts and objectives should * (1 Point)
increase financial statement users’ understanding of and confidence in financial reporting.
enhance comparability among companies’ financial statements.
allow new and emerging practical problems to be more quickly solved.
all of these answers are correct.
43
Which of the following would create a deferred tax liability? * (1 Point)
Subscriptions received in advance
Interest revenue on government bonds
Excess of tax depreciation over book depreciation
Accrual of warranty expense
44
On July 1, 2021, Blue Company signed an agreement to operate as a franchisee for a franchise
fee of P5,000,000. Of this amount, P2,000,000 was paid when the agreement was signed and
the balance is payable in six semi-annual payments of P500,000 every Dec. 31, and June 30.
The first payment was due on Dec. 31, 2021. Blue Company’s credit rating indicates that it can
borrow money at 8% per annum for a loan of this type. Information on present value factors
(PV) are:
PV of an ordinary annuity of 1 at 8% for 3 periods-----------2.5771
PV of an ordinary annuity of 1 at 4% for 6 periods-----------5.2421
What is the cost of Franchise acquired on April 1, 2021? * (2 Points)
P0
45
Which of the following is a valid statement regarding accounting for non-accumulating paid
absences? * (1 Point)
An expense is recognized when the employee renders service in the current period that increases
his entitlement to the benefits.
No liability is recognized at year-end for any unused entitlement.
A liability is recognized at year-end equal to the best estimate of any unused entitlement that the
employee will avail in future periods.
No expense is recognized for non-accumulating paid absences.
46
If there had been transactions between related parties, the entity shall disclose * (1 Point)
The nature of the relationship only.
The information about the transaction and outstanding balances.
The nature of the relationship, information about the transaction and outstanding balances.
Neither the nature of the relationship nor the information about the transaction and outstanding
balances.
47
Which of the following statement is incorrect regarding receivables on the statement of

financial position? * (1 Point)
Receivables are a financial asset.
Receivables are financial instruments.
Non-trade receivables are generally reported as separate items in the statement of financial
position.
Accounts receivable are written promises of the purchaser to pay for goods or services.
48
The inventory records of Yellow Corporation show the following purchases during its first
quarter of operations:
January: 15,000 units, P172,500
February: 25,000 units, P293,750
March: 10,000 units, P133,750
The March 31, inventory using the weighted average method is P180,000. What is the March
31, inventory using the first-in, first-out method? * (2 Points)
P192,500
49
Maroon Company’s inventory at December 31, 2021 amounts to P555,000 based on physical
count of goods priced at cost and before any year-end adjustments relating to the following:
a. Goods with a selling price of P30,000 were in transit to a customer as of December 31, 2021.
Terms 2/10, 2/30, FOB shipping point. The freight cost of P1,400 was prepaid by Maroon.
These goods cost P24,000.
b. Goods shipped FOB shipping point on December 28,2021 from a supplier to Maroon
Company were received on January 5, 2022. The invoice amount is P 25,000.
c. Goods shipped from Maroon to Pink , a customer, terms FOB destination, are still in transit
at December 31, 2021. The goods with a selling price of P120,500, were received by Pink on
January 3, 2022 The company sells goods at a mark up of 25% of cost.
d. Goods purchased FOB destination were in transit at December 31,2021. The goods with
invoice price of P16,500 were received on January 7, 2022.
What amount should Maroon report as inventory in its December 31, 2021 financial
statements? * (2 Points)
P676,400
P691,400
P692,900
P715,500
50
When should the compensation expense be recorded as a result of share options granted by
the enterprise to its employees? * (1 Point)
During the year of grant.
During the year that the options ultimately vest.
During the years when services are required to be rendered by the employees.
During the years when services are required to be rendered by the employees.
51
Year-end net assets would be overstated and current expenses would be understated as a
result of failure * (1 Point)
Expiration of prepaid insurance
Depreciation of fixed assets
Accrued wages payable
All of these answers are correct.
52
At December 31, 2021, what amount was reported by Brown Company as accrued salaries
payable? * (2 Points)
P90,000
P84,000
P72,000
P22,000
53
The sale of a depreciable asset resulting in a loss indicates that the proceeds from the sale
were * (1 Point)
less than current fair value.
greater than cost.
greater than book value.
less than book value.
54
How much is the depreciation expense on store equipment for the year 2021? * (2 Points)
P80,000
P100,000
P110,000
P140,000
55
Green Corporation acquired equipment on January 3, 2018 at a cost of P100,000. The

estimated useful life of the equipment is 10 years with estimated residual value of P10,000. The
company uses straight-line depreciation, computed to the nearest month. On October 1, 2021,
the equipment was made “held for sale”. It’s fair value on this date was P50,000 and the cost
to sell was estimated at P2,000. In January 2022, the asset was sold for P50,000 and disposal
cost incurred amounted to P3,000. Green Corporation uses Fair value model.
At what amount should the non-current assets held for sale be recorded on Oct. 1, 2021? *
(2 Points)
P48,000
56
In order to generate additional cash for its expanding business operation, Maroon Company
had the following receivable financing during the year 2021.
On February 14, the company factored P1,200,000 accounts receivable. Factoring fee was 10%.
The finance company withheld 6% of the purchase price as protection against sales returns.
On March 1, accounts receivable amounting to P500,000 were assigned to BPI Bank as

collateral for a loan. The bank advanced 80% of the assigned accounts less finance charge of
5% based on the amount advanced. During the month of March, Maroon collected P350,000
of the assigned accounts receivable. The amount was remitted to BPI on April 1. This amount
was applied first to interest at the rate of 1% per month based on the outstanding balance and
the remainder was applied to principal.
On March 19, a non-interest bearing note receivable with a face value of P50,000 was
discounted with Citi Bank at a discount rate of 10%. The P50,000 note was dated Feb. 15, 2021
and is due on June 15, 2021. (use 360 days)
How much is the total cash received by Maroon Company from receivable financing?
(factoring, assignment and discounting) * (2 Points)
P1,494,333
57
Goodwill may be recorded when
* (1 Point)
it is identified within a company.
one company acquires another in a business combination.
the fair value of a company’s assets exceeds their cost.
a company has exceptional customer relations.
58
Information relating to the operating segments of Purple Company for the year 2021, is
presented below:
Operating Profit (Loss): Segment 1 - (P18,000,000)
Operating Profit (Loss): Segment 2 - P16,000,000
Operating Profit (Loss): Segment 3 - P9,000,000
Operating Profit (Loss): Segment 4 - (P2,000,000)
The reportable segments are * (2 Points)
1,2,3,4
1,2,3
2 and 3
1 and 4
59
Red Company has an equipment costing P700,000 with an estimated residual value of P70,000
and an estimated useful life of 6 years. After using and depreciating the asset for the past two
years, the company upgraded the machine parts and the cost of upgrading amounted to
P150,000. Assuming the upgrading costs improved the quality of the asset’s output, what is
the revised depreciation expense for the 3rd year using the straight-line method? *
(2 Points)
P142,500
60
White Corporation provided you with the following summary of total assets and liabilities at
January 1, 2021 and at December 31, 2021.
Assets, January 1, 2021 - P9,000,000
Assets, December 31, 2021 - P12,000,000
Liabilities, January 1, 2021 - P3,200,000
Liabilities, December 31, 2021 - P4,500,000
During 2021, the company issued 10,000 shares of its P100 par ordinary share at P150 per
share and declared dividends of P280,000. There were no other changes affecting the equity
accounts. How much is White Corporation’s profit for the year 2021?
* (2 Points)
Enter your answer
61
Which of the following statements is/are true
I. A lease that contains a purchase option must be capitalized by the lessee.
II. The gross profit amount in a sales-type lease is greater when a guaranteed residual value
exists.
III. Direct-financing leases are in substance the financing of an asset purchase by the lessee.
* (1 Point)
all statements are true
only statement I is true
only statement II is true
only statement III is true
62
A track of land with a building was acquired for P6,000,000. The land was valued at P5,000,000
and the building value was P1,000,000. Shortly after acquisition, the building was demolished
at a cost of P200,000. Proceeds from sale of salvage materials on the demolished building
amounts to P 5,000. A new building was constructed for P3,000,000 plus the following costs:
Excavation fees-P120,000; Building permit fee-P40,000; Payment for insurance premium of
construction workers during the construction period-P75,000.
What are the costs of the land and new building respectively. * (2 Points)
P5,000,000 and P3,430,000
P5,000,000 and P3,435,000
P6,000,000 and P3,435,000
P6,200,000 and P3,435,000
63
On January 1, 2021, Red Company leased equipment by signing a four-year lease. Annual
rentals of P1,200,000 are payable at the beginning of each year starting January 1, 2021. Red
guarantees the residual value of P400,000 at the end of the lease term. The useful life of the
equipment is 5 years with estimated scrap value of P100,000. Red uses straight-line method of
depreciation. The interest implicit in the lease is 10%. The present value factors are:
PV of 1 discounted at 10% for 4 periods---------0.68301
PV of 1 discounted at 10% for 5 periods---------0.62092
PV of annuity due of 1 for 4 periods at 10%------3.48685
PV of 1 ordinary annuity at 10% for 4 periods---3.16987
What was the carrying value of the right-of-use equipment at December 31, 2021? *
(2 Points)
Enter your answer
64
Which of the following is not true? * (1 Point)

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9/19/22, 10:07 AM Compre 2022: Financial Accounting and Reporting

Compre 2022: Financial Accounting and Reporting

1. For multiple choice questions, please choose the best answer.

Expenditure made to increase the efficiency or effectiveness of an existing asset

Expenditure made to add new asset services

General-purpose financial statements are the product of * (1 Point)

both financial and managerial accounting.

neither financial nor managerial accounting.

Amortized cost; Amortized cost

Fair value; Fair Value

Fair value; Amortized cost

Amortized cost; Fair value

10% Notes Payable, due March 1, 2023 - P1,000,000

12% Notes Payable, due Dec. 31, 2024 - 1,500,000

How much interest is capitalized? * (2 Points)

P19,500,000 and depreciation expense of P500,000

P20,000,000 and depreciation expense of P500,000

P20,000,000 and P3,000,000 gain

P23,000,000 and P3,000,000 gain

Deferred tax asset o P24,300

Deferred tax asset o P21,600

Deferred tax liability of P24,300

Deferred tax liability of P21,000

a. Fines paid for late payment of taxes, P15,000.

b. Premium paid on life insurance policies of officers, P200,000. Beneficiary named in the

c. Impairment loss recognized on goodwill, P90,000.

d. Excess of tax depreciation over book depreciation, P30,000.

f. Rent collected in advance of period earned, P35,000.

How much is the Taxable income of Blue Co.? * (2 Points)

MT Corporation, a manufacturer of spice foods, contracted in 2021 to purchase 500 pounds of

Which of the following is a characteristic of a perpetual inventory system? * (1 Point)

Inventory purchases are debited to a Purchases account.

Inventory records are not kept for every item.

Cost of goods sold is recorded with each sale.

When inventory is misstated, its presentation lacks? * (1 Point)

All of the choices are correct.

Cannot be considered reportable.

May be considered reportable if the information is for internal use only.

May be considered reportable and separately disclosed if management believes that information

Which of the following statements is/are true

I. Depreciation is based on the decline in the fair value of the asset.

all statements are true

all statements are not true

only statements I and II are true

only statements II and III are true

when the entity adopts the fair value model

when there is a decrease in the fair value of the asset.

when there is a change in use.

based on the accountant’s discretion.

A company has a performance obligation when it agrees to * (1 Point)

Perform a service for a customer and receives cash payment.

Sell a product to a customer after receiving payment.

Perform a service or sell a product to a customer.

Received discount on collection.

The following information relates to the pension plan of Brown company.

Defined benefit obligation, January 1, 2020 - P 4,000,000

Fair value of plan assets, January 1, 2020 - 3,600,000

The following information is for the year 2021:

Contributions to the plan - P1,000,000

Benefits paid - 500,000

Discount rate - 10%

Service cost for year 2021 - 1,200,000

Actual return on plan assets - 400,000

Actuarial loss on defined benefit obligation - 150,000