Bridging 10/19/24 TEST
1. OKI Company and its subsidiaries have provided you with a list of
property items they own:
i. Land held by OKI for undetermined future use – P10 million
ii. A vacant building owned by OKI and to be leased out under an
operating lease – P20 million
iii. Property held by a subsidiary of OKI, a real estate firm in the
ordinary course of business - P50 million
iv. Property held by OKI for use in production – P12 million
v. A hotel owned by OKI’s subsidiary; the subsidiary also provides
security services to its guests – P60 million
vi. A building owned by OKI being leased out to OKS, one of OKS’s
subsidiaries under operating leases – P25 million
What amount shall be shown as investment property in the
consolidated statement of financial position of OKI and its
subsidiaries?
90 million
2. On December 31, 2024, an entity, a real estate company, owns an
existing building used for administrative purposes and land that is to
be sold in the ordinary course of business. The building has a carrying
amount of P50,000,000 and the land has a cost of P2,500,000. On
December 31, 2024, the entity decided to change the use of both
building and land. The existing building shall be rented out under an
operating lease. The administrative staff will be relocated to a new
building that was acquired by the entity. The land will be held for
capital appreciation. Both assets shall be carried at fair value. On
December 31, 2024, the fair values of the building and land were
P65,000,000 and P4,500,000 respectively.
Statement I: The building and land shall be reclassified to investment
property.
Statement II: The entity shall recognize P15,000,000 as revaluation
surplus on December 31, 2024.
Statement III: The entity shall recognize P2,000,000 in profit or loss
on December 31, 2024.
ALL STATEMENTS ARE TRUE.
3. On June 1, 2023, North Company purchased an investment property at
a total cost of P1,550,000 and incurred transaction costs of P50,000.
On November 30, 2023, the fair value of the property increased to
P1,600,000. On December 31, 2023, the fair value of the property was
P1,650,000. Semi-annual rent to be received from the property is
P20,000 starting July 2, 2023. The property has a useful life of 20
years. Estimated cost to sell on December 31, 2023, was P10,000.
Statement I. A depreciation expense of P40,000 in 2023 will be
recognized, if the entity uses the cost model.
Depreciation for 7 months= 7/12×P80,000= 46,667
Statement II. Using the fair value model, a gain from change in fair
value of P40,000 will be recognized in 2023 profit or loss. 50,000
BOTH STATEMENTS ARE FALSE.
4. An entity insured the life of its president for P6,000,000. The entity is
the beneficiary of the ordinary insurance policy. The premium is
P400,000. The policy is dated January 1, 2020. The cash surrender
values on December 31, 2023, and 2024 are P120,000 and P160,000,
respectively.
The entity follows the calendar year as its fiscal year. The president
died on October 1, 2024, and the policy was collected on December
31, 2024. No premium was refunded on the insurance settlement.
Question: What is the gain on life insurance settlement?
5,750,000
5. BB Company incurred the following costs during the current year:
Option fee for land acquired 20,000
Option fee for land not acquired 15,000
Taxes in arrears on land 60,000
Payment for land 1,000,000
Architect fee 250,000
Payment to city hall for approval of building construction 130,000
Contract price for factory building 5,500,000
Safety fence around construction site 40,000
Safety inspection on building 35,000
Removal of safety fence after completion of building 25,000
New fence surrounding the factory 80,000
Driveway, parking bay and safety lighting 600,000
Trees, shrubs and other landscaping 250,000
Statement I. The cost of the land is P1,080,000. T
Statement II. The cost of the new building is P5,980,000. T
Statement III. The cost of the land improvements P930,000. T
Statement IV. Demolition cost is expensed outright. F Included
in the capitalizable cost.
ONLY THREE STATEMENTS ARE TRUE.
6. Statement I. If a PPE is acquired on account and is subject to cash
discount, it shall be initially recognized at invoice price net of discount,
whether taken or not.
Statement II. If a PPE is acquired in an installment basis, it shall be
initially recognized at cash price equivalent, any excess of installment
price over cash price is interest.
Statement III. No gain or loss on exchange is recognized if a PPE is
acquired through an exchange with no commercial substance.
All statements are true.
7. On January 1, 2021, Palatino company received a P1,800,000 cash
from the government with the condition that the entity should
purchase a building that will be used as a school for its employee’s
children.
The entity immediately acquired the building costing P5,000,000 from
a certain real estate corporation specifically identified by the
government. The estimated useful life of the building is 20 years using
the straight-line method.
Assuming the grant is treated as a deferred income, how much is the
deferred income from the government grant on December 31, 2021?
90,000 CA of Grant Income is 1,710,000
8. On January 1, 2021, Palatino company received a P1,800,000 cash
from the government with the condition that the entity should
purchase a building that will be used as a school for its employee’s
children.
The entity immediately acquired the building costing P5,000,000 from
a certain real estate corporation specifically identified by the
government. The estimated useful life of the building is 20 years using
the straight-line method.
Assuming the grant is treated as a deduction from the gross
carrying amount of the asset, how much is the deferred income
from the government grant on December 31, 2021?
0
9. Thunder Company constructed its own building which qualifies for
interest capitalization. Thunder incurred the following cost and had the
following outstanding borrowings while the building is under
construction.
The construction was completed on December 31, 2022, and ready for
its intended use.
What is the capitalized interest, interest expense and cost of building
should Thunder report in its Financial Statements for year 2022?
P895,000 (capitalized interest); P11,272,500 (cost of building).
P0 (interest expense)
10. Bri-PH Company acquired machinery on January 1, 2017, which it
depreciated under the straight-line method with an estimated life of
fifteen years and no residual value. On January 1, 2022, Bri-PH
estimated that the remaining life of this machinery was six years with
no residual value. How should this change be accounted for by Bri-PH?
By setting annual depreciation equal to one-sixth of the book
value on January 1, 2022, starting 2022.
11. On January 2, 2017, Stacy Company acquired equipment to be
used in its manufacturing operations. The equipment has an estimated
useful life of 10 years and an estimated residual value of P15,000.
The depreciation applicable to this equipment was P63,636 for 2020,
computed under the sum-of-the-years'-digits method. What was the
acquisition cost of the equipment?
515,000
12. On January 1, 2016, Indians Corporation bought a factory
equipment for P924,000, salvage value was estimated at P24,000. The
asset will be depreciated over 10 years using the double declining
balance method. How much is the total accumulated depreciation to be
reported in the balance sheet on December 31, 2021?
681,779
13. On January 2, 2020, Quezon Inc. purchased equipment with a
cost of P10,500,000, a useful life of 12 years and no salvage value. The
Company uses a sum-of-the-years-digit method of depreciation. On
December 31, 2020, and December 31, 2021, the company determines
that impairment indicators are present. The following information is
available for impairment testing at each year end:
There is no change in the asset’s useful life or salvage value.
Statement I. The 2021 income statement will report recovery of
Impairment Loss of P278,013.
Statement II. An impairment loss of P333,615 is recognized in 2020.
Both statements are true.
14. On January 1, 2015, Agila Company acquired a building for
P8,000,000 and accounted it under revaluation model. The building
has a useful life of 10 years and a nil residual value.
On December 31, 2017, the fair value of the building was P6,000,000.
What is the balance of Revaluation Surplus as of December 31, 2018?
285,714
