Name:_______________________________ Score:_________

ASSESSMENT

I. Multiple Choice
Directions: Write only the letter of the correct answer before each number.
1. Another word or term for accounting income.
A. Taxable Income B. Earned Income
C. Retained Earnings D. Financial Income
2. It does not give rise to deferred tax assets or liability.
A Temporary Differences B. Accounting Income
C. Permanent Differences D. Taxable Income
3. Which of the following is not an example of property, land, and equipment
A. Cash B. Furnitures and Fixtures
C. Machinery D. Bearer Plants
4. The cost of an item of property, plant and equipment is the cash price equivalent at the
recognition date.
A. Acquisition on Account B. Acquisition on Cash Basis
C. Acquisition on Installment Basis D. None of the choices
5. It is the temporary differences that will result in future taxable amounts in determining
taxable income of future periods.
A. Current Tax Liability B. Deferred Tax Asset
C. Deferred Tax Liability D. Current Tax Asset
6. It is an excess of tax deductions over gross income in a year that may be carried
forward to reduce taxable income in a future year.
A. Deferred Tax Asset B. Current Tax Asset
C. Operating Loss Carryforward D. Operating Loss Carryback
7. A new notion and it is defined as the event or transaction causing the cash flows of the
entity to change significantly by reason of the exchange.
A. Fair Value B. Exchange
C. Bonds Payable D. Commercial Substance
8. It is the current tax expense or the amount of income tax actually payable.
A. Current Tax Liability B. Deferred Tax Asset
C. Deferred Tax Liability D. Current Tax Asset
9. Are tangible assets that are held for use in production or supply of goods or services, for
rental to others, or for administrative purposes, and are expected to be used during
more than one period.
A. Plant B. Property, Plant, and Equipment
C. Property D. Equipment
10. It is either the period over which an asset is expected to be available for use by the
entity, or the number of production or similar units expected to be obtained from the
asset by the entity.
A. Useful Life B. Depreciable Amount
C. Residual Value D. All of the choices

II. TRUE OR FALSE. Write PAPASA if the statement is true and BABAGSAK if the statement is
false before each number.
___________1. There are four factors of depreciation which are depreciable amount, residual
value, useful life, and cash.
___________2. If taxable income is higher than accounting income, the revenue and gains are
included in taxable income of the current period but are included in accounting
income of future periods.
 ___________3. Permanent differences pertains to nontaxable revenue and nondeductible
expenses.
___________4. A deferred tax liability arises when accounting income is higher than taxable
income because of the future taxable amount.
___________5. The objective of depreciation is to have each period benefiting from the use of
the asset bears an equitable share of the asset cost.
___________6. Depreciation is an income.
___________7. Depreciation ceases when the asset is recognized.
___________8. The revaluation model means that the property, plant, and equipment are
carried at revalued carrying amount.
___________9. Taxable income refers to the income appearing on the income tax return and
computed in accordance with the income tax law.
___________10. Cash discounts are generally considered as reduction of cost and not as
income.

III. Problem Solving (10 pts)

Compute the depreciation expense

1. Company A purchases a building for P50,000,000, to be used over 25 years, with no
residual value. If the formula is the amount of the building divided by the years, find the
annual depreciation of the building.
2. Company B purchases equipment for P20,000,000, to be used over 10 years, with no
residual value. If the formula is the amount of the equipment divided by the years, find
the annual depreciation of the equipment.