Far 1 - Final Examinations

HAVANA Company provided the following calculation about an impairment loss recognized on December 31, 2017:                                 Goodwill            Other assets Carrying amount      3,000,000              9,000,000 Impairment loss        3,000,000             2,000,000 There has been a favorable change in the estimate of the recoverable amount of the net assets since the impairment loss was recognized. The recoverable amount is now P8,000,000 on December 31, 2018. The carrying amount of the new assets of would have been P7,200,000 on December 31, 2018. Assets are depreciated at 20% of reducing balance. What amount should be recognized as gain on reversal of impairment for 2018?

PAS 1 is

During 2016, the first year of operations, R Company purchased the following equity securities:                                                     Cost                                Market value                        Market value                                                                                     December 31, 2016            December 31, 2017 Security 1                            2,200,000                              1,400,000                              900,000 Security 2                            700,000                                 1,000,000                            1,100,000 Security 3                          1,600,000                               1,500,000                             1,600,000         Security 4                          2,000,000                               2,500,000                             1,200,000 Security 1 and Security 2 are held for trading and Security 3 and Security 4 are measured as at fair value through other comprehensive income by election. During 2017, the entity sold one-half of Security 1 for P1,000,000, and one-half of Security 4 for P1,300,000. What is the unrealized gain or unrealized loss – FVOCI to be recorded on December 31, 2017?

At the beginning of current year, M Company purchased 40% of the outstanding ordinary shares of an investee paying P2,560,000 when the carrying amount of the net assets of the investee equalled P5,000,000. The difference was attributed to equipment which had a carrying amount of P1,200,000 and a fair market value of P2,000,000, and to building with a carrying amount of P1,000,000 and a fair market value of P1,600,000. The remaining useful life of the equipment and building was 4 years and 12 years, respectively. During the current year, the investee reported net income of P1,600,000 and paid dividends of P1,000,000. What is the carrying amount of the investment in associate at year-end?

On January 1, 2019, Angus Company purchased bonds with face amount of P5,000,000. The business model of the entity in managing the financial asset is not only to collect contractual cash flows that are solely payment of principal and interest but also to sell the bonds in the open market. The entity has not elected the fair value option of measuring financial assets. The entity paid P4,600,000 plus transaction cost P142,000 for the bond investment. The bonds mature on December 31,2021 and pay 6% interest annually on December 31 each year with 8% effective yield. The bonds are quoted at 105 on December 31,2019 and 110 on December 31,2020. The bonds are redeemed at face amount on December 31,2021. Which of the following is incorrect?

On January 1, 2019, E Company purchased bonds with face value of P4,000,000 for P3,649,600 in order to collect contractual cash flows that are solely payments of principal and interest. The bonds are purchased to yield 10% interest. The nominal interest rate on the bonds is 8% payable annually every December 31. On December 31, 2020, as a result of a change in the business model for managing financial assets, the entity decided to reclassify the bonds from amortized cost to fair value. The market value of the bonds on January 1, 2021 is 105. What is the gain on reclassification of financial asset on January 1, 2021?

Ukraine Company, a real estate firm, had a building with a carrying amount of P10,000,000 on December 31, 2019. The building was used as offices of the entity’s administrative staff. On December 31, 2019, the entity intended to rent out the building to independent parties. The staff will be moved to a new building purchased early in 2019. On December 31, 2019, the original building had a fair value of P17,500,000. On this date, the entity also had a land that was held for sale in the ordinary course of business. The land had a carrying amount of P5,000,000 and fair value of P7,500,000 on December 31, 2019. On such date, the entity decided to hold the land for capital appreciation. The accounting policy is to carry all investment property at fair value. Which of the following is incorrect?

On January 1, 2019, I Company adopted a plan to accumulate P8,000,000 by January 1, 2023. The entity plans to make four equal annual deposits to a fund that will earn interest at 12% compounded annually. The first deposit was made on December 31, 2019 and every December 31 thereafter. Future value factors are: Future value of an ordinary annuity of 1 at 12% for 4 periods 4.78 Future value of an annuity in advance of 1 at 12% for 4 periods 5.35 On the same date, J Company adopted a plan to accumulate funds for a new plant building to be erected beginning January 1, 2024 at an estimated cost of P9,000,000. The entity intends to make five equal annual deposits in a fund that will earn interest at 8% compounded annually. The first deposit is made on January 1, 2019 and every January 1 thereafter. Present value and future value factors are as follows: Future value of ordinary annuity of 1 at 8% for 5 periods 5.87 Future value of annuity in advance of 1 at 8% for 5 periods 6.34 On March 15, 2019, M Company adopted a plan to accumulate P5,000,000 by September 1, 2023. The entity plans to make four equal annual deposits to a fund that will earn interest at 10% compounded annually. The entity made the first deposit on September 1, 2019. The future value of 1 at 10% for 4 periods is 1.46, the future value of an ordinary annuity of 1 at 10% for 4 periods is 4.64, and the future value of annuity of 1 in advance at 10% for 4 periods is 5.11. C Company made an investment of P5,000,000 at 10% per annum compounded annually for 6 years. The future value of 1 at 10% for 6 periods is 1.77. N Company made investment for 5 years at 12% per annum compounded semiannually to equal P7,160,000 on the date of maturity. The future value of 1 at 12% for 5 periods is 1.76, and the future value of 1 at 6% for 10 periods is 1.79. Which of the following is incorrect?

At the beginning of the current year, QUITO Company traded in an old machine for a newer model. Machine A (old machine) Original cost 800,000 Accumulated depreciation on January 1 600,000 Average published retail value 170,000 Machine Z (new machine) List Price 1,000,000 Cash Price without trade in 900,000 Cash paid with trade in 780,000 What is the initial cost of the new machine acquired in the exchange?

BUENOS AIRES Company incurred the following expenditures related to land and building: Cash paid for land and dilapidated building                                                              1,000,000 Removal of old building to make room for construction of a new building                   50,000 Assessment by city for drainage project                                                                           5,000 cost of grading, leveling and landfill                                                                              45,000 Driveways and walks to new building from street (part of the building)                    40,000 Temporary quarters for construction crew                                                                     80,000 Temporary building to house tools and materials                                                          60,000 Cost of changes during construction to make new building more energy efficient                                                                     50,000 Cost of windows broken by vandals                                                                             25,000 Payment to tenants for vacating old building                                                               15,000 Architect fee for new building                                                                                    200,000 Building permit for new construction                                                                           30,000 Fee for title search                                                                                                        10,000 Survey before construction                                                                                          20,000 Excavation before new construction                                                                          100,000 New building constructed                                                                                        6,000,000

During 2017, TEGUCIGALPA Company constructed asset costing P4,215,000. The weighted average accumulated expenditures on the asset during the current year amounted to P3,900,000. The entity borrowed P2,000,000 at 7.5% on January 1, 2017. Funds not needed for construction were temporarily invested in short-term securities and earned P59,000 in interest revenue. In addition to the construction loan, the entity had two other notes outstanding during the year, a P1,500,000 10-year, 10% note payable dated October 1, 2016, and a P1,000,000 8% note payable dated November 2, 2016. What amount of interest should be capitalized during 2017?

MANAGUA Company acquired property for P9,000,000 which is believed to include mineral deposit. Geological survey indicated that approximately 1,000,000 tons of mineral may be extracted. It is further estimated that the property can be sold for P2,500,000 following mineral extraction. The entity is legally required to restore the land to a condition appropriate for resale at a discounted amount of P800,000. The entity extracted 50,000 tons of the mineral in the current year. After initial acquisition, the following costs were incurred: Exploration cost                                                           3,500,000 Development cost related to drilling of wells              3,200,000 Development cost related to production equipment    4,600,000 What amount should be recorded as depletion for the current year?

On January 1, 2017, BRASILIA Company revealed the following historical balances of land and building:                                                         Cost Land                                           50,000,000 Building                                     300,000,000 ( the asset is 30% depreciated) The land and building were appraised on same date and the revaluation showed the following: Land has a sound value of P70,000,000 while the building has a depreciated replacement cost of P315,000,000.There were no additions or disposals during the current year. Depreciation is computed on the straight line basis. The estimated useful life of the building is 20 years. What is the revaluation surplus on December 31, 2017?

In January 1, 2016, JJ Company purchased equipment with a cost of P11,000,000, useful life of 10 years and no residual value. The entity used straight line depreciation. At every-year end, the entity determined that impairment indicators are present. There is no change in the useful life or residual value. The following information is available for impairment testing at each year end:                                                           Dec 31, 2016                         Dec 31, 2017 FVLCOD                                              8,100,000                              8,400,000 VIU                                                       8,550,000                              8,200,000 What is the impairment loss for 2016?

In January 1, 2016, JJ Company purchased equipment with a cost of P11,000,000, useful life of 10 years and no residual value. The entity used straight line depreciation. At every-year end, the entity determined that impairment indicators are present. There is no change in the useful life or residual value. The following information is available for impairment testing at each year end:                                                           Dec 31, 2016                         Dec 31, 2017 FVLCOD                                              8,100,000                              8,400,000 VIU                                                       8,550,000                              8,200,000 What is the gain on reversal of impairment for 2017?

In January 1, 2016, JJ Company purchased equipment with a cost of P11,000,000, useful life of 10 years and no residual value. The entity used straight line depreciation. At every-year end, the entity determined that impairment indicators are present. There is no change in the useful life or residual value. The following information is available for impairment testing at each year end:                                                           Dec 31, 2016                         Dec 31, 2017 FVLCOD                                              8,100,000                              8,400,000 VIU                                                       8,550,000                              8,200,000 What is the depreciation for 2018?

On January 1, 2016, G Company owned a building with historical cost of P40,000,000. The property is depreciated over 40 years on a straight line basis with no residual value. The entity adopted the revaluation model of measuring property, plant and equipment. The building has so far been revalued twice at fair value as follows: January 1, 2017                46,800,000 January 1, 2019                55,500,000 What is the revaluation surplus on January 1, 2017?

On January 1, 2016, G Company owned a building with historical cost of P40,000,000. The property is depreciated over 40 years on a straight line basis with no residual value. The entity adopted the revaluation model of measuring property, plant and equipment. The building has so far been revalued twice at fair value as follows: January 1, 2017                46,800,000 January 1, 2019                55,500,000 What is the increase in revaluation surplus to be recognized as component of other comprehensive income on January 1, 2019?

On January 1, 2016, G Company owned a building with historical cost of P40,000,000. The property is depreciated over 40 years on a straight line basis with no residual value. The entity adopted the revaluation model of measuring property, plant and equipment. The building has so far been revalued twice at fair value as follows: January 1, 2017                46,800,000 January 1, 2019                55,500,000 What is the revaluation surplus to be reported in the statements of changes in equity on December 31, 2019?

P Company purchased a machinery on January 1, 2013 for P7,200,000. The machinery had useful life of 10 years with no residual value and was depreciated using the straight line method. In 2016, a decision was made to change the depreciation method from straight line to sum of the years’ digits. The estimate of useful of useful life and residual value remained unchanged. What is the depreciation for the current year?