An unrealized holding gain or loss on a trading
Account for separately under PAS 40 –
debt investment is the difference between
the investment’s
A. Fair Value and original cost.
B. Fair Value and amortized cost.
C. Face Value and amortized cost.
D. Face Value and original cost.
Answer: B. Fair value and Amortized Cost.
All of the following are requirements for
disclosures related to financial instruments
except
A. Combining or netting the fair value of
separate financial instruments.
B. Disclosing the fair value and related
carrying value of the instruments.
C. Distinguishing between financial
instruments held or issued for purposes
other than Trading.
D. Displaying as a separate classification
of other comprehensive income the net
gain/loss on derivative instruments
designated in cash flow hedges.
Answer: A. Combining or netting the fair
value of separate financial instruments.
If the entity uses part of a building for its own
use and rents the remainder, how should this be
treated?
A. All as investment property under PAS
40 – investment property
B. All under PAS 16 – property, plant and
equipment
C. It will depend on the discretion of the
company
D.
investment property and PAS 16 –
property, plant and equipment
Answer: D. Account for separately under
PAS 40 – investment property and PAS 16 –
property, plant and equipment
4. All of the following are requirements for
disclosures related to financial instruments
except
A. Combining or netting the fair value of
separate financial instruments.
B. Disclosing the fair value and related
carrying value of the instruments.
C. Distinguishing between financial
instruments held or issued for purposes
other than Trading.
D. Displaying as a separate classification of
other comprehensive income the net
gain/loss on derivative instruments
designated in cash flow hedges.
Answer: A. Combining or netting the fair
value of separate financial instruments.
11. Match the investment accounting approach
with the correct valuation approach:
Not held-for-collection
Held-for-collection
A. Amortized cost
Amortized cost
B. Fair value
Amortized cost
C. Fair value
Fair value
D. Amortized cost
Fair value
Answer: B. Fair value Amortized cost the investor’s share of the
associate’s profit or loss in the
1. The Equity method is not required when
period in which the investment
the associate has been acquired and
is acquired
held with a view to disposal within what
B. Exclude in the determination of
time period?
the investor’s share, but include
A. Six months from the end of
in other comprehensive income
reporting period
C. Ignored since there is no
B. Twelve months from the end of
relevance for any period.
reporting period
D. A deferred gain
C. Twelve months from date of
classification as held for sale
Answer: A. Included in the determination of the
D. In the near future
investor’s share of the associate’s profit or loss
in the period in which the investment is acquired
Answer: C. Twelve months from date of
classification as held for sale
1. An investor uses the equity method to
1. Which statement is incorrect
account 30% investment. Amortization
concerning the equity method?
of the investor’s share of the excess fair
A. The investment is initially
value over carrying amount of
recorded at cost
depreciable asset at the date of the
B. The investment in associate is
purchase shall be reported in the
increased or decreased by the
investor’s income statement as part of
investor's share of the profit or
A. Other Expense
loss of the investee after the
B. Depreciation Expense
date of acquisition
C. Equity in earnings of investee
C. The investor’s share of the profit
D. Amortization of Goodwill
or loss of the investee is
ANSWER C
recognized in the investor’s
profit or loss
2. The initial operating loss should be:
D. Dividends received from the
investee are accounted for as
dividend income a. Capitalized as part of the cost of the plant.

Answer: D. Dividends received from the b. Expensed and charged to the income
investee are accounted for as dividend statement.
income
c. Deferred and amortized over a reasonable
1. Goodwill arising from an investment in period.
associate is
A. Included in the carrying amount d. Charged to retained earnings.
of the investment and amortized
over the useful life Answer: B.
B. Included in the carrying amount
of the investment and not The following statements are true about
amortized depreciation period except:
C. Charged to retained earnings
D. Charged to expense a. Depreciable amount of an asset shall be
immediately allocated on a systemic basis over the useful
life.
Answer: B. Included in the carrying amount
of the investment and not amortized b. Depreciation of an asset begins when it is
available for use.
1. The excess of investor’s share of the net
fair value of the associate’s net assets c. Depreciation ceases when the asset is
over the cost of the investment is derecognized.
A. Included in the determination of
d. Depreciation does not cease when the
asset becomes idle indefinitely.
Answer: D. (should be idle temporarily)
The following statements are true about real
property taxes except:
a. It is an outright expense.
b. If unpaid real property taxes are assumed
by the buyer, the taxes are capitalized only up to
the date of acquisition.
c. Capitalizable to land account because it
increases the value of the land.
d. Taxes paid after the date of acquisition
are treated as an expense.
Answer: A
2. PAS 16 requires a business to review the
depreciation method and the useful life and
residual value estimated at the end of each year.
A change in any of these is accounted for using
a. a specific transitional provision of a PFRS
b. prospective application
c. retrospective application
d. either a or b
Answer: B
10. When an item of property, plant and
equipment is acquired by issuing equity shares,
which of the following is the best basis for
establishing the historical cost of the acquired
asset?
a. Historical cost of the asset to the seller
b. Historical cost of a similar asset acquired in
another transaction by the buyer
c. Fair value of the asset received or the fair
value of the shares issued, whichever is more
readily determinable
d. Historical cost of the asset is zero since
noncash is paid in the acquisition
Answer: C
12. Donated equipment for which the fair value
has been determined shall be recorded as a
debit to the equipment account and a credit to
a. Other Comprehensive income
b. Retained earnings
c. Share Capital
d. Income
Answer: D
18. The following statements are deemed true
about investment property and investment in
associates except one.
A. Transferring an investment from one
classification to another should occur only when
the business model for managing the investment
changes.
B. An impairment loss is a difference between
an investment’s cost and the expected future
cash flows.
C. If the investment and owner-occupied
portions could be sold or leased out
separately, the portions shall be accounted for
separately as an investment property
and owner-occupied property.
D. If the investment and owner-occupied
property portions cannot be sold or leased out
separately, the property is investment property if
only an insignificant portion is
held for manufacturing or administrative
purposes.
ANSWER- A.
Which of the following costs incurred internally
to create an intangible asset is generally
expensed?
A. Research and development costs
B. Filing costs
C. Legal costs
D. All of the above
Answer: A. Research and development
costs.
Factors considered in determining an intangible
asset’s useful life include all of the following
except
A. The expected use of the asset
B. Any provisions for renewal or extension
of the asset’s legal ;ofe
C. The amortization method used
D. Any legal or contractual provisions that
may limit the useful life
Answer: C. The amortization method used
. Borrowing costs can be capitalized as cost of
the asset when
a. The asset is a qualifying asset.
b. The asset is a qualifying asset and it is
not probable that the borrowing costs
will result in future economic benefits to
the entity.
c. The asset is a qualifying asset and it is
probable that the borrowing costs will
result in future economic benefits to the
entity but the costs cannot be measured
reliably.
d. The asset is qualifying asset and it is
probable that borrowing costs will result
in future economic benefits to the entity
and the cost can be measured reliably.
21-D
22.Which of the following may not be considered
a qualifying asset?
a. A power generation plant that normally
takes two years to build
b. An expensive private jet that can be
purchased from a vendor.
c. A toll bridge that usually takes more
than a year to build.
d. A ship that normally takes one to two
years to complete.
22. B
23. An entity can commence capitalization of
borrowing costs on a new construction project
when
a. Loan interest relating to project starts to
incur
b. Technical site planning commences
c. Expenditures on the project starts to
incur
d. Construction work commences
23C
24. Agricultural Produce as it grows on bearer
plants is measured at year end using
A. Fair value
B. Fair value less cost of disposal
C. Fair value plus cost of disposal
D. Fair value less cost of disposal upon point of
harvest
24-B
25. Agricultural Produce harvested is measured
at year end using
A. Fair value
B. Fair value less cost of disposal
C. Fair value plus cost of disposal
D. Fair value less cost of disposal upon point of
harvest
25- D
The cost of purchasing patent rights for a
product that might otherwise have seriously
competed with one of the purchaser's patented
products should be
A. charged off in the current period.
B. amortized over the legal life of the
purchased patent.
C. added to factory overhead and allocated
to production of the purchaser's product.
D. amortized over the remaining estimated
life of the original patent covering the
product whose market would have been
impaired by competition from the newly
patented product.
Answer: D. amortized over the remaining
estimated life of the original patent covering
the product whose market would have been
impaired by competition from the newly
patented product.
 C. P770,000
D. P920,000
PROBLEM
—------------------------------------------------------------- Answer: A. P585,000
---

8. On June 30, 2023, Juls, Inc. exchanged 2,000

shares of Seely Corp. P30 par value common
stock for a patent owned by Gore Co. The Seely
stock was acquired in 2023 at a cost of P55,000.
At the exchange date, Seely common stock had
a fair value of P46 per share, and the patent had
a net carrying value of P110,000 on Gore's
books. Juls should record the patent at
A. P55,000.
B. P60,000.
C. P92,000.
D. P110,000.
Answer: C. P92,000.
2,000 shares x P46 = P92,000
10. Chrissy Co. incurred the following costs
during 2011:
Significant modification to the formulation of a P160,000
chemical product
Cost of exploration of new formulas 200,000
Laboratory research aimed at discovery of 225,000
new technology
Research and development expense P585,000
Kara Company purchased a new machinery on
a deferred payment basis. A downpayment of
P200,000 was made and 6 monthly installments
of P250,000 are to be made at the end of each
month. The cash equivalent price of the machine
was P1,000,000. Additionally, the entity incurred
P25,000 and P6,000 for insurance while the
machinery is in transit and installation cost
respectively. How much is the cost of the
machinery?

a. P1,700,000
Significant modification to the formulation of a P160,000
chemical product b. P1,731,000

Trouble-shooting in connection with 150,000c. P1,000,000

breakdowns during commercial
production d. P1,031,000

Cost of exploration of new formulas 200,000AnsSolution: D.

Seasonal or other periodic design changes to 185,000Cash equivalent price P

existing products 1,000,000

Laboratory research aimed at discovery of 225,000Insurance

25,000
new technology
Installation cost
6,000
In its income statement for the year ended
Total cost P
December 31, 2011, Chrissy should report
1,031,000
research and development expense of
A. P585,000 Marco Company purchased an investment
B. P735,000
property on January 1, 2020, at a cost of
P8,000,000. The property had a useful life of 10 On such a date, the entity decided to hold the
years and on December 31, 2021, had a fair land for capital appreciation. The accounting
value of P6,800,000. On December 31, 2021, policy is to carry all investment property at fair
the property was sold for net proceeds of value.
P7,500,000. The entity used the cost model to
account for the investment property. On December 31, 2020, what amount should be
What is the gain to be recognized for 2021 recognized in profit or loss as a result of the
regarding the disposal of the investment transfer of the land to an investment property?
property? A. 20,000,000
A. 900,000 B. 35,000,000
B. 800,000 C. 15,000,000
C. 1,000,000 D. 10,000,000
D. 1,100,000
Answer: A. 20,000,000
Answer: D. 1,100,000
Cost Fair Value

Bldg used for office 60,000,000 40,000,000

Cost – Jan. 1, 2020 of administrative
8,000,000
staff of FAE
Accumulated depreciation 1,600,000
(8,000,000/ 10 x 2) Land held for 30,000,000 50,000,000
ordinary course of
Carrying Amount – Dec. 31, 2021 6,400,000
business
For items 31-35, refer to the following items
below:
Sale price 7,500,000
- entity purchased the ff equity investments on
Carrying Amount 6,400,000
Jan 2020.

Gain on disposal 1,100,000 Purchase Transactio Market Value

FAE Company, a real estate entity, had a Price n Cost at Yr End

building with a carrying amount of P60,000,000 2020

on December 31, 2020. The building was used Security A 100,000 10,000 120,000

as the office of the entity’s administrative staff. Security B 200,000 20,000 150,000
On December 31, 2020, the entity intended to Security C 300,000 30,000 310,000
rent out the building to independent third parties. Only July 1, 2021, The security A was sold for
The staff will be moved to a new building 190,000.
purchased early in 2020. On December 31, 3131. What loss will be recognized in 2020 in the
2020, the entity also had land that was held for income statement if the assets were held for
sale in the ordinary course of business. The land trading? . (cost- yr end bal)
had a carrying amount of P30,000,000 and a fair a. 20,000 c. 40,000
value of P50,000,000 on December 31, 2020. b. 80,000 d. 0
32. Assuming same scenario in 31, What amount of
January 1, 2023 – December 31, 2024 = 2
gain on sale will be recognized as gain on sale for the years X P100,000 = P200,000
2021 income statement. (sp – yr end bal)
P500,000 – P200,000 = P300,000
a. 90,000 c. 60,000
37-40.
b. 70,000 d. 80,000
33. What unrealized gain\loss will be recognized in What amount of gain on remeasurement to
2020 in the income statement if the assets were equity should be reported in the 2022 income
statement?
assigned at FVOCI? (fv plus transaction cost less year a. P1,320,000
end bal) b. P1,080,000
a. 20,000 c. (40,000) c. P1,000,000
d. 0
b. (80,000) d. 80,000 Answer: C. P1,000,000
34. Assuming same scenario in 33, What amount of 38. How much is the recognized income arising
adjustment to retained earnings will be for the 2021? from the investment classified as FVOCI for year
end 2021?
(sp-2020 bal plus yung balance)
a. 1,120,000
a. 90,000 c. 60,000 b.750,000
b. 70,000 d. 80,000 c.140,000
d.0
35. The balance for the investment in equities account ANSWER- C. 140,000 ( 100,000 x 1.4 per
will for 2021 is share)
a. 490,000 c. 460,000 Any previous unrealized gain or loss on the
existing interest accounted for at fair value
b. 440,000 d. 480,000 through OCI is reclassified to profit or loss.
Fair Value, Dec. 31, 2021
36.  An entity purchased an equipment for P9,000,000
P5,000,000 and received a government grant of Carrying Amount
P500,000 with respect to this asset on January 8,000,000
1, 2023. The asset has a useful life of 5 years,
Unrealized gain – OCI
depreciated on a straight line basis, with a
residual value of P200,000. How much is the P1,000,000
deferred income from government grant on To reclassify the unrealized gain on January 1,
December 31, 2024? 2015:
Unrealized Gain – OCI
a.       P400,000 1,000,000
Gain on remeasurement to equity
b.      P300,000
1,000,000
c.       P200,000 How much is the goodwill arising from the
acquisition of additional 300,000 shares on
d.       P450,000  January 1,2022?
a. 0
Solution: B. b. P2,400,000
c. P7,000,000
Grant income per year = P500,000/5 years = d. P9,000,000
P100,000
Answer: B
Solution:
Fair Value of 15% existing interest Insurance premium paid during the first year of
P 9,000,000 operation on this equipment       1,500
Cost of 25% additional interest
30,000,000 Special plumbing fixtures required for new
Total Cost of investment in associated equipment                                         8,000          
Repair cost incurred in first year of operations
P39,000,000
related to this equipment             1,300               
Carrying amount of net assets acquired (P92M x         
40%) 36,800,000
Goodwill How much is the total cost of the purchased
P 2,200,000 equipment?
How much is the carrying amount of the
investment in associate on December 31,2022? a. 120,900                                                           
a. P45,000,000
b. P40,320,000
c. P37,680,000 b. 119,100
d. P39,000,000
Answer: B c. 126,900
Solution:
Total cost of investment in associate, Jan. 1, d. 124,100
2022 P39,000,000
Cash dividend received (P2.70 x 400,000) Answer: D
(1,080,000)
Share in net income (P6,000,000 x 40%) SOLUTION: 

2,400,000 Cash paid, including sales tax                             

Carrying amount, Dec. 31, 2022 P 105,000
P40,320,000
Freight and insurance cost                                  
        2,000

41. ABC Company both purchases and Cost of moving equipment to factory                 
constructs various equipment it uses in its         3,100
operation. The following items were recorded in
random order during the calendar year 2022. Wage cost for testing equipment                
        6,000
Cash paid for equipment, including sales tax of
P5,000        Special plumbing fixtures                                     
P105,000                                                               8,000
     
Cost of equipment Purchased                               
Freight and insurance cost while in transit     
     P 124,100
2,000

Xtian Farming Industries purchased dairy cattle

Cost of moving equipment into place at factory   
        3,100 at an auction for ₱300,000 on July 1, 2014. Cost
of transporting the cattle to the company’s farm
Wage cost for technicians to test equipment      was ₱3,000 and the company would have to
        6,000 incur cost similar amount of transportation cost if
 it was to sell the cattle in the auction, in addition
to the auctioneer’s
fee of 2% of sales price.

On December 31, 2014, after taking into account

and location, the fair value of the biological
assets had increased to ₱500,000 (that is, the
market price including the cost of transporting
the asset).

43. What amount should the biological assets be

initially recognized?
a. 291,000 c. 300,000
b. 297,000 d. 309,000

(FAIR VALUE LESS COST TO SELL)

44. What amount should the biological assets be

reported in the December 31, 2014 statement of
financial position? (FAIR VALUE LESS COST
TO SELL
a. 500,000 c. 489,000
b. 497,000 d. 487,000

45. What amount of gain or loss should the

company include in the statement of
comprehensive income due to the change in the
fair value of the biological assets?

a. 200,000 c. 196,000
b. 209,000 d. 0