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St. Paul University Philippines
Tuguegarao City, Cagayan 3500
Seatwork No. 6
Prepared by: Harley Bernieson D. Cortes
Date: January 23, 2018
Time : 8:30PM-10:00PM
Name:____________________________________________________
1. At the beginning of current year, Argel Company issued 100,000 treasury shares with P25 par value for a parcel of
land to be held as investment property. The treasury shares were acquired at a cost of P30 per share. The share had
a fair market value of P40 at the beginning of current year. The entity received P50,000 from the sale of scrap when
an existing structure on the site was immediate razed. What is the initial cost of the land?
a. 4,000,000
c. 3,000,000
b. 3,950,000
d. 2,500,000
2. Davenn Company acquired two items of machinery.
December 31, 2019, Davenn Company purchased a machine in exchange for non-interest bearing note requiring
ten payments of P500,000. The first payment was made on December 31, 2020, and the others are due annually on
December 31. The prevailing rate of interest for this type of note at date of issuance was 12%. The present valule
of an ordinary annuity of 1 at 12% is 5.33 for nine periods and 5.65 for ten periods.
December 31, 2019, Davenn Company acquired used machinery by issuing the seller a two-year, noninterestbearing note for P3,000,000. In recent borrowing, the entity has paid a 12% interest for this type of note. The present
value 1 at 12% for two years is .80 and the present value of an ordinary annuity of 1 at 12% for two years is 1.69.
What is the total cost of the machinery?
a. 5,065,000
c. 5,565,000
b. 5,225,000
d. 8,235,000
Guiller Company and Vega Company are fuel oil distributors. To facilitate the delivery of oil to their customers,
Guiller and Vega exchanged ownership of 1,200 barrels of oil without physically moving the oil.
Guiller paid Vega P300,000 to compensate for a difference in the grade of oil. It is reliably determined that the
exchange lacks commercial substance.
On the date of the exchange, cost and market value of the oil were as follows:
Guiller Company
Vega Company
Cost
1,000,000
1,400,000
Market Value
1,200,000
1,500,000
3. What amount should Guiller Company record as cost of the oil inventory received in exchange?
a. 1,000,000
c. 1,300,000
b. 1,200,000
d. 1,500,000
4. What amount should Vega Company record as cost of the oil inventory received in exchange?
a. 1,400,000
c. 1,100,000
b. 1,500,000
d. 1,200,000
Ed Company received a government grant of 600,000 related to depreciable asset acquired on January 1, 2019 for
P6,600,000. This grant was deducted from the cost of the asset with a useful life of 10 years and residual value of
500,000. On January 1, 2021, the grant became fully repayable due to noncompliance with conditions.
5. What is depreciation for 2019?
a. 600,000
c. 550,000
b. 610,000
d. 660,000
6. What is the depreciation for 2021?
a. 610,000
c. 730,000
b. 780,000
d. 600,000
Otis Company was incorporated on January 1, 2019 but began activities on July 1, 2019. An analysis of the land
and building account on December 31, 2019 showed the following:
January 31
Land and an old building
1,600,000
February 28
Cost of removal of old building
90,000
May 1
Partial payment on new construction
700,000
May 1
Legal fees paid
50,000
June 1
Second payment on new construction 400,000
June 1
Insurance premium
480,000
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Junewas
1 downloaded Special
tax assessment
60,000
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June 30
July 1
7.
8.
9.
10.
General expenses
Final payment on new construction
320,000
900,000
To acquire land and building, the entity paid P800,000 cash and issued 8,000 preferences shares with par value of
P100 and fair value of P150.
The old building with insignificant fair value was demolished to make room for the construction of a new building.
Legal fees covered organization cost P15,000, title examination of land purchased P10,000, and legal work P25,000
in connection with construction contract.
Insurance premium covered the building for a two-year term beginning May 1, 2019.
The special tax assessment was for street improvements that are permanent in nature.
General expenses included the president’s salary of P220,000 and the plan superintendent’s salary of P100,00.
What is the cost of land?
a. 2,070,000
c. 2,000,000
b. 2,160,000
d. 2,100,000
What is the cost of building?
a. 2,155,000
c. 2,395,000
b. 2,065,000
d. 2,305,000
On July 1, GE Company had a delivery van which was destroyed in an accident. On that date, the carrying amount
of the van was P500,000. On July 15, the entity received and recorded a P140,000 invoice for a new engine installed
in the van in May, and another P100,000 invoice for various repairs. In August, the entity received P700,000 under
an insurance policy on the van, which it plans to use to replace the van. What amount should be reported as gain on
disposal of the van in the income statement?
a. 200,000
c. 60,000
b. 700,000
d. 0
Sairamaezing, owned a parcel of real estate condemned by the city government. The entity received P7,500,000 for
this property which had a carrying amount of P5,750,000. The following costs were incurred as a result of the
condemnation:
Appraisal fee to support a P7,500,000 value
25,000
Attorney fee for the closing with the city government
35,000
Attorney fee to review contract to acquire replacement property
30,000
Title insurance on replacement property
40,000
What amount should be reported as gain on the condemnation?
a. 1,690,000
b. 1,750,000
c. 1,620,000
d. 1,680,000
Gvcsslgh Company had the following outstanding loans during 2019 and 2020.
Specific construction loan
3,000,000
General loan
25,000,000
The entity began the self-construction of a new building on January 1, 2019 and the building was completed on
June 30, 2020.
The following expenditures were made in 2019 and 2018:
01/01/2019
4,000,000
04/01/2019
5,000,000
12/01/2019
3,000,000
03/01/2020
6,000,000
11. What is the cost of the new building on December 31, 2019
a. 12,000,000
b. 12,900,000
12. What is the cost of the new building on June 31, 2020?
a. 18,000,000
b. 19,884,000
13. What is the interest expense for 2020?
a. 2,316,000
b. 2,166,000
c. 12,300,000
d. 12,600,000
c. 20,868,000
d. 19,377,000
c. 2,016,000
d. 1,500,000
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Sheyebrow Company provided the following:
Total Cost
Machine A
5,500,000
Machine B
2,000,000
Machine C
400,000
14.
15.
16.
17.
18.
19.
20.
21.
Residual Value
500,000
200,000
Estimated Life
20
15
5
The entity computed depreciation on the straight line method.
What is the composite life of the assets?
a. 13.3
c. 18
b. 16
d. 19.8
What is the composite rate of depreciation?
a. 6.25%
c. 2.50%
b. 5.70%
d. 7.50%
On January 1, 2019, _Inagarcia Company showed accumulated depreciation on machinery with a balance of
P3,700,000. At the end of 2019, after the adjusting entries were posted, the accumulated depreciation showed a
balance of P3,900,000. During 2019, a machine costing P1,300,000 was sold for P500,000 cash. The transaction
resulted in a loss of P100,000. No other asset was disposed of during the year.
What was the depreciation for 2019?
a. 900,000
c. 200,000
b. 700,000
d. 600,000
On January 1, 2019, Assshlleh Company purchased a machine for P5,000,000. The entity paid shipping expenses
P50,000 as well as installation cost of P120,000.
The machine was estimated to have a useful life of 10 years, an estimated residual value of P300,000 and the straight
line method is used.
In January 2020, additions costing P360,000 were made to the machine in order to comply with pollution control
ordinances. These additions neither prolonged the life of the machine nor did they have any residual value.
What amount should be recorded as depreciation expense for 2020?
a. 557,000
c. 487,000
b. 517,000
d. 527,000
In 2014, harleymaw_ Company acquired a silver mine in Eastern Mindanao. Because the mine is located deep in
the Mindanao frontier, the entity was able to acquire the mine for the low price of P50,000. In 2016, the entity
constructed a road to the silver mine costing P5,000,000. Improvements and other development costs made in 2015
cost P750,000. Because of the improvements to the mine and to the surrounding land, it is estimated that the mine
can be sold for P600,000 when mining activities are complete. During 2016, a building was constructed near the
mine site to house the mine workers and their families. The total cost of the building was P2,000,000. Estimated
residual value is P200,000. Geologists estimated that 4,000,000 tons of silver ore could be removed from the mine
for refining. During 2017, the first year of operations, only 500,000 tons of silver ore were removed from the mine,
However, in 2018, workers mined 1,000,000 tons of silver. During that same year, geologists discovered that the
mine contained 3,000,000 tons of silver in addition to the original 4,000,000 tons. Development costs of P1,300,000
were made to the mine early in 2018 to facilitate the removal of the additional silver. Early in 2018, an additional
building was constructed at a cost of P375,000 to house the additional workers needed to excavate the added silver.
This building is not expected to have any residual value.
What is the depletion for 2017?
a. 718,750
c. 725,00
b. 650,000
d. 643,750
What is the depletion for 2018?
a. 1,300,000
c. 900,000
b. 1,525,000
d. 700,000
What is the depreciation of building for 2017?
a. 250,000
c. 318,750
b. 225,000
d. 343,750
What is the depreciation of building for 2018?
a. 300,000
c. 500,000
b. 450,000
d. 290,000
On January 1, 2019, RoadgesNamikaze Company provided the following information relating to the revaluation of
an equipment:
Cost
Replacement Cost
Equipment
6,500,000
9,200,000
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200,000
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Useful life
Age of equipment
Accumulated depreciation
22.
23.
24.
25.
12
2
?
?
The equipment was sold on December 31, 2019 for P8,000,000.
What is the revaluation surplus on January 1, 2019?
a. 2,700,000
c. 2,500,000
b. 2,200,000
d. 2,000,000
What is the depreciation for 2019?
a. 530,000
c. 750,000
b. 900,000
d. 220,000
What is the revaluation surplus on December 31, 2019?
a. 2,200,000
c. 2,430,000
b. 2,250,000
d. 1,980,000
What amount of gain on sale of equipment should be recognized on December 31, 2019?
a. 1,050,000
c. 3,230,000
b. 3,030,000
d. 300,000
In January 2019, Mariokulet Company purchased equipment at a cost of P5,000,000. The equipment had an
estimated residual value of P1,000,000, an estimated 8-year useful life, and was being depreciated by the straight
line method.
Two years later, it became apparent that this equipment suffered a permanent impairment of value. In January 2021,
management determined the carrying amount should be only P1,750,000 with a 2-year remaining useful life, and
the residual value should be reduced to P250,000.
26. What is the impairment loss for 2020?
a. 4,000,000
c. 2,250,000
b. 3,250,000
d. 0
27. On December 31, 2021, what is the carrying amount of the equipment?
a. 3,500,000
c. 1,500,000
b. 1,750,000
d. 1,000,000
On January 1, 2019, BriStadfeld Company purchased equipment with cost of P11,000,000, useful life of 10 years
and no residual value. The entity used straight line depreciation.
On December 31, 2019 and December 31, 2020, the entity determined that impairment indicators are present. There
is no change in the useful life or residual value.
Fair value less of disposal
Value in use
12/31/2019
8,100,000
8,550,000
28. What is the impairment loss for 2019?
a. 1,800,00
b. 1,350,000
29. What is the gain on reversal of impairment for 2020?
a. 400,000
b. 250,000
30. What is the depreciation for 2021?
a. 1,100,000
b. 1,050,000
12/31/2020
8,400,000
8,200,000
c. 2,450,000
d. 0
c. 800,000
d. 0
c. 1,025,000
d. 950,000
END
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