Solman Assets

CORRECTIONS/NOTES
Chapter 1
No. 7 The correct answer is not among the choices.
Prob M Change the bank statement balance from P118,300 to P102,000.
Chapter 2
Prob P Due date of the note should be January 1, 2019, not 2018.
Chapter 4
Chapter 5
No. 15 Derecognition of Patent C, not Patent B.
Prob M Expiry is December 31, 2020, not 2019.
Chapter 6
Chapter 7
No. 20 The choices and answers are based on IAS 39.
No. 21 The choices and answers are based on IAS 39.
Chapter 11
No. 1 Question should be June 30, 2016 (not December 31, 2016)
Prob. C (b) On March 1, 2017 (not March 1, 2016), Hugo issued a new 10-year . . .
No. 6 Question should be December 31, 2016 (not December 31, 2015)
Prob. I The problem is defective. Please ignore.
Prob. Z The escrow liability balance of P30,000 is as of December 31, 2015 (not
December 31, 2016)
Chapter 13
Chapter 14
Chapter 16
Chapter 18
Prob C Purchase returns should be P80,000, not P50,000
Chapter 19
2
Chapter 1 Cash and Cash Equivalents
A. 1. C Cash balance per bank statement P556,800

Outstanding checks (98,850)
Deposit on June 30 not recorded by bank 6,000
Deposits in transit 134,250
Correct cash balance P598,200
2. C Balance per books P691,720

Correct cash balance 598,200
Net adjustment to the cash account (reduction/credit) P 93,520
B. 3. C Deposit in transit, May 31 P22,500

22,500 + 2,618,200 2,569,200 = 71,500
Add receipts per books 2,618,200
Deduct deposits per bank (2,569,200)
Deposit in transit, June 30, 2016 P 71,500
4. D Outstanding checks, May 31 P 41,800

Disbursements per books
Reported per ledger P2,566,400
Check for P23,300 recorded as P32,300 (9,000)
Check for P18,000 recorded as P1,800 16,200
Correct disbursements per books 2,573,600
Checks that cleared the bank
Reported checks that cleared the bank P2,570,700
Check erroneously charged by bank (21,000) (2,549,700)
Outstanding checks, June 30, 2016 P 65,700
5. A Balance per bank statement, June 30 P778,300

Deposits in transit 71,500
Erroneous charge by bank 21,000
Correct cash balance, June 30 P805,100
C. 6. B Currencies and coins P 8,500

Replenishment check 2,320
Correct petty cash balance P10,820
7. Petty cash fund P 10,820

Cash on hand (190,700 30,000 15,000) 145,700
Metrobank current account (310,200 + 25,000 + 43,000) 378,200
Allied bank current account, net (320,000 40,000) 280,000
Total cash on hand and in banks P814,720
D. 8. A Balance per bank, August 31 (750,000 + 550,000 480,000) P820,000

No sufficient fund check 40,000
Service charge 2,000
Deposit in transit 190,000
Unadjusted cash balance per books P902,000
9. C Deposit in transit, end P190,000

Deposits per bank 550,000
Deposit in transit, beginning (120,000)
Cash receipts per books during August P620,000
3
10. C Outstanding checks, end P150,000
Checks that cleared the bank during August
Total charges P480,000
No-sufficient fund check (40,000)
Service charges (2,000)
Erroneous bank credit in July cleared in August (50,000) 388,000
Outstanding checks, beginning (140,000)
Cash disbursements per books during August P398,000
11. B Cash balance per books (from No. 8) P902,000

No-sufficent fund checks (40,000)
Service charges (2,000)
Or
Cash balance per bank P820,000
E. 12. D See proof of cash below P5,776,500
13. B See proof of cash below P4,617,750
14. A See proof of cash below P3,212,250
March 31 Receipts Disbursements April 30

Balances per bank statement 2,203,500 5,251,500 4,357,750 3,097,250
Deposit in transit, March 31 125,000 (125,000)
Deposit in transit, April 30 670,000 670,000
Outstanding checks, March 31 (275,000) (275,000)
Outstanding checks, April 30 580,000 (580,000)
Erroneous bank credit (20,000) (20,000)
Loan amortization debited by bank (45,000) 45,000
Adjusted balances 2,053,500 5,776,500 4,617,750 3,212,250
Balances per books 2,038,300 5,601,000 4,619,800 3,019,500

Note collected by bank 17,000 (17,000)
Bank service charge for March (1,800) (1,800)
Bank service charge for April 2,450 (2,450)
Proceeds of own note discounted
200,000(200,000 x .12 x 6/12) 188,000 188,000
Understated April book receipts 4,500 4,500
Overstated April book disbursements (2,700) 2,700
Adjusted balances 2,053,500 5,776,500 4,617,750 3,212,250
F. 15. C Note collected by bank P93,500

Company check for P18,300 erroneously recorded as P13,800 (4,500)
NSF check returned by bank (25,000)
Service charge for December (1,500)
Net debit adjustment to the cash balance P62,500
16. B Cash balance per ledger P852,400

Net debit adjustment to cash 62,500
4
G. 17. A Cash in Metrobank P1,875,000
Cash in BPI 200,000
Cash on hand (125,000 15,000) 110,000
Total cash P2,185,000
H. 18. B Cash in Metrobank (99,320 -5,200) P 94,120

Savings account at Far East Bank 30,800
Petty cash fund (1,500 250) 1,250
Cash on hand 4,200
Cash in foreign bank (in equivalent pesos) 62,000
Travelers check 4,450
Certified check 3,120
90-day BSP treasury bills 12,000
Total cash and cash equivalents P211,940
I. 19. C Checkbook balance P123,450

NSF check included in checkbook balance (12,500)
Undelivered check recorded in the books 8,275
Adjusted cash balance P119,225
J. 20. B Bank statement balance P146,570

Correct cash balance P 78,100
K. 21. B Cash in BDO P320,000

Petty cash fund 580
Total cash, April 30 P320,580
L. 22. C Deposit in transit, July 31 P95,000

Cash receipts per ledger 321,000
Deposits per bank statement (302,000)
Deposit in transit, August 31 P114,000
23. C Outstanding checks, August 31 P125,800

Checks that cleared during August 326,000
Cash disbursements per ledger (265,000)
Outstanding checks, July 31 P186,800
M. 24. D Note: Kindly change the bank statement balance from P118,300 to P102,000.
Bank statement balance P102,000
Balance per books P128,000
Service charge (6,000)
Customers no sufficient fund check (20,000)
Face value of note collected by bank 15,000
Balance before interest on note 117,000
Interest on note collected by bank P 1,300
N. 25. C Currencies P 5,600

Coins 450
Paid vouchers for office supplies dated July 2 1,750
Replenishment check 3,850
Correct amount of petty cash P11,650
5
26. A Imprest balance of petty cash fund P15,000
Total amount in the fund
Correct amount of petty cash P11,650
Paid vouchers dated June 29 300
Loans to employees 3,000 14,950
Shortage P 50
O. 27. A Imprest balance of petty cash fund P10,000.00

Count of cash on hand on June 30 P3,557.40
Paid vouchers (841.60 + 780 + 1,000 + 1,321.40 + 837.60) 4,780.60
Receivable from employee 1,100.00 9,438.00
Cash shortage P 562.00
P. 28. D Total disbursements per books for December (refer to proof of cash) P407,500
29. B November 30 unadjusted balance per bank (refer to proof of cash) P269,500
30. A Total cash receipts per bank during December (refer to proof of cash) P490,000
31. D Total disbursements per bank during December (refer to proof of cash) P396,000
32. B Unadjusted bank balance, December 31 P363,500
Nov. 30 Receipts Disbursements Dec. 31

Balances per bank statement 269,500 490,000 396,000 363,500
Deposit in transit, Nov. 30 36,000 (36,000)
Deposit in transit, Dec. 31 28,750 28,750
Outstanding checks, Nov. 30 (63,000) (63,000)
Outstanding checks, Dec. 31 75,500 (75,500
Adjusted balances 242,500 482,750 408,500 316,750
Balances per books 244,500 482,750 407,500 319,750

Bank service charge for November (2,000) (2,000)
Bank service charge for December 3,000 (3,000)
Adjusted balances 242,500 482,750 408,500 316,750
Q. 33. A Deposit in transit, Feb. 28 P 18,200

Receipts per books (490,000 +7,200) 497,200
Deposits per bank (476,000)
Deposit in transit, March 31 P 39,400
34. A Outstanding checks, Feb. 28 P 38,100

Check issued per books 610,000
Checks cleared per bank (617,000 15,000) (602,000)
Outstanding checks, March 31 P 46,100
35. D Balance per bank, March 31 P919,300

Check erroneously charged by bank 15,000
6
R. 36. B Cash on hand P 860
Receipts for miscellaneous expenses 2,740
Receivable from employee 1,250
Total in the fund P4,850
Petty cash fund established 5,000
Cash short and over P 150
S. 37. D Pre-adjustment cash balance per books P76,837.00

Outstanding checks 12,075.00
Deposit in transit (7,280.00)
Net adjustment in the cash balance (debit) 6,272.60
Unadjusted balance per bank statement P87,904.60
38. C Pre-adjustment cash balance per books P76,837.00

Net adjustment (debit) 6,272.60
Correct cash balance, June 30 P83,109.60
T. 39. B Per bank Per books

Unadjusted balances 2,230,000 2,009,000
Customers uncollectible check charged by bank (100,000)
Dishonored note receivable (50,500)
Customers check for P72,500 erroneously recorded in
the books as P62,500 10,000
Check issued for P124,250 recorded as P122,450 (1,800)
Check issued for P32,900 entered as P3,290 (29,610)
Bank service charges (2,090)
Note collected by bank, net 255,000
Undeposited receipts 420,000
Outstanding checks (P1,220,000 P660,000) (560,000)
Adjusted balances P2,090,000 P2,090,000
U. 40. C Balance per bank P581,050

Balance per books P627,000
Interest earned 1,250
Service charges (400)
Balance per books before the unrecorded check 627,850
Amount of the unrecorded check issued by the company P 11,100
Z. 41. C Bank statement balance P140,230

Deposits not yet recorded by bank 18,445
Checks written but not yet cleared (32,650)
Adjusted cash balance P126,025
V. 42. A Outstanding checks, July 31 P13,260

Checks cleared during July
Checks and charges recorded by bank P17,210
Less July service charge (30)
Customers NSF check charged in July (100) 17,080
Checks issued during July
Total of credits to cash in all journals P19,802
Service charge in June recorded in July (20) (19,782)
Outstanding checks, July 1 P10,558
7
W. 43. A Deposit in transit, December 31 P100,000
Deposits per bank
Total credits per bank P800,000
Credit memo in December (80,000)
Erroneous bank charge recorded and corrected in Dec (8,000) 712,000
Receipts per books
Total company receipts P850,000
Credit memo for November recorded in December (60,000)
Erroneous receipt during December (10,000) (780,000)
Deposit in transit, November 30 P 32,000
X. 44. B Bank statement balance P5,000,000

Deposit in transit 2,000,000
Outstanding checks (500,000 100,000) (400,000)
Correct cash balance P6,600,000
Y. 45. D Balance per books P170,000

Outstanding checks (100,000 20,000) 80,000
Deposit in transit (40,000)
NSF checks (30,000 10,000) (20,000)
Erroneous credit by bank 60,000
Note collected by bank 150,000
Balance per bank statement P400,000
Z. 46. C
Per bank Per books
Unadjusted balances P415,000 P396,980
Bank service charges (1,500)
Note collected by bank, net 92,050
Receipts not yet deposited 289,000
Customers uncollectible check charged by bank (45,320)
Customers check for P90,000 entered as P60,000 30,000
Company check for P49,100 entered as 41,900 (7,200)
Company check for P5,280 entered as P58,200 52,920
Adjusted cash balance P517,390 P517,390
8
Chapter 2 Trade and Other Receivables
A. 1. A Accounts receivable, December 31, 2015 P95,842

Sales on account (591,050 205,175) 385,875
Cash collections from credit customers (320,800)
Cash discounts granted to customers (281,300/97%) x 3% (8,700)
Accounts written off as worthless (4,955)
Credit memoranda for sales returns and allowances (26,275)
Accounts receivable, December 31, 2016 P120,987
Allowance for bad debts, December 31, 2016 (given) P 17,300
2. D Allowance for doubtful accounts, December 31, 2015 P9,740

Recoveries of accounts previously written off 6,615
Allowance balance before adjustment/provision P11,400
Required allowance balance, end 17,300
Bad debts expense for the year P 5,900
B. 3. D Accounts receivable, December 31, 2015 P 674,000

Sales on account 3,000,000
Cash received from customers (3,200,000)
Cash discounts granted to customers
(1,746,000/97%) x 3% P 54,000
(990,000/99%) x 1% 10,000 (64,000)
Recoveries of accounts previous written off 6,000
Credit memoranda for sales returns (12,000)
Accounts receivable, December 31, 2016 P 382,000
Allowance balance required at December 31, 2016

(150,000 x 2%) + (120,000 x 8%) + (86,000 x x 15%) + (26,000 x 30%) P33,300
4. D Allowance for bad debts, December 31, 2015 P24,000

Recovery of accounts written off 6,000
Accounts written off (22,000)
Allowance balance before adjustment P 8,000
Required allowance balance, end 33,300
Bad debts expense for 2016 P25,300
B. 5. B Required allowance balance, December 31

(2% x 1.5M) + (20% x 750,000) + (25% x 600,000) +
(50% x 300,000) + (80% x 200,000) P640,000
Allowance balance, beginning 400,000
Recoveries 15,000
Additional accounts written off (150,000)
Allowance balance before adjustment 215,000
Bad debt expense for the year P425,000
C. 6. A Accounts receivable, January 1 P 360,000

Sales (all on credit) 1,800,000
Accounts receivable, December 31 (315,000)
Cash collected from customers P1,837,500
9
7. C Required allowance balance, end
(1% x 125,000) + (3% x 90,000) + (10% x 100,000) P13,950
Allowance balance before adjustment (12,000 7,500) 4,500
Bad debts expense for the year P 9,450
8. D Accounts receivable P315,000

Allowance for bad debts (13,950)
Carrying amount/amortized cost of accounts receivable P301,050
D. 9. B Accounts receivable, December 31, 2015 P1,300,000

Credit sales for the year 5,400,000
Collections from customers, including recoveries (4,750,000)
Recoveries of accounts written off 25,000
Accounts receivable, December 31, 2016 P1,850,000
Estimated uncollectibles per aging (165,000)
Net accounts receivable, December 31, 2016 P1,685,000
E. 10. B Allowance for bad debts, January 1 P63,000

Provision for the year 18,000
Recoveries 12,000 P93,000
Estimated uncollectibles per aging 85,200
Accounts written off during the year P7,800
F. 11. B Accounts receivable, beginning P120,000

Sales on account
Cost of goods sold (690,000 150,000) 540,000
Cost rate (100% - 25%) 75%
Total sales 720,000
Percentage of sales on account x 80% 576,000
Accounts receivable collected (545,000)
Accounts receivable, end P151,000
G. 12. B Accounts receivable, January 1 P325,000

Sales during the year 2,800,000
Cash received from customers (2,260,000)
Sales returns and allowances (14,280)
Sales discounts
(1,140,000 95%) x 5% P60,000
(873,000 97%) x 3% 27,000 (87,000)
Recoveries of accounts written off 12,000
Accounts receivable, December 31 P758,220
13. C Required allowance balance, December 31 (5% x 758,220) P37,911

Allowance balance before adjustment (18,400 + 12,000 17,500) 12,900
Bad debts expense for the year P25,011
H. 14. D Invoice price of goods (4.0M x 80% x 90%) P2,880,000

Sales returns 400,000
Net sales P2,480,000
Less freight paid by client 100,000
Net realizable value (the 10-day discount period has already
lapsed as of December 31) P2,380,000
10
I. 15. D Invoice price of goods (5.0M x 80% x 95%) P3,800,000
Value added tax (12% x 3.8M) 456,000
Total accounts receivable P4,236,000
J. 16. A Reported amount of accounts receivable P1,300,000

Unrecorded sale on December 30, FOB shipping point 50,000
Customers check marked DAIF returned on December 29 5,000
Adjusted balance of accounts receivable P1,355,000
K. 17. D May Company (2.0M x 10% x 3/12) P 50,000

Bucks Company (630,000 x 12%) 75,600
Accrued interest receivable, December 31 P125,600
L. 18. A Present value of note/selling price of equipment (300,000 x .7972) P239,160

Carrying value of equipment (350,000 240,000) 110,000
Gain on sale of equipment P129,160
19. C Interest revenue for 2016 (239,160 x 12%) P28,699

Interest revenue for 2017 (300,000239,160 = 60,840; 60840 28,699) P32,141
M. 20. B Selling price of land P600,000

Cost of land 400,000
Gain on sale of land P200,000
21. A Interest revenue for 2016 (600,000 x 8%) P48,000
22. B Present value of note

200,000 + (8% x 600,000) = 248,000; 248,000 x 0.8929 221.439
200,000 + (8% x 400,000) = 232,000; 232,000 x 0.7972 184,950
200,000 + (8% x 200,000) = 216,000; 216,000 x 0.7118 153,749 P560,138
23. A Interest revenue for 2016 (560,138 x 12%) P 67,217
24. C Carrying amount of note, January 1, 2016 P560,138

1st principal payment on December 31 (200,000)
Amortization of discount (67,217 48,000) 19,217
Carrying amount of note, December 31, 2016 P379,355
N. 25. D Present value of note/selling price of equipment (1.0M x 0.712) P712,000

Book value of equipment 800,000
Loss on sale of equipment P 88,200
Interest income (712,000 x 12%) P 85,440
O. 26. C Present value of note (120,000 x 3.60) P432,000

Effective interest rate 12%
Interest revenue for 2016 P 51,840
27. C Present value of note, January 1 P432,000

1st principal payment (120,000)
Amortization of discount 51,840
Amortized cost of notes receivable, December 31 P363,840
P. 28. C Interest income for 2016 (400,000 x 0.75 x 10%) P30,000
29. B Carrying amount, December 31 (300,000 + 30,000) P330,000
30. A Interest income for 2016 (400,000 x 0.75 x 10% x 6/12) P15,000
11
Q. 31. C Maturity value of note (400,000 x 10% x 6/12) + 400,000 P420,000
Discount (420,000 x 12% x 6/12) 25,200
Proceeds from discounting P394,800
32. C Maturity value of note (400,000 x 10% x 6/12) + 400,000 P420,000

Discount (420,000 x 12% x 4/12) 16,800
Proceeds from discounting P403,200
R. 33. A Face value of note P400,000.00

Accrued interest as of discounting date (400,000 x 10% x 2/12) 6,666.67
Carrying amount of notes receivable sold P406,666.67
Proceeds from discounting without recourse (see No. 32 403,200.00
Loss on sale of notes receivable P 3,466.67
S. 34. A Loan from Citibank (accounts receivable pledged)

500,000 (500,000 x 12% x 6/12) P 470,000
Factoring of accounts receivable (1.0M x 0.85) 850,000
Total cash received P1,320,000
Loss on factoring (1.0M x 5%) P 50,000
T. 35. A Balance of accounts receivable assigned, November 30 600,000

Collections during December 200,000
Balance of accounts receivable assigned, December 31 P400,000
Balance of notes payable to Manila Bank (600,000 x 75%) 450,000
Payment 200,000
Interest (450,000 x 1%) 4,500
Applied to principal 195,500 254,500
Equity of Lebron in assigned accounts P145,500
36. D Estimated uncollectibles 5% x (500,000 + 400,000) P45,000

Allowance balance before adjustment 32,000
Uncollectible accounts expense P13,000
37. B Maturity value of note (300,000 x 10% x 120/360) + 300,000 P310,000

Discount (310,000 x 12% x 75/360) 7,750
Proceeds P302,250
U. 38. A Carrying value of impaired note, December 31, 2016 P5,500,000

Present value of restructured notes receivable
1,750,000 x 0.909 1,590,750
2,000,000 x 0.826 1,652,000
1,750,000 x 0.751 1,314,250 4,557,000
Impairment loss P 943,000
39. B Interest revenue for 2017 (4,557,000 x 10% P 455,700
V. 40. D Carrying value of impaired note, December 31, 2016 P5,500,000

Present value of restructured notes receivable
4.0M x 0.7513 3,005,200
4.0M x 8% x 2.4869 795,808 3,801,008
Impairment loss P1,698,992
41. B Restructured notes receivable, December 31, 2016 P3,801,008

Amortization of discount on notes receivable
Nominal interest (8% x 4.0M) P320,000
Effective interest (10% x 3,801,008) 380,101 60,101
12
Restructured notes receivable, December 31, 2017 P3,861,109
Chapter 3 Inventories
A. 1. C Reported amount of inventory P345,600

Goods purchased still in transit shipped FOB destination (14,800)
Goods held on consignment (19,200)
Correct amount of inventory, December 31, 2016 P271,600
B. 2. D Physical inventory, December 31, 2016 P364,000

Merchandise sold still in transit shipped FOB destination 62,000
Merchandise purchased still in transit shipped FOB seller 54,000
Correct inventory, December 31, 2016 P480,000
C. 3. C Physical count of goods, December 31, 2016 P570,000

Goods purchased still in transit shipped FOB shipping point 25,000
Goods sold still in transit shipped FOB destination (120,500/1.25) 96,400
Correct amount of inventory, December 31, 2016 P691,400
D. 4. B Purchases, net of returns

Metro Pacific Company (836,000 + 180,000 52,000) P964,000
Ayaling Corporation (524,500 28,500) P496,000
Cash discounts on net purchases
Metro Pacific Company (964,000 x 3%) P28,920
Ayaling Corporation (496,000 x 2%) 9,920
Total available cash discounts P38,840
Cash discounts taken during the year 22,180
Discounts lost P16,660
E. 5. A Reported inventory on hand P1,920,000

Purchases still in transit shipped FOB shipping point, including freight 175,000
Goods sold still in transit shipped FOB destination
245,000 20,000 = 225,000; 225,000 1.5 150,000
Goods out on consignment (180,000 1.5 = 120,000; 120,000 + 15,000 135,000
Correct amount of inventory P2,380,000
F. 6. A Reported inventory P2,350,000

Goods in the delivery department excluded in inventory 40,000
Goods on approval from a supplier included in inventory (200,000)
Correct merchandise inventory, December 31, 2016 P2,165,000
G. 7. C January 8 (40 units at P2,000) 80,000

January 30 (120 units at P2,400) 288,000 P368,000
Moving average unit cost (368,000 / 160 units) P2,300
H. 8. B January 5 43 units @ 1,102 47,365

(22 units @ 1,102 24,244)
January 8 21 units @ 1,101 23,121
38 units @ 1,180 44,840
January 24 59 units @ 1,152 67,961
January 30 36 units @ 1,152 41,472
January 31 23 units @ 1,152 P26,489
13
9. C Cost of goods available for sale (25,800 + 21,565 + 44,840) P92,205
Total units available for sale (24 + 19 + 38) 81
Weighted average cost per unit P 1,138
Inventory value, January 31 (1,138 x 23 units) P26,174
I. 10. C Units, August 31 - 6,000

Most recent purchase 1,500 x P59 P 88,500
Next most recent purchase 3,000 x P55 165,000
Next most recent purchase 1,500 x P52 78,000
Cost of inventory, August 31, FIFO P331,500
11. B Sales (1,500 x 130) + (8,000 x 135) P1,275,000

Cost of goods sold (under weighted average)
Average cost per unit (821,500/15,500 units = 53.00
53.00 x 9,500 units sold 503,500
Gross profit P771,500
12. A Sold on August 10 (1,500 x 50) P 75,000

Sold on August 20 (8,000 x 52) 416,000
Cost of goods sold during August (Specific identification) P491,000
J. 13. B January 10 10,000 P2,250,000 @ P225

January 15 (6,000 1,350,000 @ P225)
4,000 P 900,000 @ P225
January 31 14,000 2,100,000 @ P150
January 31 18,000 P3,000,000 @ P167 P167
K. 14. A Average cost per unit (595,200/48,000) = 12.40

Number of units in ending inventory (279,000/12.40) = 22,500
Most recent cost (13,000) P167,700
Next most recent (9,500 x 12.00) 114,000
March 31 inventory using FIFO P281,700
L. 15. B 2014 2015 2016

Profit under FIFO P720,000 P1,000,000 P1,400,000
Difference in beginning inventory - 280,000 200,000
Difference in ending inventory (280,000) (200,000) (500,000)
Profit under weighted average P440,000 P1,080,000 P1,300,000
M. 16. C Total profit for three years under FIFO P910,000

Total profit for three years under weighted average 560,000
Difference in ending inventory of 2016 (excess FIFO inventory over WA) P350,000
Ending inventory of 2016 under FIFO 710,000
Ending inventory of 2016 under weighted average P360,000
N. 17. A Total profit for 2014-2016 under weighted average method P2,950,000
Difference in ending inventory of 2016 430,000
Total profit for 2014-2016 under FIFO basis P3,380,000
O. 18. B The cost per unit is increasing (inflation situation); hence, profit under
FIFO will be higher than under weighted average.
P. 19. B Cost is P680 which is lower than net realizable value of P780
(P1,200 P480).
14
Q. 20. D Cost P29,000
Net realizable value (54,000 4,000 20,000 3,000) Lower P27,000
R. 21. A Splendid Regular White Muscovado

Cost per unit P2,500 P1,500 P1,300
Net realizable value per unit P2,400 P1,600 P2,000
Lower amount P2,400 P1,500 P1,300
Number of units 200 500 250
Total P480,000 P750,000 P 325,000
Total inventory P1,555,000
S. 22. B Total cost P5,000,000

Total inventory value (lower of cost or net realizable value)
(700,000 + 1,500,000 +1,450,000 + 800,000) 4,450,000
Required balance in Allowance for inventory write down P 550,000
Reported balance before adjustment 200,000
Loss on inventory write down P 350,000
T. 23. B Cost NRV Lower

Product A: 30,000 @ 8.00 8.00 x 90% x 90% = 6.48 45,000 x 6.48 = 291,600
15,000 @ 6.50
Product B: 25,000 @ 10.50 11.00 x 90% x 90% = 8.91 25,000 x 8.91 = 222,750
Product C: 30,000 @ 1.25 2.00 x 90% x 90% = 1.62 30,000 x 1.25 = 37,500
20,000 @ 0.90 20,000 x 0.90 = 18,000
Total inventory value, December 31, 2016 P569,850
U. 24. A Gross profit rate in 2015

Cost of goods sold (2,200,000 400,000) 1,800,000
Gross profit (2.4M 1.8M) 600,000
Gross profit rate (600,000 / 2,400,000) 25%
Gross profit rate in 2016 (25% + 5%) 30%
25. B Cost of goods available for sale (400,000 + 2,320,000) P2,720,000

Estimated cost of goods sold (3,120,000 x 70%) 2,184,000
Estimated ending inventory P 536,000
Cost of undamaged merchandise (100,000 x 70%) (70,000)
Estimated realizable value of damaged merchandise (8,000)
Estimated inventory loss from the flood P 458,000
26. B Estimated ending inventory P 536,000

Cost of damaged merchandise (30,000 x 70%) which is lower than the
estimated realizable value of damaged merchandise (21,000)
Estimated inventory loss from the flood P 445,000
V. 27. A Estimated cost of goods sold (3,640,000/1.3) P2,800,000
28. B Cost of goods available for sale (550,000 + 3,000,000) P3,550,000

Estimated cost of goods sold (3,640,000 x 70%) 2,548,000
Estimated cost of ending inventory P1,002,000
Less realizable value of damaged merchandise 50,000
Estimated cost of merchandise lost by the fire P 952,000
15
W. 29. B Inventory, January 1, 2016 P1,700,000
Net purchases (3.9M 300,000) 3,600,000
Cost of goods available for sale P5,300,000
Estimated cost of goods sold (6,260,000 x 60%*) 3,756,000
Estimated cost of ending inventory P1,544,000
Net realizable value of damaged merchandise (53,000)
Amount of loss as a result of the fire P1,365,000
*Average gross profit rate (40.5% + 39.5%) / 2 = 40%
2014: 2,268/5,600 = 40.5%
2015: 1,975/5,000 = 39.5%
X. 30. C Inventory, December 31, 2015 P 320,000

Purchases (1,410,000 + 10,000 20,000) 1,400,000
Estimated cost of goods sold
Sales 350,000 +1.8M + 300,000 250,000 = 2,200,000 x 60% 1,320,000
Estimated cost of ending inventory P 400,000
Reported amount of ending inventory 360,000
Inventory shortage P 40,000
Y. 31. B Inventory, January 1 P 550,000

Net purchases (3M + 60,000- 200,000 -80,000 ) 2,780,000
Estimated cost of goods sold
Net sales (3.6M + 300,000 160,000) = 3,740,000; 3.74M x 70% 2,618,000
Estimated cost of ending inventory P 712,000
Realizable value of damaged merchandise 50,000
Inventory loss P 662,000
Z. 32. B Ending inventory, at retail (300,000 + 1.1M + 100,000 200,000 900,000) P400,000
Cost to retail ratio 600,000/1.1M + 100,000 200,000 60%
Estimated cost of ending inventory (FIFO retail) P240,000
33. C Ending inventory, at retail P400,000

Cost to retail ratio
115,000 + 600,000 = 715,000;
300,000 + 1.1M + 100,000 200,000 = 1,300,000
715,000/1,300,000 = 55% 55%
Estimated cost of ending inventory (Average retail) P220,000
34. D Ending inventory, at retail P400,000

600,000/1,200,000 50%
Estimated cost of ending inventory (lower of FIFO cost or NRV) P200,000
16
AA. 35. C Cost Retail
Beginning inventory P 650,000 P1,075,000
Purchases 2,450,000 3,025,000
Freight in 50,000
Net markup 400,000
Net markdown (300,000)
Available for sale (3,150/4,200 = 75%) P3,150,000 P4,200,000
Sales (3,880,000)
Ending inventory, at retail P 320,000
Cost ratio 75%
Ending inventory at estimated cost P 240,000
36. B Ending inventory, at retail P320,000

Cost ratio 2,500/3,125 80%
Ending inventory, at estimated cost P256,000
BB. 37. C Ending inventory, at retail

250,000 + 1,575,000 + 175,000 1,705,000 125,000 20,000 P150,000
180,000 + 1,020,000 = 1,200,000
250,000 + 1,575,000 + 175,000 125,000 = 1,875,000
1,200,000 / 1,875,000 64%
Ending inventory, at estimated cost P 96,000
CC. 38. A Cost Retail

Beginning inventory P 800,000 P1,400,000
Purchases P2,970,000 P4,200,000
Freight-in 40,000
Net markups 100,000
P3,010,000 P4,300,000
Available for sale P5,680,000
Sales (4,000,000)
Markdowns (20,000)
Shortages (80,000)
Ending inventory, at retail P1,600,000
Cost to retail ratio (3,010/4,300) 70%
Ending inventory, at estimated cost P1,120,000
DD. 39. C Loss on purchase commitments (2,700 2,680) x 1,000 P20,000
40. C Loss on purchase commitments (2,680 2,670) x 1,000 P10,000
41. B The recovery is limited by the amount of loss previously

recognized. P20,000
EE. 42. C Reported profit P658,000

Advances from customers recorded as sales revenue (40,000)
Overstated beginning inventory 71,000
Understated ending inventory 96,000
Correct profit P785,000
FF. 43. C Reported profit P320,000

Understated beginning inventory (20,000)
Goods counted twice in ending inventory (12,000)
Understated sales 33,000
17
Correct profit P321,000
Chapter 4 Property, Plant and Equipment
A. 1. B a. 400,000 + 10,000 P410,000

b. Appraised value P800,000
c. Fair value of shares issued (100,000 x P78) P7,800,000
d. Down payment P100,000
Present value of note (120,000 x 0.91) 109,200
(80,000 x 0.75) 60,000 P269,200
B. 2. A Appraised Value Allocated Cost

Drill press P84,000 (84/420 x 400,000) P 80,000
Lathe (240,000 9,000) 231,000 (231/420 x 400,000) 220,000
Air compressor 105,000 (105/420 x 400,000) 100,000
Total P420,000 P400,000
C. 3. B Cost of land/present value of payments (100,000 x 3.49) P349,000
D. 4. D Land P5,000,000
New building
Demolition cost of old building P 200,000
Construction cost of new building 3,000,000
Excavation fees 120,000
Architectural design fees 160,000
Building permit fee 40,000
Insurance premiums during construction period 75,000
Total cost of new building P3,595,000
E. 5. D Land
Land Improvements Building
January 1 balances P 350,000 P20,000 P900,000
Cash purchase of land 1,250,000
Mortgage assumed on land purchase 2,000,000
Realtors commission 150,000
Legal fees, realty taxes, etc. 25,000
Payment to squatters to vacate 50,000
Demolition costs of old building 60,000
Recovery from demolished building (45,000)
Cost of fencing property 55,000
Payment to contractor 1,000,000
Building permit fees 10,000
Excavation expenses 25,000
Architects fees 25,000
Totals P3,775,000 P75,000 P2,025,000
F. 6. A Purchase price P600,000

Installation cost 80,000
Total cost of new mixing machinery P680,000
G. 7. C Cash price (given) P750,000
8. B Trade in allowance/Fair value of old asset (750,000 500,000) P250,000

Carrying value of old asset (700,000 400,000) 300,000
Loss on exchange P 50,000
18
H. 9. D Fair market value of automobile (no cash involved; same as machine) P172,800
Carrying value of automobile (Cool Company) 135,000
Gain on exchange P37,800
Fair market value of molding machine P172,800

Carrying value of molding machine (Water Company) 240,000-83,000 157,000
Gain on exchange P 15,800
10. A Fair market value of automobile P145,000

Carrying value of automobile (Cool Company) 135,000
Gain on exchange P10,000
Fair market value of molding machine P150,000

Carrying value of molding machine (Water Company) 240,000-83,000 157,000
Gain (loss) on exchange (P 7,000)
I. 11. B Cost of new machine (140,000 + 32,000) P172,000

Fair market value of old packaging machine P140,000
Carrying value (240,000 x 50%) 120,000
Gain on exchange P 20,000
J. 12. C Fair value of the computer system P860,000
13. C Fair value of the car (860,000 100,000) P760,000

Carrying amount of the car 600,000
Gain on the exchange P160,000
K. 14. B Interest on specific borrowing (1.5M x 12% P180,000

Interest earned on temporary investments (8,000)
Capitalized interest P172,000
15. Average accumulated expenditures

1.5M x 2/12 P 250,000
1.86M x 7/12 1,085,000
4.2M x 2/12 700,000
4.5M x 1/12 375,000
Total P2,410,000
Capitalized interest on specific borrowing (see no.14) P 172,000
Capitalized interest on general borrowing
Excess of ave. accum expenditures over specific borrowing
(2,410,000 1,500,000) P910,000
Weighted average interest rate
(16% x 1M) + (13% x 500,000)
1.0M + 500,000 x 15% 136,500
Capitalized interest P 308,500
Total construction costs 4,500,000
Total cost of self-constructed building P4,808,500
16. Total interest on borrowings (162,500 + 490,000) P652,500

Weighted average interest rate
(16.25% x 1.0M) + (14% x 3.5M)
1.0M + 3.5M = 14.5%
Capitalized interest on general borrowings
2,410,000 x 14.5% 349,450
19
Interest expense P303,050
L. 17. B Average accumulated expenditures
400,000 x 12/12 P400,000
500,000 x 9/12 375,000
480,000 x 5/12 200,000
180,000 x 1/12 15,000
Total P990,000
18. A Interest on specific borrowing (500,000 x 15%) P90,000
19. B Interest on specific borrowing P 90,000

Interest on general borrowing (990,000 500,000) x 20% 98,000
Total capitalized interest P 188,000
Total construction costs 1,560,000
Total cost of self-constructed asset P1,748,000
20. A Average accumulated expenditures (1,560,000/2) = 780,000

Interest on specific borrowing (16% x 700,000) P112,000
Interest on general borrowing (780,000 700,000) x 18% 14,400
Total capitalized interest P126,400
M. 21. D Straight line depreciation expense for 2016

(125,000 5,000) / 5 = 24,000; 24,000 x 6/12 P12,000
22. A SYD depreciation expense for 2017

(125,000 5,000) x 4.5/15 P36,000
or (120,000 x 5/15 x ) + (120,000 x 4/15 x )
23. A DDB carrying value at December 31, 2018

(125,000 x 80% x 60% x 60%) P36,000
or Cost 125,000
Accum. depreciation
2016 (125,000 x 40% x ) 25,000
2017 (100,000 x 40%) 40,000
2018 (60,000 x 40%) 24,000 89,000
Carrying value, 12/31/18 36,000
24. A Service hours method depreciation rate per hour

(125,000 5,000) / 10,000 hours P12.00
25. C Productive output method

120,000/24,000 units = 5.00 / unit
Accumulated depreciation, December 31, 2017
(3,000 + 7,500) x 5.00 P52,500
N. 26. D Most appropriate is productive output method

(162,000 12,000) / 48,000 units = 3.125 / unit
3.125 x 14,000 units produced in 2016 P43,750
O. 27. B Trial and error computations

SL method would result to P42,000 accum. depreciation at 12/3/15
SYD method would result to P72,545 accum. depr. at 12/31/15
DDB method would result to P81,000 accum. depreciation at
12/31/15 which is in agreement with the given balance
Depreciation expense for 2016 (225,000 81,000) x 20% P28,800
20
P. 28. A Carrying value, October 1, 2015
250,000 (250,000 x 25% x 2 years) 125,000
Additional capital expenditure 50,000
Revised depreciable cost 175,000
Remaining life of asset 2 years P87,500
Q. 29. A Carrying value of engine at time of replacement (300,000 200,000) P100,000
R. 30. B Cost 400,000

Accum. depreciation (360,000/5) x 36,000
Carrying value, January 1, 2016 364,000
Revised depreciation for 2016
(364,000 10,000) / 2.5 years P141,600
S. 31. B Accumulated depreciation is the sum of 8 + 7 + 6 + 5 or 26 for the 1 st

four years of use
T. 32. A Straight line carrying value after two years

700,000 (630,000/6 years) x 2 years P490,000
Upgrading costs 120,000
Total P610,000
Revised depreciation for third year
(610,000 70,000)/ 4 years P135,000
SYD carrying value after two years

700,000 (630,000 x 11/21) P370,000
Total P490,000
(490,000 70,000) x 4/10 P168,000
33. B Straight line carrying value after two years

700,000 (630,000/6 years) x 2 years P490,000
Total P610,000
(610,000 70,000)/ 6 years P90,000
SYD carrying value after two years

700,000 (630,000 x 11/21) P370,000
Total P490,000
(490,000 70,000) x 6/21 P120,000
U. 34. B Fair value, January 1, 2016 P20,000,000

Carrying value, January 1, 2016
Cost P22,000,000
Accumulated depreciation
(22M 2M)/20 = 1.0M; 1.0M x 5 years 5,000,000 17,000,000
Revaluation surplus recognized in the accounts P 3,000,000
35. B Annual depreciation charge after revaluation

(20M 3M) / 10 years P1,700,000
21
36. A Selling price P13,500,000
Carrying value, January 1, 2020
Fair value, January 1, 2016 P20,000,000
Less depreciation for 4 years (1.7M x 4) 6,800,000 13,200,000
Gain on sale P300,000
V. 37. D DDB depreciation for the year 2016

2015 210,000 x 2/6 x = 35,000
2016 175,000 x 2/6 P58,333
W. 38. C Accumulated depreciation, December 31, 2015

132,000/8 years = 16,500; 16,500 x 3 years P49,500
Depreciation expense for 2016
(132,000 49,500) = 82,500; 82,500 / 3 years 27,500
Accumulated depreciation balance, December 31, 2016 P77,000
X. 39. B Depreciation expense for 2015 (400,000 - 40,000) x 5/15 P120,000

(360,000 x 5/15) + { (400,000 120,000 40,000)/4} = 180,000
Revised depreciation expense for 2016
Depreciable value, Jan. 1, 2016 (400,000 120,000 - 40,000) 240,000
240,000/4 60,000
Accumulated depreciation, December 31, 2016 P180,000
Y. 40. A. Impairment loss is recognized when the asset carrying value exceeds
its recoverable amount(the higher between value in use and net
realizable value
Case 1 No Case 4 Yes
Case 2 No Case 5 Yes
Case 3 No Case 6 No
Z. 41. B Carrying value (10M 5M) P5,000,000

Recoverable value (higher of 3.0M and 4.0M) 4,000,000
Impairment loss P1,000,000
AA. 42. C Carrying value (4.5M 1.8M) P2,700,000

2.7M 2.25M = 450,000
Recoverable value Higher of (NRV 2.25M) or (Value in use P2.180) 2,250,000
43. C Depreciation expense for the year 2017

2,250,000 / 6 years* P375,000
*4.5M/10 = 450,000/year; 1.8M / 450,000 = 4 yearsl 10 4 = 6 years
BB. 44. B Carrying value (450,000 210,000) P240,000

Recoverable value 150,000
45. A Accumulated depreciation before impairment P210,000

(450,000 150,000) +(150,000/3) = 350,000
Impairment loss credited to accumulated depreciation 90,000
Depreciation expense for 2017 (150,000/3) 50,000
Accumulated depreciation, December 31, 2017 P350,000
22
CC. 46. D Life of asset (4.0M/160,000) = 25 years
Remaining life (25 9) = 16 years
Recovery of impairment (500,000 x 13/16) P 406,250
47. A Carrying value (4.0M x 16/25) P2,560,000

Impairment loss (given) 500,000
Recoverable value, December 31, 2013 P2,060,000
Depreciation for 3 years (2014 2016)
2,060,000/16 = 128,750/year; 128,750 x 3 years 386,250
Carrying value, December 31, 2016 P1,673,750
Fair value 3,240,000
Increase in value P1,566,250
Unrecovered impairment loss (500,000 x 13/16) 406,250
Revaluation surplus recognized P1,160,000
DD. 48. C Carrying value, January 1, 2016 (5.0M 1.5M) P3,500,000

5M 1.5M 500,000 = 3M; 3M 2.5M = 500,000
Depreciation expense for 2016 (500,000)
Carrying value, December 31, 2015 at time of impairment P3,000,000
Recoverable value 2,500,000
EE. 49. D Fair value P36,000,000

Carrying value 30M (30M x 4% x 3 years) 26,400,000
Revaluation surplus P 9,600,000
50. A Revised depreciation expense for 2016 ( 36M / 15 years) P2,400,000
FF. 51. B Carrying value, December 31, 2016 (650,000 x 6/10) P390,000
Recoverable amount 240,000
Impairment loss P150,000
52. D Carrying amount prior to recovery of impairment (240,000 x 4/6) P160,000
53. C Recovery of previous impairment (150,000 x 4/6) P100,000
GG. 54. A Fair value, December 31, 2013 P550,000

Carrying value (500,000 x 8/10) 400,000
Revaluation surplus P150,000
55. A Carrying value, December 31, 2016 (550,000 x 5/8) P343,750

Recoverable amount 200,000
Decrease in value of asset P143,750
Charge to revaluation surplus balance (150,000 x 5/8) 93,750
HH. 56. A Fair value P22,000,000

Carrying value
Cost P30,000,000
Accumulated depreciation (27M/15 yrs) x 8 14,400,000 15,600,000
Revaluation surplus, January 1, 2016 P6,400,000
Amount transferred to retained earnings (6.4M/10) (640,000)
Revaluation surplus balance, December 31, 2016 P5,760,000
23
II. 57. B Fair value of land P20 million
Cost of land 10 million
Revaluation surplus, land P10 million
Replacement cost of building P100 million

Less accum. depreciation (90M/15) x 5 years 30 million
Fair value P 70 million
Carrying value of building (75M 25M) 50 million
Revaluation surplus, January 1, 2016 P20 million
Less amount transferred to retained earnings (20M/10) 2 million
Revaluation surplus, building, December 31, 2016 18 million
Total revaluation surplus, December 31, 2016 P28 million
JJ. 58. A Purchase price of land P 9,000,000

Exploration and development costs 1,000,000
Present value of expected cashflows for restoration (1.5M x 0.62) 930,000
Total depletable cost P10,930,000
Total recoverable reserves (in tons) 2,500,000
Depletion rate per ton P 4.37
KK. 59. A Purchase price of property P28,000,000

Residual value (5,000,000)
Present value of estimated restoration costs (2M x 0.621) 1,242,000
Development costs incurred in 2014 1,000,000
Additional development cost incurred in 2015 1,200,000
Estimated total reserves (in tons) 10,000,000
Depletion rate per ton for 2015 P 2.64
Tons extracted during 2015 x 3,000,000
Depletion expense in 2015 P7,920,000
Total depletable cost in 2015 P26,442,000

Depletion for 2015 (7,920,000)
Carrying amount,end of 2015 P18,522,000
Estimated reserves, beginning of 2016 (3.5M + 2.5M) 6,000,000
Depletion rate per ton for 2016 P3.09
Tons extracted during 2016 x 3,500,000
Depletion expense in 2016 P10,815,000
LL. 60. A Cost of structures and sheds P3,600,000

Estimated yield (in tons) 480,000
Depreciation rate per ton P7.50
Number of tons removed during 2016 x 15,000
Depreciation expense for 2016 P112,500
MM. 61. A Depletion rate per metric ton for 2015 (20M3M+1.5M=18.5M; 18.5M/4M) P4.625
Number of metric tons mined in 2015 x 2million
Depletion expense for 2015 P9,250,000

Depletion expense in 2015 (9,250,000)
Carrying value, end of 2015 P 9,250,000
Revised estimate of recovery (2.5M + 1.4M) 4,000,000
Revised depletion rate per metric ton P2,3125
Number of metric tons mined in 2016 x 1,500,000
Depletion expense for 2016 P3,468,750
24
Chapter 5 Intangible Assets
A. 1. A Franchise
Cost 200,000 + (120,000 x 2.9137) P549,644
Less amortization for 2 years (549,644/10) x 2 years 109,929 P439,715
Patents (131,200 x 6/8) P 98,400
Trademarks (not subject to amortization) P320,000
B. 2. B R&D services performed for Mowgli P1,500,000

Cost in the conceptual formulation of process 2,000,000
Depreciation expense of building (3.0M/10 years) 300,000
Design of tools, jigs and moulds 1,300,000
Cost of testing prototype 900,000
Total research and development expense P6,000,000
C. 3. D Design of tools , jigs, moulds and dies P125,000

Modification of the formulation of a process 160,000
Research and development expense in 2016 P285,000
D. 4. C Development costs after establishing technological feasibility P500,000

Legal expenses to obtain patent 50,000
Expenses of drawings required by patent office 20,000
Licensing fees paid to patent office 150,000
Total cost to be capitalized as intangible asset P720,000
E. 5. A Patent
Legal fees to obtain patent P60,000
(60,000 + 25,000) + (150,000 x 2/3) + (150,000 x 1/3) = 235,000
Patent application and licensing fees 25,000 P 85,000
License (150,000 x 2/3) 100,000
Trademark (150,000 x 1/3) 50,000
Total cost of intangible assets P235,000
F. 6. D Amortization expense (3,125,000 / 10) x 9/12 P234,375

Franchise fee (8.5M 5.0M) x 5% P175,000
G. 7. C Amortization expense for 2014 (1,250,000/5 = 250,000; 250,000 x ) P125,000
8. C Carrying amount 1,250,000 (250,000 x 1.5 years) P875,000

Fair value 750,000
9. A New carrying value, January 1, 2016 P750,000

Less amortization for the year (750,000/3 years) 250,000
Patent carrying value, December 31, 2016 P500,000
H. 10. D Accumulated amortization, December 31, 2016 (10 M/ 10 years) P1,000,000
I. 11. B Cost of patent, June 28, 2013 P350,000

Less accumulated amortization (350,000/5 = 70,000; 70,000 x 2.5 years) 175,000
Carrying value, January 1, 2016 P175,000
Revised remaining life 4 years
Amortization expense for 2016 P43,750
25
J. 12. D Patent A
Carrying value, January 1, 2016 (150,000 x 3/8) P 56,250
Remaining useful life 2 years P28,125
Patent B (not subject to amortization)
Patent C (no amortization in the year of derecognition)
13. C Carrying amount of Patent B at December 31, 2015 (72,000 x 3/5) P43,200
Legal fees incurred 15,000
Loss on derecognition of Patent B P58,200
K. 14. C Down payment P2,000,000

Present value of six semi-annual payment of P500,000
500,000 x 5.2421 2,621,050
Cost of franchise P4,621,050
L. 15. C Patent amortization expense for 2011 (570,000/10 years)

570,000/7.5 years = 760,000; 760,000/10 P76,000
16. B Acquisition cost of the patent 570,000 7.5 = 760,000

Carrying value, beginning of 2013 (760,000 x 5.5/10) P418,000
Additional expenditures capitalizable 142,000
Total carrying value subject to amortization P560,000
Patent amortization for 2013 P 80,000
17. D Patents carrying value, December 31, 2016 (560,000 x 3/7) P240,000
M. 18. B Note: Please change the expiry date to December 31, 2020
Accumulated amortization, January 1, 2016 (540,000 x 3/8) P202,500
Revised amortization for 2016
540,000 202,500 = 337,500; 337,500/3 112,500
Accumulated amortization, December 31, 2016 P315,000
N. 19. B Carrying value, December 31, 2014

714,000 x 5/8 x 2/3 P297,500
or Cost of patent, January 1, 2012 714,000
Less accum. amortization 714,000/8 years = 89,250 x 3 267,750
Carrying value, January 1, 2015 446,250
Less revised amortization for 2015 (446,250/3) 148,750
Carrying value, December 31, 2015 297,500
O. 20. A Straight line rate: 1/5 or 20%

Rate based on revenue: 30% (higher)
Amortization expense of computer software, Year 1 (30% x 1.2M) P360,000
P. 21. B Straight line rate: 1/3 or 33 1/3% (annual rate); 16 2/3% (half year)
Rate based on revenue: 2M/10M = 20% (annual rate) higher
Carrying amount of computer software, December 31, 2016
3.6M x 80% P2,880,000
26
Q. 22. B Amortization of patents
Carrying value, January 1, 2016 (3.0M x 5/10) 1,500,000
Amortization of patents for 2016 P500,000
Depreciation of manufacturing equipment
Depreciable carrying value, January 1, 2016
(8.0M 3.4M 200,000) 4,400,000
Estimated useful life 10 years 440,000
Total charge against 2016 income P940,000
R. 23. B Carrying value of trademark (not subject to amortization) P3,000,000

Recoverable value of trademark (120,000/6%) 2,000,000
Impairment loss on trademark P1,000,000
Carrying value of patent (2.0M x 4/5) P1,600,000

Recoverable value of patent (present value of future cash flows
500,000 x 0.94 470,000 400,000 x 0.84 336,000
600,000 x 0.89 534,000 500,000 x 0.79 395,000 1,735,000
No impairment on patent
S. 24. C Fair value of all net assets, excluding goodwill P38,000,000

Carrying amount of net assets, excluding 35,000,000
Value of goodwill P 3,000,000
Reported amount of goodwill 4,000,000
Impairment loss on goodwill P1,000,000
T. 25. C Purchase price of Wealth Company P25,000,000

25M 21M = 4M
Fair value of Wealth Companys net assets 21,000,000
Goodwill P 4,000,000
U. 26. A Average earnings P3,000,000

Normal return based on appraised value of net assets (10% x P28.5M) 2,850,000
Excess earnings P 150,000
Goodwill (150,000 25%) P 600,000
V. 27. B Implied value of the acquired company (8.0M x 1.6) P12,800,000

Net assets (15.0M 4.0M) 11,000,000
Implied goodwill P 1,800,000
Reported amount of goodwill 5,000,000
Goodwill impairment loss P 3,200,000
W. 28. B Given (Other expenditures given are expensed) P10million
X. 29. B Average earnings (7.2M 5 years) P1,440,000

Normal return on net assets (10.35M 6.65M) x 20% 740,000
Excess earnings P 700,000
Goodwill (700,000 25%) P2,800,000
Net assets 3,700,000
Amount paid in the acquisition of Rowen Corporation P6,500,000
Y. 30. D Average earnings (16.5M/5) = 3,300,000

Normal return on average net assets (92.2M/5) x 10% = 1,844,000
Goodwill (3,300,000 1,844,000) 40% P 3,640,000
Net assets in 2015 20,200,000
Total payment in the acquisition of Toronto P23,840,000
27
Chapter 6 Equity Investments
A. 1. B Equity investments at fair value, December 31, 2015 (4,000 x 106.70) P426,800
2. B Cash dividends received (4,000 x 4.50) P18,000
3. A Fair value, December 31, 2015 P426,800

Number of shares held after receipt of 10% bonus issue (4,000 + 400) 4,400
Revised carrying amount per share P 97.00
4. D No gain or loss. The shares are adjusted to their fair value (which is the P0
sales price) at the time of sale.
5. D Total cost of investment 101,600 + (3,000 x 104) = 413,600

Cost of 1,500 shares = 413,600 x 1,500/4,400 P141,000
Fair value (1,500 x 95) 142,500
Unrealized gain related to shares sold /transferred to retained P 1,500
earnings
6. B Shares remaining after sale (4,400 1,500) 2,900

Fair value per share on December 31, 2016 x P96.00
Equity investments , December 31, 2016 P278,400
B. 7. B Total market, December 31, 2016 (34,000 + 153,000 + 295,000) P482,000

Total cost (28,000 + 170,000 + 315,000) 513,000
Unrealized loss taken to profit or loss in 2016 P 31,000
8. A Net selling price (155,000 900) P154,100

Carrying amount (fair value), December 31, 2016 153,000
Gain on sale P 1,100
9. C AB Company ordinary (200 shares x P150) P 30,000

(200 x 150 = 30,000) + (2,000 x 153 = 306,000) = 336,000
EF Company ordinary (2,000 shares x 153) 306,000
Equity investment, December 31, 2017 P336,000
C. 10. A No income is recognized upon receipt of share rights. Only a

memorandum entry is made upon their receipt. P0
11. A Investment income is equal to the proceeds from sale (10,000 x 5) P50,000
12. A Total cost of new investment (market value of shares acquired)

2,000 shares x P98 P196,000
D. 13. C Preference shares received (1,000/10) 100

Market value per preference share x P100
Dividend revenue P10,000
E. 14. B Dividend revenue (3,000 shares x P4.00) P12,000
15. No gain or loss is recognized on sale of equity investments at FVOCI.

The shares are adjusted to their fair value (which is the sales price) at
the time of sale. P0
28
F. 16. D The shares are classified as investments at fair value through other
comprehensive income since they are not intended to be traded in the
near term and the investor does not have the ability to exercise
significant influence. Any change in fair value is taken to OCI and not
profit or loss P0
17. B Equity investments, December 31, 2016 (fair value) P222,000
G. 18. B Fair value of shares acquired through exercise of rights (250 x P203) P50,750
Cash paid upon exercise (250 x P180) 45,000
Investment income P 5,750
H. 19. C Cost of investment acquired through exercise of rights (1,000/4) x P124 P31,000
20. A Investment income from exercise (124 110) x 250 shares P3,500
Sale of rights (1,000 x 4) 4,000
Total investment income from the stock rights P7,500
I. 21. A Cash dividends from Purl (6,000 2,500) x P1.00 P3,500

Cash dividends from Axe Corp preference shares (1,000 x P2.40) 2,400
Dividend revenue for year 2016 P5,900
J. 22. A Unrealized loss is taken to other comprehensive income, not profit or loss.
K. 23. C FVPL market value, December 31, 2015 P 950,000

FVPL market value, December 31, 2016 1,050,000
Increase in market value/Unrealized gain taken to profit or loss P 100,000
24. B FVOCI market value, December 31, 2016 P 980,000

FVOCI cost 1,000,000
Accumulated unrealized loss (debit), December 31, 2016 P 20,000
L. 25. A FVPL market value, December 31, 2016 P512,000

FVPL market value, December 31, 2015 541,000
Decrease in market value/Unrealized loss in 2016 P 29,000
26. A Selling price of the securities P550,000

Carrying amount/fair value, December 31, 2016 512,000
27. D None
M 28. D Income from associates for year 2016 (1.2M x 30% x 9/12) P270,000
29. B Acquisition cost of investment P1,700,000

Share in income of associate 270,000
Cash dividends received (120,000 x P1.50) (180,000)
Investment carrying amount, December 31, 2016 P1,790,000
30. B Acquisition cost of investment P1,700,000

Share in income of associate 270,000
Adjustment in share in income due to excess attributable to equipment
1.7M 1.4M = 300,000 excess
300,000/5 years = 60,000/year; 60,000 x 9/12 (45,000)
Cash dividends received (120,000 x P1.50) (180,000)
29
N. 31. A Purchase price P510,000
Brokers fees 5,100
Investment acquisition cost P515,100
32. C Acquisition cost, July 1, 2015 P515,100

Share in income of associate (850,000 x 6/12 x 25%) 106,250
Cash dividends (25% x 320,000) (80,000)
Investment carrying amount, December 31, 2015 P541,350
33. B Sales price of investment sold, net (275,000 2,750) P272,250

Carrying amount of investment sold (541,350 x ) 270,675
34. D Carrying amount of remaining securities reclassified to fair value

5,000 shares x 49 P245,000
O. 35. B Investment carrying value, December 31, 2016 P4,840,000

Share in reported income (2.4M 480,000) x 25% (480,000)
Cash dividends received during the year (60,000 + 80,000) 140,000
Acquisition cost of the investment P4,500,000
P. 36. A Investment balance, December 31, 2016 P12,000,000

12M (20M x 25% x 6/12) - + 100,000 + 1M = 10.6M
Share in reported profit (20M x 25% x 6/12) (2,500,000)
Adjustment in reported profit due to undervalued equipment
1.0M/5 = 200,000/year; 200,000 x 6/12 100,000
Dividends received 1,000,000
Acquisition cost of the investment P10,600,000
Q. 37. A Acquisition cost P2,430,000

Share in reported profit (30% x 1,520,000) 456,000
Adjustment in reported profit attributable to
Machinery (500,000 x 30%) / 4 years P 37,500
Inventories (600,000 x 30%) 180,000 (217,500)
Dividends received (30% x 650,000) (195,000)
Investment carrying value, December 31, 2016 P2,473,500
R. 38. B Acquisition cost P200,000

Share in income (10% x 1.5M) 150,000
Investment in Sharon, December 31, 2016 P260,000
S. 39. C Profit reported by Joel for 2016 P900,000

Dividend on cumulative preference share (12% x 1M) (120,000)
Profit related to ordinary shareholders P780,000
Interest owned by Billy 25%
Share in income of Joel P195,000
T. 40. D Acquisition cost in excess of the Robbie Companys net assets P150,000
Excess attributable to undervalued land and building
(250,000 + 100,000) x 30% 105,000
Excess attributable to goodwill P 45,000
30
41. C Acquisition cost P650,000
Share in reported income (600,000 120,000 ) x 30% 144,000
Adjustment in reported income
Attributable to equipment
(100,000 x 30% = 30,000; 30,000/5 years = 6,000; 6000 x 8/12) (4,000)
Dividends received (18,000 x P4.00) (72,000)
Investment carrying value, December 31, 2016 P718,000
U. 42. A Acquisition cost (30,000 x P180) P5,400,000

5.4M + 552,000 120,000 + 840,000 510,000 = 6,162,000
Share in profit for 9 months of 2015 (4.8M - 2,960,000) x 30% 552,000
Dividends received (120,000)
Share in profit of 2016 (2.8M x 30%) 840,000
Dividends received (1.7M x 30%) (510,000)
43. D Sales price (20,000 x P250) P5,000,000

5M 4,108,000 = 892,000
Carrying amount of investment sold (6,162,000 x 2/3) 4,108,000
44. D Investment carrying amount, December 31, 2017 (after losing

significant influence, the investment is reclassified to fair value) P2,300,000
V. 45. C Share in reported income (1,350,000 650,000) x 25% P175,000

Adjustment for the excess attributable to
Depreciable plant assets
(150,000 x 25% = 37,500; 37,500/10 years = 3,750; 3,750 x (1,875)
Inventories (20,000 x 25%) (5,000)
Adjusted share in income P168,125
W. 46. D FVOCI fair value, December 31, 2017 P4,850,000

FVOCI fair value, July 1, 2017 after reclassification 4,500,000
Unrealized gain taken to other comprehensive income P 350,000
X. 47. B Acquisition cost, January 1, 2015 P4,000,000

Share in profits of 2015 (30% x 800,000) 240,000
Share in losses of 2016 (30% x 320,000) (96,000
31
Chapter 7 Debt Investments
A. 1. C Present value of maturity value (8M x 0.676) P5,408,000

Present value of interest payments (8M x 5% x 8.111) 3,244,400
Purchase price of the bonds P8,652,400
2. B Present value of maturity value (8M x 0.681) P5,448,000

Purchase price of the bonds P8,642,400
B. 3. B Present value of maturity value (2M x 0.3387) P 677,400

Purchase price of the debt investment P1,810,992
C. 4. A Purchase price (100,000 x .99) P 99,000.00

99,000 + (100,000 x 14% x 2/12) + 500 = 101,833.33
Accrued interest (100,000 x 14% x 2/12) 2,333.33
Brokers fees 500.00
Total cash payment P101,833.33
5. D Interest revenue (100,000 x 14% x 3/12) P3,500
D. 6. D P1,051,163 (see table)
7. B Interest revenue, January 1 June 30 (see table below) P 53,250

Interest revenue, July 1 December 31 (see table below) 52,913
Total interest revenue for the year 2016 P106,163
Date Nom. Int Effect Int Amort CV

1/1/16 1,065,000
7/1/16 60,000 53,250 6,750 1,058,250
1/1/17 60,000 52,913 7,087 1,051,163
8. B Fair value at December 31, 2016 (1,000 shares x 1,055) P1,055,000
9. A Interest revenue (nominal interest) for 2016 (1.0M x 12%) P120,000
E. 10. C Interest revenue (effective interest) 3,756,000 x 10% P375,600
11. D Investment carrying value, January 1, 2016 P3,756,000

Amortization of discount 375,600 - (4.0M x 9%) 15,600
12. A Fair value, December 31, 2016 (4M x .99) P3,960,000

Amortized cost (see No. 11) 3,771,600
Unrealized gain taken to other comprehensive income P 188,400
F. 13. C Investment cost, April 1, 2016 P8,295,000

Amortization of premium for 9 months
50,500 (see table) x 9/12 (37,875)
Investment carrying value, March 31, 2017 P8,244,500

Amortization of premium for 9 months
55,550 (see table) x 9/12 (41,663)
32
14. B Interest revenue for 2016 (829,500 (see table) x 9/12) P622,125
Interest revenue for 2017 (see table)
January 1 March 31 829,500 x 3/12 207,375
April 1 December 31 824,450 x 9/12 618,338 P825,713
Date Nom. Int Effect Int Amort CV

4/1/16 8,295,000
3/31/17 880,000 829,500 50,500 8,244,500
3/31/18 880,000 824,450 55,550 8,188,950
G. 15. B Interest income (equal to nominal interest) 1.0M x 12% P120,000
16. B Selling price (600,000 x 1.01) P606,000

Market value on December 31, 2015 (600,000 x 1.06) 636,000
Loss on sale P 30,000
17. D Fair market value, December 31, 2015 (1M x 1.06) P1,060,000
Fair market value, December 31, 2016 (400,000 x 1.04) P 416,000
18. C Amortized cost, December 31, 2015 (see given table) P1,034,706
19. B Amortized cost, December 31, 2015 P1,034,706

Amortization of premium up to the date of sale (16,529 x 3/12) (4,132)
Amortized cost, April 1, 2016 P1,030,574
Portion of investment sold (600/1,000) 60%
Carrying amount of investment sold P 618,344
Selling price (600,000 x 1.01) 606,000
20. C January 1 April 1, 2016 (103,471 x 3/12) P25,868

April 1 December 31, 2016 (nominal interest after reclassification to FV )
(400,000 x 12% x 9/12) 36,000
Interest income for 2016 P61,868
Under IFRS 9, reclassification shall be made when and only when

an entity changes its business model for managing its financial
assets. The tainting concept, under IAS 39 does not apply. Interest
income, then, is computed as follows
Jan. 1 Apr. 1, 2016 103,471 x 3/12 P25,868
Apr. 1 Dec. 31, 2016 103,471 x .40 x 9/12 31,041
Total interest income for year 2016 P56,909
21. B Fair value, December 31, 2016 (400,000 x 1.04) P416,000

Under IFRS 9, after the sale of a significant portion of the
investment, it continues to be accounted for at amortized cost. The
carrying amount at December 31, 2016 is
1,018,177 x 4/10 P407,271
22. A Fair value, December 31, 2015 (1.0M x 1.06) P1,060,000
23. B Fair value, December 31, 2014 (1.0M x 1.08) P1,080,000

Amortized cost, December 31, 2014 (see given table) 1,049,733
Unrealized gain taken to other comprehensive income in 2014 P 30,267
24. A Fair value, December 31, 2015 (1.0M x 1.06) P1,060,000
33
Amortized cost, December 31, 2015 (see given table) 1,034,706
Accumulated amount of unrealized gain P 25,294
Unrealized gain recognized in 2014 30,267
Unrealized loss taken to other comprehensive income in 2015 P 4,973
H. 25. D Nominal interest (1.0M x 4%) P40,000

Amortization of discount 3,600
Interest revenue P43,600
I. 26. B January 1 June 30 (1,812,000 x 5%) P 90,600

July 1 December 31
90,600 (2M x 4%) = 10,600; (1,812,000 + 10,600) x 5% 91,130
Interest revenue for year ended December 31, 2016 P181,730
J. 27. D Purchase price, January 1, 2015 P912,400

Amortization of discount in 2015 (912,400 x 10%) 80,000 11,240
Amortized cost, December 31, 2015 P923,640
Amortization of discount in 2016 (923,640 x 10%) 80,000 12,364
Amortized cost, December 31, 2016 P936,004
28. D Interest revenue for 2016 (923,640 x 10%) P92,364
K. 29. D Market value, December 31, 2015 (given) P472,500
30. C Interest revenue (500,000 x 8% x 6/12) P20,000
31. B Sales price P460,000

Carrying amount on December 31, 2015 472,500
L. 32. B Sales price at a premium of P28,000

Carrying amount at a discount (20,000 4,000) 16,000
Gain on sale P44,000
M. 33. B Sales price P1,595,000

Carrying value of debt investment sold
Purchase price, January 1 , 2015 (3,108,000 x ) 1,554,000
Amortization of premium, December 31
Effective interest (1,554,000 x 12%) 186,480
Nominal interest (1.5M x 13%) 195,000 (8,520)
Carrying value, December 31, 2015 1,545,480
Amortization through June 30, 2016
Nominal interest (1.5M x 6.5%) 97,500 (4,771) 1,540,709
Gain on sale of debt investment P 54,291
34. D Market value of remaining bonds, December 31, 2016

1,500,000 x 1.01 P1,515,000
N. 35. D Sales price 7,850,000 (8M x 8% x 6/12) P7,530,000
34
Carrying value of debt investment, June 1, 2017
Purchase price, June 1, 2016 7,383,000
Amortization of discount, December 1, 2016
Nominal interest (8M x 4%) 320,000 49,150
Carrying value, December 1, 2016 7,432,150
Amortization of discount, June 1, 2017
Nominal interest (8M x 4%) 320,000 51,608 7,483,758
36. D Interest revenue, June 1 December 1 P369,150

Interest revenue, December 1-31 (371,608 x 1/6) 61,935
Interest revenue for 2016 P431,085
O. 37. D Acquisition cost 3,050,000 100,000 (3M x 10% x 6/12) P2,800,000

Market value, December 31, 2016 (3M x 1.05) 3,150,000
Unrealized gain P 350,000
P. 38. B Present value of bonds

1M + (10% x 3M) = 1.3M x 0.885 1,150,500
1M + (10% x 2M) = 1.2M x 0.783 939,600
1M + (10% x 1M) = 1.1M x 0.693 762,300 P2,852,400
39. A Initial cost, December 31, 2015 P2,852,400

Principal due (1,000,000)
Amortization of discount (3M x 10) (2,852,400 x 13%) 70,812
Carrying amount of debt investment, Dece,ber 31, 2016 P1,923,212
Q. 40. C Purchase price of debt investment, January 1, 2015 P2,819,100

2,819,100+ (338,292 300,000) + (343,887 300,000) = 2,900,279
Nominal interest (3M x 10%) 300,000
Effective interest (2,819,200 x 12%) 338,292 38,292
Carrying amount, December 31, 2015 P2,857,392
Nominal interest 300,000
Carrying value of debt investment on December 31, 2016 P2,900,279
41. B
42. A Fair market value at time of reclassification P3,030,000

Investment carrying amount prior to reclassification 2,900,279
Amount taken to profit or loss P 129,721
R. 43. B 10% treasury bonds interest income (1M x 10% x 9/12) P75,000
35
12% Buttercup bonds (150,000 x 12% x 6/12) 9,000
Blossom ordinary shares
Fair value, December 31, 2016 (2,000 x 190) P380,000
Cost of investment 374,000 6,000
10% treasury bonds
Fair value, December 31, 2016 (1M x .99) P990,000
Cost of investment 1,000,000 (10,000)
12% Buttercup bonds
Fair value, December 31, 2016 (150,000 x 1.02) 153,000
Cost of investment 150,000 3,000
Total income for the year 2016 P83,000
S. 44. B Sales price of bond investment (5.0M x 1.10) P5,500,000

Acquisition cost, January 1, 2015 P4,742,000
Nominal interest (5.0M x 6%) P300,000
Amortized cost, December 31, 2015 P4,821,360
Nominal interest P300,000
Effective interest (4,821,360 x 8%) 385,709 85,709 4,907,069
T. 45. C January 1- July 1 (3,761,000 x 5.5%) P206,855

July 1 December 31
206,855 (4.0M x 5%) = 6,855; (3,761,000+ 6,855) x 5.5% 207,232
Interest revenue for year ended December 31, 2016 P414,087
Chapter 8 Investment Property
36
A. 1. B (Fair value model) Fair value, end of year P5,000,000
Reclassification from owner-occupied to investment property, P500,000
difference is credited to revaluation surplus, not to P&L P0
B. 2. A Sales price P290,000

Carrying amount (cost model) 250,000 x 17/20 212,500
C. 3. D Carrying amount (cost model) 270,000 x 14/15 P252,000

Depreciation expense (270,000/15) P 18,000
D. 4. D Total fair value, December 31, 2016 (240,000+ 288,000 + 365,000) P893,000
Total fair value, December 31, 2015 (220,000 + 305,000 + 375,000) 900,000
Loss in 2016 P 7,000
E. 5. A Any difference resulting from reclassification from owner-occupied to

investment property is taken to equity/revaluation surplus. P0
F. 6. B Fair value model (590,000 580,000) P10,000

Cost model (580,000/40 years) P14,500
G. 7. D Building owned being rented out, at fair value P5,500,000

Fourth floor being rented under operating lease and subleased to
others, at fair value 2,000,000
Total amount reported as investment property P7,500,000
H. 8. B Land held, no intended specific use in the future P 1,800,000

Building in process of construction intended to be leased under
operating leases 8,000,000
Building 70% x 18.0M (being leased out) 12,600,000
Total investment property, December 31, 2016 P22,400,000
Chapter 9 Other Non-current Financial Assets and Non-current Assets Held for Sale
37
A. 1. D Desired amount in five years P10,000,000
10M / 12.5779 = 795,045.27
Future value of ordinary annuity at 5% for ten periods 12.5779
Required semi-annual deposit P795,045
B. 2. A Face value of non-interesting bearing note P5,000,000

Present value of 1 at 12% for 5 periods x 0.5674
Present value of note, July 1, 2016 P2,837,000
3. D Interest revenue (2,837,000 x 6%) P170,220
C. 4. C 1st deposit on June 30, 2016 P 795,045.27

Interest, December 31, 2016 (795,045.27 x 5%) 39,752.26
2nd deposit, December 31, 2016 795,045.27
Bond sinking fund balance, December 31, 2016 P1,629,842.80
D. 5. B 1st deposit on January 1, 2016 P1,489,070.20

Interest at 10% 148,907.02
Bond sinking fund balance P1,637,977.22
E. 6. C Future amount in three years P21,000,000

Future value of an ordinarty annuity of 1 at 10% for 3 periods 3.31
Annual deposit to the fund P 6,344,410
F. 7. B Bond sinking fund, January 1, 2015 P5,000,000

Additional investment in 2015 1,000,000
Dividend on investment 510,000
Interest revenue 1,520,000
Administration costs (800,000)
Sinking fund balance, December 31, 2015 P7,230,000
G. 8. A Cash in sinking fund (including P200,000 earned prior to 2015) P3,900,000

Securities in sinking fund 1,600,000
Interest and dividends earned in 2015 (receivable in 2016) 80,000
Sinking fund balance, December 31, 2015 P5,580,000
H. 9. D Annual premium, net of dividends (40,000 6,000) P34.000

Increase in cash surrender value (108,000 87,000) 21,000
Life insurance expense for 2016 P13,000
I. 10. B Annual premium, net of dividends (96,000 1,500) P94,500

Increase in cash surrender value 7,000
Life insurance expense for 2016 P87,500
J. 11. A Cash surrender value, December 31, 2016 P182,000

Annual premium due, net of dividends (50,000 5,000) 45,000
Life insurance expense recognized in 2016 35,000
Increase in cash surrender value during 2016 10,000
Cash surrender value, January 1, 2016 P172,000
K. 12. D Annual premium P120,000

Increase in cash surrender value (62,000 49,000) (13,000)
Life insurance expense for one year P107,000
Life insurance expense for 9 months of 2016 (107,000 x 9/12) P 80,250
13. B Face value of life insurance policy P4,000,000
38
4M 49,000 (120,000 x 3/12) = 3,921,000
Cash surrender value of life insurance (49,000)
Unexpired insurance (120,000 x 3/12) (30,000)
Gain from life insurance settlement P3,921,000
L. 14. B Cash surrender value, December 31, 2016 P117,000

Annual premium P50,000
Life insurance expense recognized in 2016 (38,000) 12,000
Cash surrence value, December 31, 2015 P105,000
M. 15. D Face value of life insurance policy P8,000,000

Cash surrender value of life insurance, December 31, 2015 (60,000)
Unexpired insurance (200,000 x 3/12) (50,000)
Gain from life insurance settlement P7,890,000
N. 16. A Cash surrender value, January 1 P100,000

Increase in cash surrender value
Annual premium, net of dividends 190,000
Life insurance expensefor 2016 170,000 20,000
Cash surrender value, December 31 P120,000
O. 17. B Present value of security deposit (300,000 x 0.7513) P225,390
18. A Accretion using effective interest method (225,390 x 10%) P 22,539

Security deposit balance, December 31, 2016 (225,390 + 22,539) P247,929
P. 19. B Carrying value of asset P64,000

Fair value less cost to sell (48,000 3,800) 44,200
20. D Sales price P40,000

Carrying value 44,200
Loss on disposal P 4,200
Q. 21. C Lower of carrying amount (P34,000)

or fair value less cost to sell (48,000 3,800) P34,000
R. 22 C Cost of asset P100,000

Accumulated depreciation at time of reclassification
(100,000 10,000)/10 years = 9,000; 9,000 x 3.75 years 33,750
Carrying amount P66,250
S. 23. D Carrying amount P45,000

Sales price P27,600

Carrying amount of noncurrent asset held for sale 28,500
Loss on disposal P 900
T. 24. A Carrying amount P24,500
39
No impairment loss ------
The asset is reported at the lower amount P24,500
25. A Carrying amount, September 30, 2016

8.0M 3.2M (8M x 8% x 9/12) P4,320,000
Fair value less cost to sell (4.9M 400,000) P4,500,000
Sales price net of disposal costs (4,950,000 350,000) P4,600,000
Carrying amount (lower amount) 4,320,000
26. B Carrying amount after classification as held for sale on January 1, 2016
(lower between P2,200,000 and P2,500,000) P2,200,000
Fair value less cost to sell at December 31, 2016 (1.8M 50,000) 1,750,000
Additional loss in 2016 P 450,000
Chapter 10 Biological Assets
40
A. 1. B Fair value less cost to sell , December 31
125 x 5,000 625,000
75 x 4,500 337,500
80 x 3,600 288,000 P1,250,500
Fair value less cost to sell, January 1
125 x 4,000 500,000
75 x 3,000 225,000
Purchased on July 1
80 x 3,100 248,000 973,000
Increase in value of biological assets in 2016 P 277,500
B. 2. D 30 x (15,000 13,000) 60,000

5 x (15,000 13,000) 10,000
5 x 4,000 20,000
5 (7,000 4,500) 12,500
Gain arising from change in FV less CTS due to physical change P102,500
3. B 30 x (13,000 12,500) 15,000

5 x (13,000 12,500) 2,500
5 (4,500 4,000) 2,500
Gain arising from change in FV less CTS due to price change P20,000
C. 4. B 11 x 12,000 132,000
1 x 8,000 8,000
Biological assets, December 31, 2016 P140,000
5. D Biological assets, December 31, 2016 P140,000

Biological assets, January 1, 2016
10 x 10,000 100,000
Purchased on July 1, 2016
1 x 10,800 10,800 110,800
Gain arising from change in fair value P 29,200
D. 6. B Fair value of biological assets, December 31 P3,600,000

Costs to sell (45,000 + 12,000) (57,000)
Biological assets (at FV less CTS), December 31, 2016 P3,543,000
E. 7. D Carrying amount at January 1 P1,000,000

Livestock purchased during the year 340,000
Increase in FV less cost to sell due to physical changes 180,000
Increase in FV less cost to sell due to price changes 40,000
Livestock sold during the year (890,000)
Biological assets at December 31 P 670,000
8. B Increase in FV less cost to sell due to physical changes P180,000

Increase in FV less cost to sell due to price changes 40,000
Amount included in gross income P220,000
F. 9. C 150 bulls x (38,000 35,000) P450,000

100 cattle x (24,000 22,000) 200,000
50 heifers x (13,000 12,500) 25,000
Change in FV less CTS due to price change P675,000
10. A 150 bulls x (45,000 38,000) P1,050,000
41
100 cattle x (38,000 24,000) 1,400,000
50 heifers x (24,000 13,000) 550,000
Change in FV less CTS due to physical change P3,000,000
11. B (150 40) bulls x 45,000 P4,950,000

(100 50) cattle x 38,000 1,900,000
50 heifers x 24,000 1,200,000
Biological assets, December 31, 2016 P8,050,000
G. 12. A Gain on initial recognition (8,500 8,000) x 5 P2,500
13. C 30 x (16,500 11,600) P147,000

5 x (11,600 8,800) 14,000
10 x 6,000 60,000
10 x (8,800 6,500) 23,000
Gain arising from change in FV due to physical change P244,000
14. B 30 x (11,600 11,200) P12,000

5 x (8,800 8,500) 1,500
10 x (6,500 6,000) 5,000
Gain arising from change in FV due to price change P18,500
15. B 25 x 16,500 P412,500

5 x 11,600 58,000
10 x 8,800 88,000
Biological assets, December 31, 2016 P558,500
42

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CORRECTIONS/NOTES

A. 1. C Cash balance per bank statement P556,800

2. C Balance per books P691,720

B. 3. C Deposit in transit, May 31 P22,500

4. D Outstanding checks, May 31 P 41,800

5. A Balance per bank statement, June 30 P778,300

C. 6. B Currencies and coins P 8,500

7. Petty cash fund P 10,820

D. 8. A Balance per bank, August 31 (750,000 + 550,000 480,000) P820,000

9. C Deposit in transit, end P190,000

11. B Cash balance per books (from No. 8) P902,000

E. 12. D See proof of cash below P5,776,500

13. B See proof of cash below P4,617,750

14. A See proof of cash below P3,212,250

March 31 Receipts Disbursements April 30

Balances per books 2,038,300 5,601,000 4,619,800 3,019,500

F. 15. C Note collected by bank P93,500

16. B Cash balance per ledger P852,400

H. 18. B Cash in Metrobank (99,320 -5,200) P 94,120

I. 19. C Checkbook balance P123,450

J. 20. B Bank statement balance P146,570

K. 21. B Cash in BDO P320,000

L. 22. C Deposit in transit, July 31 P95,000

23. C Outstanding checks, August 31 P125,800

N. 25. C Currencies P 5,600

O. 27. A Imprest balance of petty cash fund P10,000.00

32. B Unadjusted bank balance, December 31 P363,500

Nov. 30 Receipts Disbursements Dec. 31

Balances per books 244,500 482,750 407,500 319,750

Q. 33. A Deposit in transit, Feb. 28 P 18,200

34. A Outstanding checks, Feb. 28 P 38,100

35. D Balance per bank, March 31 P919,300

S. 37. D Pre-adjustment cash balance per books P76,837.00

38. C Pre-adjustment cash balance per books P76,837.00

T. 39. B Per bank Per books

U. 40. C Balance per bank P581,050

Z. 41. C Bank statement balance P140,230

V. 42. A Outstanding checks, July 31 P13,260

X. 44. B Bank statement balance P5,000,000

Y. 45. D Balance per books P170,000

A. 1. A Accounts receivable, December 31, 2015 P95,842

2. D Allowance for doubtful accounts, December 31, 2015 P9,740

B. 3. D Accounts receivable, December 31, 2015 P 674,000

Allowance balance required at December 31, 2016

4. D Allowance for bad debts, December 31, 2015 P24,000

B. 5. B Required allowance balance, December 31

C. 6. A Accounts receivable, January 1 P 360,000

8. D Accounts receivable P315,000

D. 9. B Accounts receivable, December 31, 2015 P1,300,000

E. 10. B Allowance for bad debts, January 1 P63,000

F. 11. B Accounts receivable, beginning P120,000

G. 12. B Accounts receivable, January 1 P325,000

13. C Required allowance balance, December 31 (5% x 758,220) P37,911

H. 14. D Invoice price of goods (4.0M x 80% x 90%) P2,880,000

J. 16. A Reported amount of accounts receivable P1,300,000

K. 17. D May Company (2.0M x 10% x 3/12) P 50,000

L. 18. A Present value of note/selling price of equipment (300,000 x .7972) P239,160

19. C Interest revenue for 2016 (239,160 x 12%) P28,699

M. 20. B Selling price of land P600,000

21. A Interest revenue for 2016 (600,000 x 8%) P48,000

22. B Present value of note

23. A Interest revenue for 2016 (560,138 x 12%) P 67,217

24. C Carrying amount of note, January 1, 2016 P560,138