11/7/2020 Submissions - Integrated Review 1 - SBCA-JBN

Integrated Review 1

Standalone assignment

2nd Summative Examination

Submissions
Here are your latest answers:

Question 1
Golden Company developed a new machine for manufacturing baseballs. Because the machine is considered very valuable, the entity had it patented.

The following expenditures were incurred in developing and patenting the machine:

Purchase of special equipment to be used solely for development of the new machine
1,800,000
Research salaries and fringe benefits for engineers and scientists
200,000
Cost of testing prototype 250,000
Legal cost for filing of patent 150,000
Fees paid to government patent office 50,000
Drawings required by patent office to be filed with patent application
40,000

What amount should be capitalized as cost of patent?

Response: 240,000

Feedback:

Legal cost for filing of patent 150,000

Fees paid to patent office 50,000
Drawings required by patent office 40,000
Total cost of patent 240,000

Correct answer: 240,000

Score: 1 out of 1 Yes

Question 2
On January 1, 200A, Cool Company owned an equipment costing P5,200,000 with residual value of P400,000.

The life of the asset is 10 years and was depreciated using the straight line method.

On such date, the equipment has a replacement cost of P8,000,000 with residual value of P200,000. The age of the asset is 4 years.

The appraisal of the equipment showed a total revised useful life of 12 years and the entity decided to carry the equipment at revalued amount.

What amount should be reported as pretax revaluation surplus on January 1, 200A?

Response: 1,600,000

Feedback:

Cost Replacement Cost Appreciation

Equipment 5,200,000 8,000,000 2,800,000
Residual value (200,000) (200,000)
Depreciable amount 5,000,000 7,800,000 2,800,000

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Depreciable amount
Accumulated depreciation
(40% x 4,800,000) (1,920,000)
(40% x 7,800,000) (3,120,000) (1,200,000)
Balance 3,080,000 4,680,000 1,600,000

Percentage of accumulated depreciation

(4 years expired / 10 years original life) 40%

Correct answer: 1,600,000

Score: 1 out of 1 Yes

Question 3
Peach Company purchased a machine for P7,000,000 on January 1, 200A and received a government grant of P1,000,000 toward the capital cost.

The machine is to be depreciated on a straight line basis over 5 years and estimated to have a residual value of P500,000 at the end of this period.

The accounting policy is to treat the grant as a deferred income.

What is the carrying amount of the asset on December 31, 200B?

Response: 4,400,000

Feedback:

Acquisition cost- January 1, 200A 7,000,000

Accumulated depreciation (7,000,000-500,000/5 x 2) (2,600,000)
Carrying amount - December 31, 200B 4,400,000

Correct answer: 4,400,000

Score: 1 out of 1 Yes

Question 4
Betty Company purchased a jewel polishing machine for P3,600,000 on January 1, 200A and received a government grant of P500,000 toward the capital cost.

The accounting policy is to treat the grant as a reduction in the cost of the asset.

The machine is to be depreciated on a straight line basis over 8 year and estimated to have a residual value of P100,000 at the end of this period.

What is the depreciation of the machine for 200A?

Response: 375,000

Feedback:

Cost 3,600,000
Government grant (500,000)
Net cost 3,100,000
Residual value (100,000)
Depreciable amount 3,000,000

Annual depreciation (3,000,000/8) 375,000

Correct answer: 375,000

Score: 1 out of 1 Yes

Question 5
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On January 1, Ebe Company purchased 1,000 2-year old cows for P8,000 each, for producing milk. As of December 31, the selling price, net of point of sale cost, of 3-year
and 2-year cows are P15,000 and P12,000, respectively.

What is the gain on physical change?

Response: 3,000,000

Feedback:

Price of 3-year old cows Dec 31 15,000

Price of 2-year old cows Dec 31 (12,000)
Change in price due to physical change 3,000
Number of cows owned 1,000
Physical change 3,000,000

Correct answer: 3,000,000

Score: 1 out of 1 Yes

Question 6
At year-end, Kerr Company purchased goods costing P500,000 FOB destination. These goods were received at year-end. The costs incurred in connection with the sale and
delivery of the goods were:

Packaging for shipment 10,000

Shipping 15,000
Special handling charges 25,000

What total cost should be included in inventory?

Response: 500,000

Feedback: When goods are purchased FOB destination, the seller is responsible for costs incurred in transporting the goods to the buyer.

Correct answer: 500,000

Score: 1 out of 1 Yes

Question 7
Karla Company acquired a new processing machine.

Invoice cost 1,600,000

Cost of transportation 50,000
Cost of installation 150,000

The terms of the acquisition include a 5% discount if payment is made in 10 days. The entity paid beyond the discount period.

The entity's chief engineer spent two-thirds of his time during trial run of the new machine. The monthly salary is P60,000.

The entity requested an allowance from the supplier because the machine proved to be of less than standard performance capability. The supplier granted a cash allowance of
P100,000.

The cost of removing the old machine before the new machine was installed amounted to P10,000.

The operator of the old machine who was laid off due to the acquisition of the new machine was paid a gratuity of P30,000.

What amount should be recorded as cost of the new machine?

Response: 1,650,000

Feedback:

Correct answer: 1,660,000

Score: 0 out of 1 No

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Question 8
At the beginning of the current year, Leonora Company purchased a parcel of land as a factory site.

An old building on the land was demolished and construction started on a new building that was completed at the end of current year.

Purchase price of land 3,400,000

Demolition ofold building 200,000
Architect fee 300,000
Legal fee-title investigation 50,000
Construction cost 8,300,000
Imputed interest on construction cost 140,000
Landfill for building site 190,000
Clearing of trees from building site 100,000
Timber sold 30,000
Temporary building used for construction activities 290,000
Land survey 40,000
Excavation for basement 110,000

What amount should be capitalized as cost of new building?

Response: 9,400,000

Feedback:

Correct answer: 9,200,000

Score: 0 out of 1 No

Question 9
Zambia Company purchased four convenience store buildings on January 1, 200A for a total of P25,000,000. The buildings have been depreciated using the straight-line
method witha 20-year useful life and 10% residual value.

On January 1, 200G, the entity has converted the buildings into a hotel and restaurant. Because of the change in the use of the buildings, the entity is evaluating the buildings
for possible impairment.

The entity estimated that the buildings have a remaining useful life of 10 years, that their residual value will be zero, that undiscounted net cash inflows from the buildings
will total P1,500,000 per year, and that the current fair value of the four buildings totals P10,000,000.

The appropriate discount rate is 12%. The present value of an ordinary annuity of 1 at 12% for 10 periods is 5.65.

What amount of impairment loss should be recognized for 200G?

Response: 8,250,000

Feedback:

Fair value 10,000,000

Present value of net cash inflows (1,500,000 x 5.65) 8,475,000

Buildings 25,000,000
Accumulated depreciation (22,500,000 / 20 x 6) (6,750,000)
Carrying amount- January 1, 200G 18,250,000
Fair value - higher than value in use (10,000,000)
Impairment loss 8,250,000

Correct answer: 8,250,000

Score: 1 out of 1 Yes

Question 10
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During the month of January, Metro Company which used a perpetual inventory system recorded the following information pertaining to inventory:

Units Unit Cost Total Cost Units on Hand

Balance on 1/1 10,000 P 100 P 1,000,000 10,000
Purchased on 1/7 6,000 300 1,800,000 16,000
Sold on 1/20 9,000 7,000
Purchased 1/25 4,000 500 2,000,000 11,000

Under the weighted average method, what amount should Metro report as inventory on January 31?

Response: 2,640,000

Feedback:

Units Unit Cost Total Cost

January 25 4,000 500 2,000,000
January 7 6,000 300 1,800,000
January 1 10,000 100 1,000,000
Total 20,000 4,800,000

Inventory cost per unit = 4,800,000 ¸ 20,000 = P240/unit

Inventory value as of January 31 = 11,000 units x P240/unit = P2,640,000

Correct answer: 2,640,000

Score: 1 out of 1 Yes

Question 11
Cefalin Corp. uses the FIFO retail method of inventory valuation. Following are the information available.

Cost Retail
Beginning inventory P 24,000 P 60,000
Purchases 120,000 220,000
Net markups 20,000
Net markdowns 40,000
Sale revenue 180,000

If the lower of or market rule is disregarded, the estimated cost of ending inventory would be

Response: 41,600

Feedback:

Correct answer: 48,000

Score: 0 out of 1 No

Question 12
Peach Company purchased a machine for P7,000,000 on January 1, 200A and received a government grant of P1,000,000 toward the capital cost.

The machine is to be depreciated on a straight line basis over 5 years and estimated to have a residual value of P500,000 at the end of this period.

The accounting policy is to treat the grant as a deferred income.

What is the deferred grant income on December 31, 200B?

Response: 600,000

Feedback:

Government grant 1,000,000

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Income recognized for 200A and 200B (1,000,000/5 x 2) (400,000)

Deferred grant income December 31, 200B 600,000

Correct answer: 600,000

Score: 1 out of 1 Yes

Question 13
Betty Company purchased a jewel polishing machine for P3,600,000 on January 1, 200A and received a government grant of P500,000 toward the capital cost.

The accounting policy is to treat the grant as a reduction in the cost of the asset.

The machine is to be depreciated on a straight line basis over 8 year and estimated to have a residual value of P100,000 at the end of this period.

What is the depreciation of the machine for 200A?

Response: 375,000

Feedback:

Cost 3,600,000
Government grant (500,000)
Net cost 3,100,000
Residual value (100,000)
Depreciable amount 3,000,000

Annual depreciation (3,000,000/8) 375,000

Correct answer: 375,000

Score: 1 out of 1 Yes

Question 14
Kibungan Company provided the following information on January 1, 200A relating to property, plant and equipment.

Land 30,000,000
Building 300,000,000
Accumulated depreciation-building (37,500,000)
Machinery 400,000,000
Accumulated depreciation - machinery (100,000,000)
Carrying amount 592,500,000

There were no additions or disposals during 200A. Depreciation is computed using straight line over 20 years for building and 10 years for machinery.

On June 30, 200A, all of the property, plant and equipment were revalued.

Replacement cost Sound value

Land 40,000,000 40,000,000
Building 500,000,000 425,000,000
Machinery 650,000,000 455,000,000

What is the pretax revaluation surplus on December 31, 200A?

Response: 355,000,000

Feedback:

Correct answer: 337,500,000

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Score: 0 out of 1 No

Question 15
The following information pertains to Biglang-awa's inventory for 200A:

Cost NRV
Product A P 100,000 P 120,000
Product B 210,000 180,000
Product C 300,000 270,000
Product D 500,000 520,000
Total P 1,110,000 P 1,090,000

Net purchases 3,870,000

Inventory 1/1 at cost 980,000
Allowance for inventory writedown 10,000

What is Biglang-awa’s cost of sales during 200A?

Response: 3,740,000

Feedback:

Correct answer: 3,790,000

Score: 0 out of 1 No

Question 16
On January 1, Ebe Company purchased 1,000 2-year old cows for P8,000 each, for producing milk. As of December 31, the selling price, net of point of sale cost, of 3-year
and 2-year cows are P15,000 and P12,000, respectively.

What is the gain on price change?

Response: 3,000,000

Feedback:

Correct answer: 4,000,000

Score: 0 out of 1 No

Question 17
On April 1, 200A, Kew Company purchased new machinery for P3,300,000. The machinery had an estimated useful life of years with residual value of P300,000.
Depreciation is computed by the sum of the years' digits method.

What amount should be recorded as depreciation for 200A?

Response: 750,000

Feedback:

SYD = 1 + 2 + 3 + 4 + 5
SYD = 15

April 1, 200A to March 31, 200B (5/15 x 3,000,000) 1,000,000

April 1, 200B to March 31, 200C (4/15 x 3,000,000) 800,000
Accumulated depreciation- March 31, 200C 1,800,000

April 1, 200A- December 31, 200A (1,000,000 x 9/12) 750,000

Correct answer: 750,000

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Score: 1 out of 1 Yes

Question 18
On March 31, 200A, Mariel Company purchased the right to remove gravel from an old rock quarry, The gravel is to be sold as roadbed for highway construction.

The cost of the quarry right was P1,640,000 with estimated salable rock of 200,000 tons. During 200A, the entity loaded and sold 40,000 tons of rock.

On January 1, 200B, the entity estimated that 200,000 tons still remained. During 200B, the entity loaded and sold 80,000 tons.

What amount should be recorded as depletion for 200A?

Response: 328,000

Feedback:

Rate per ton (1,640,000/200,000) 8.20

Depletion for 200A (40,000 x 8.20) 328,000

Correct answer: 328,000

Score: 1 out of 1 Yes

Question 19
At the beginning of the current year, Winn Company traded in an old machine having a carrying amount of P2,000,000 and paid a cash difference of P600,000 for a new
machine having a cash price of P2,500,000.

What amount of loss should be recognized on the exchange?

Response: 100,000

Feedback:

Cash price of new machine 2,500,000

Less: Cash payment (600,000)
Fair value of old machine 1,900,000
Less: Carrying amount of old machine (2,000,000)
Loss on exchange (100,000)

Correct answer: 100,000

Score: 1 out of 1 Yes

Question 20
On January 1, 200A, Hamlet Company borrowed P6,000,000 at an annual interest rate of 10% to finance specifically the cost of building an electricity generating plant.
Construction commenced on January 1, 200A with a cost P6,000,000.

Not all the cash borrowed was used immediately, so interest income of P80,000 was generated by temporarily investing some of the borrowed fùnds prior to use. The project
was completed on November 30, 200A.

What is the carrying amount of the plant on November 30, 200A?

Response: 6,470,000

Feedback:

Construction cost 6,000,000

Interest (6,000,000 x 10% x 11/12) 550,000
Interest income (80,000)
Total cost of plant 6,470,000

PAS 23, paragraph 12, provides that if the funds are borrowed specifically for the purpose of acquiring a qualifying asset, the amount of capitalizable borrowing cost is the
actual borrowing cost incurred during the period less any investment income from the temporary investment of those borrowings.

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Correct answer: 6,470,000

Score: 1 out of 1 Yes

Question 21
Zambia Company purchased four convenience store buildings on January 1, 200A for a total of P25,000,000. The buildings have been depreciated using the straight-line
method witha 20-year useful life and 10% residual value.

On January 1, 200G, the entity has converted the buildings into a hotel and restaurant. Because of the change in the use of the buildings, the entity is evaluating the buildings
for possible impairment.

The entity estimated that the buildings have a remaining useful life of 10 years, that their residual value will be zero, that undiscounted net cash inflows from the buildings
will total P1,500,000 per year, and that the current fair value of the four buildings totals P10,000,000.

The appropriate discount rate is 12%. The present value of an ordinary annuity of 1 at 12% for 10 periods is 5.65.

What amount should be recorded as depreciation for 200G?

Response: 847,500

Feedback:

Correct answer: 1,000,000

Score: 0 out of 1 No

Question 22
Isabela Company incurred the following cost during the current year:

Option fee for land acquired 10,000

Option fee for land not acquired 10,000
Taxes in arrears on land 50,000
Payment for land 1,000,000
Architect fee 230,000
Payment to city hall for approval of building construction 120,000
Contract price for factory building 5,000,000
Safety fence around construction site 35,000
Safety inspection on building 30,000
Removal of safety fence after completion of building 20,000
New fence surrounding the factory 80,000
Driveway, parking bay and safety lighting 550,000
Trees, shrubs and other landscaping 200,000

What is the cost of the new building?

Response: 5,435,000

Feedback:

Architect fee 230,000

Payment to city hall 120,000
Contract price 5,000,000
Safety fence around construction site 35,000
Safety inspection on building 30,000
Removal fo safety fence 20,000
Total cost of new building 5,435,000

Correct answer: 5,435,000

Score: 1 out of 1 Yes

Question 23
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During the current year, Beam Company paid P100,000 cash and traded inventory, which had a carrying amount of P2,000,000 and a fair value of P2,100,000, for other
inventory in the same line of business with a fair value of P2,200,000.

What amount should be recorded as cost of the inventory received in exchange?

Response: 2,200,000

Feedback:

Fair value of inventory given 2,100,000

Cash payment 100,000
Total cost of inventory received 2,200,000

Correct answer: 2,200,000

Score: 1 out of 1 Yes

Question 24
Janelle Company used the retail inventory method to approximate the ending inventory.

Cost Retail
Beginning inventory 650,000 1,200,000
Purchases 9,000,000 14,700,000
Freight-in 200,000
Purhase returns 300,000 500,000
Purchase allowances 150,000
Departmental transfer-in 200,000 300,000
Markup 400,000
Markup cancellation 100,000
Markdown 1,200,000
Markdown cancellation 200,000
Sales 9,500,000
Sales discounts 100,000
Employee discounts 300,000
Estimated normal shoplifting loss 600,000
Estimated normal shrinkage 400,000

What is the estimated cost of ending inventory using the conservative approach?

Response: 2,400,000

Feedback:

Correct answer: 2,520,000

Score: 0 out of 1 No

Question 25
At year-end, Visayas Company showed the following intangible assets:

Trademark 6,000,000
Patent 3,000,000

The trademark has 8 years remaining in the legal life. However, it is anticipated that the trademark will be routinely renewed in the future.

Thus, the trademark is considered to have an indefinite life. Because of an inflationary economy, the trademark is expected to generate cash flows of P200,000 per year.

The appropriate discount rate is 10%. Mathematically, the discounted value of a strcam of indefinite annual cash flows is simply computed by dividing the annual cash flow
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by the discount rate.

The patent has a remaining economic life of 5 years. It is expected that the patent will generate cash flows of P500,000 per year.

The appropriate discount rate is also 10%. The present value of an ordinary annuity of 1 at 10% for 5 periods is 3.79.

What total amount should be recognized as impairment loss for the year?

Response: 5,105,000

Feedback:

Trademark 6,000,000
Present value of indefinite cash flows
(200,000/10%) (2,000,000)
Impairment loss 4,000,000

Patent 3,000,000
Present value of cash flows
(500,000 x 3.79) (1,895,000)
Impairment loss 1,105,000

Total impairment loss (4,000,000+ 1,105,000) 5,105,000

Correct answer: 5,105,000

Score: 1 out of 1 Yes

Question 26
Corolla Compay incurred the following costs:

Materials 700,000
Storage costs of finished goods 180,000
Delivery to customers 40,000
Irrecoverable purchase taxes 60,000

At what amount should the inventory be measured?

Response: 760,000

Feedback:

Materials 700,000
Irrecoverable purchase taxes 60,000
Total cost of inventory 760,000

Correct answer: 760,000

Score: 1 out of 1 Yes

Question 27
Marsh Company had 150,000 units of product A on hand at January 1, costing P21 each.

Purchases of product A during the month of January were:

Units Unit cost

January 10 200,000 22
18 250,000 23
28 100,000 24
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A physical count on January 31 shows 250,000 units of product A on hand.

What is the cost of the inventory on January 31 under the FIFO method?

Response: 5,850,000

Feedback:

Units Unit cost Total cost

January 18 150,000 23 3,450,000
28 100,000 24 2,400,000
Tota? FIFO cost 250,000 5,850,000

Correct answer: 5,850,000

Score: 1 out of 1 Yes

Question 28
The following information is available for Torino Corp. for its most recent year:

Net sales ............................................. 3,600,000

Freight-in ............................................ 90,000
Purchase discounts .................................... 50,000
Ending inventory ...................................... 240,000

The gross margin is 40 percent of net sales. What is the cost of goods available for sale?

Response: 2,440,000

Feedback:

Correct answer: 2,400,000

Score: 0 out of 1 No

Question 29
On January 1,200A, Mogul Company acquired equipment to be used in the manufacturing operations.

The equipment had an estimated useful life of 10 years and an estimated residual value of P50,000.

The depreciation applicable to this equipment was P240,000 for 200C computed under the sum of years' digits method.

What was the acquisition cost of the equipment?

Response: 1,700,000

Feedback: SYD = 1+2+3+4+5+6+7+8+9+10 = 55

The first three fractions are 10/55 for 200A, 9/55 for 200B, and 8/55 for 200C.

Thus, the 200C depreciation of P240,000 is equal to 8/55.

Depreciation for 200C 240,000

Divide by equivalent fraction ÷ 8/55
Depreciable amount 1,650,000
Residual value 50,000
Acquisition cost 1,700,000

Correct answer: 1,700,000

Score: 1 out of 1 Yes

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Question 30
During the current year, Christian Company purchased a second hand machine at a price of P5,000,000.

A cash payment of P1,000,000 was made and a two-year, noninterest bearing note was issued for the balance of P4,000,000

Recent transactions involving similar machine indicate that the used machine has a second hand market value of P4,500,000. A new machine would cost P6,500,000.

The following costs were incurred during the year:

Cost of removing old machine that is replaced 350,000

Cash proceeds from the sale of the old machine replaced 100,000
General overhaul and repairs to recondition machine prior to use
220,000
Cost of spare parts to cover breakdowns 80,000
Cost of installation 180,000
Cost of testing machine prior to use 150,000
Cost of hauling the machine from vendor to company premises
40,000
Cost of repairing damage to machine caused when the machine was dropped during installation
50,000
Repairs incurred during the first year of operation 160,000
Safety device added to the machine 235,000

What total amount should be capitalized as cost of the second hand machine?

Response: 5,390,000

Feedback:

Correct answer: 5,325,000

Score: 0 out of 1 No

Question 31
Jamaica Company is a producer of coffee. On December 31, 200A, the entity has harvested coffee beans costing P3,000,000 and with fair value less cost of disposal of
P3,500,000 at the point of harvest. Bacause of long aging and maturation process after the harvest, the harvested coffee beans were still on hand on December 31, 200B. On
such date, the fair value less cost of disposal is P3,900,000 and the net realizable value is P3,200,000. What is the measurement of the coffee beans inventory on December
31, 200B?

Response: 3,200,000

Feedback: Fair value measurement stops at the point of harvest and PAS 2 applies after such date.

Accordingly, the coffee beans inventory shall be measured at lower of cost and net realizable value on December 31, 200B.

for purposes of applying PAS 2, the fair value less cost to sell of P3,500,000 at the point of harvest is the initial cost of coffee beans inventory. The net realizable value of
P3,200,000 is the measurement on December 31, 200B because this is lower than the deemed cost of P3,500,000.

Accordingly, loss on inventory writedown of P300,000 should be recognized in 200B.

Correct answer: 3,200,000

Score: 1 out of 1 Yes

Question 32
Bell Printing Company incurred the following costs:

Purchase of collating and stapling attachment 840,000

Installation of attachment 360,000
Replacement parts for overhaul of press 260,000
Labor and overhead in connection with overhaul 140,000

The overhaul resulted in a significant increase in production. Neither the attachment nor the overhaul increased the estimated useful life of the press.

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What total amount of the costs should be capitalized?

Response: 1,600,000

Feedback: All costs are capitalized. The overhaul resulted in a significant increase in production.

Correct answer: 1,600,000

Score: 1 out of 1 Yes

Question 33
Caustic Company acquired a building on January 1, 200A for P9,000,000. At that date the building had a useful life of 30 years. The building was classified as owner
occupied property accounted for under the cost model.

On December 31, 200D the fair value of the building was P8,600,000 and on December 31, 200E, the fair value is P8,800,000.

On December 31, 200E, the building was reclassified as an investment property and to be accounted for under the fair value model.

What amount should be carried in the statement of financial position and revaluation for 200F?

Carrying amount Revaluation

Response: 8,800,000 No revaluation

Feedback:

Correct answer: 8,600,000 200,000

Score: 0 out of 1 No

Question 34
On October 1, 200A, Grimm Company consigned 40 freezers to Holden Company.costing P14.000 each for sale at P20,000 cash and paid P16,000 in transportation costs.

On December 30, 200A, Holden Company reported the sale of 10 freezers and remitted P170,000. The remittance was net of the agreed 15% commission.

What amount should be recorded as consignment sales revenue for 200A?

Response: 200,000

Feedback:

Freezers sold (10 x P20,000) 200,000

Correct answer: 200,000

Score: 1 out of 1 Yes

Question 35
Sun Company was constructing an asset that qualified for interest capitalization. The construction began at the beginning of the current year and was completed at the end of
current year.

The construction cost totaled P12,000,000 and was incurred evenly during the current year.

The entity had outstanding notes payable during the entire year of construction comprising P6,000,000 8% interest and P9,000,000 9% interest. None of the borrowings were
specified for the construction of the qualified asset.

What amount of interest should be capitalized?

Response: 516,000

Feedback: If the construction is financed by general borrowing, the average interest rate is multiplied by average expenditures in computing capitalizable borrowing cost.

Principal Interest
8% note payable (8% x 6,000,000) 6,000,000 480,000
9% note payable (9% x 9,000,000) 9,000,000 810,000
Total 15,000,000 1,290,000

Average interest rate (1,290,000/15,000,000) 8.60%

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Average expenditures (12,000,000/2) 6,000,000

Capitalizable interest (6,000,000 x 8.6%) 516,000

Correct answer: 516,000

Score: 1 out of 1 Yes

Question 36
Matinee Company incurred the following costs in purchasing a land as a factory site:

Purchase price 2,400,000

Cost of tearing down old building 240,000
Legal fee for title investigation 15,000
Title insurance 10,000
Architect fee 100,000
Liability insurance during construction 25,000
Excavation cost 40,000
Payment to building contractor 8,800,000
Special assessment by city for public improvement 70,000
Interest cost during construction 300,000

What amount should be recorded as cost of the land?

Response: 2,455,000

Feedback:

Correct answer: 2,495,000

Score: 0 out of 1 No

Question 37
Yola Company and Zaro Company are fuel oil distributors. To facilitate the delivery of oil to their customers, Yola and Zaro exchanged ownership of 1,200 barrels of oil
without physically moving the oil. Yola paid Zaro P300,000 to compensate for a difference in the grade of oil. It is reliably determined that the exchange lacks commercial
substance. On the date of the exchange, cost and fair value of the oil of Yola Company were P1,000,000 and P1,200,000, respectively.

What amount should Yola Company record as cost of the oil inventory received in exchange?

Response: 1,300,000

Feedback:

Cost of oil inventory given 1,000,000

Cash payment 300,000
Total cost of oil inventory received 1,300,000

The exchange transaction is measured at the carrying amount of the asset given up adjusted by the cash involved if the exchange lacks commercial substance.

Correct answer: 1,300,000

Score: 1 out of 1 Yes

Question 38
Winter Company provided the following inventory data at year-end:

Cost NRV
Skis 2,200,000 2,500,000

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Boots 1,700,000 1,500,000

Ski equipment 700,000 800,000
Ski apparel 400,000 500,000

What amount should be reported as inventory at year-end?

Response: 4,800,000

Feedback:

Cost NRV LCNRV

Skis 2,200,000 2,500,000 2,200,000
Boots 1,700,000 1,500,000 1,500,000
Ski equipment 700,000 800,000 700,000
Ski apparel 400,000 500,000 400,000
5,000,000 5,300,000 4,800,000

Inventories shall be measured at the lower of cost and net realizable value applied by individual item.

Correct answer: 4,800,000

Score: 1 out of 1 Yes

Question 39
Davis Company's accounting records indicated the following information:

Inventory, 1/1/0A..................................... 1,000,000

Purchases during 200A ................................. 5,000,000
Sales during 200A ..................................... 6,400,000

A physical inventory taken on December 31, 200A, revealed actual ending inventory at cost was P1,150,000. Davis' gross profit on sales has regularly been about 25 percent
in recent years. The company believes some inventory may have been stolen during the year.

What is the estimated amount of missing inventory at December 31, 200A?

Response: 50,000

Feedback:

Inventory, 1/1/0A 1,000,000

Purchases during 200A 5,000,000
Cost of goods sold (4,800,000)
Estimated ending inventory 1,200,000
Actual inventory (1,150,000)
Missing inventory 50,000

Sales during 200A 6,400,000

Multiply: Cost ratio based on sales (100% - 25%) x 75%
Cost of goods sold 4,800,000

Correct answer: 50,000

Score: 1 out of 1 Yes

Question 40

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On March 31, 200A, Mariel Company purchased the right to remove gravel from an old rock quarry, The gravel is to be sold as roadbed for highway construction.

The cost of the quarry right was P1,640,000 with estimated salable rock of 200,000 tons. During 200A, the entity loaded and sold 40,000 tons of rock.

On January 1, 200B, the entity estimated that 200,000 tons still remained. During 200B, the entity loaded and sold 80,000 tons.

What amount should be recorded as depletion for 200B?

Response: 524,800

Feedback:

Rate per ton (1,640,000/200,000) 8.20

Depletion for 200A (40,000 x 8.20) 328,000

Cost of rock quarry 1,640,000

Depletion for 200A (328,000)
Remaining depletable amount 1,312,000

New rate per ton (1,312,000/200,000) 6.56

Depletion for 200B (80,000 x 6.56) 524,800

Correct answer: 524,800

Score: 1 out of 1 Yes

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