R4ACADS-FINACC-EXTRA[1]
1. Anna Company amended a pension plan at the beginning of current year.
Before amendment
After amendment
Accumulated benefit obligation
950,000
1,425,000
Projected benefit obligation
1,300,000
1,900,000
What is the total amount of past service cost as a result of the plan amendment?
a. 475,000
c. 125,000
b. 600,000
d. 950,000
2. On December 31, 2014, Kerr Company provided the following information in relation to a defined benefit plan:
Fair value plan assets
3,450,000
Accumulated benefit obligation
4,300,000
Projected benefit obligation
5,700,000
What is the accrued liability on December 31, 2014?
a. 2,250,000
c. 1,400,000
b. 850,000
d. 5,700,000
3. A director of Ester Company shall receive a retirement benefit of 20% of final salary per annum for a contractual
period of three years. The anticipated salary is Pi,000,000 for 2014, Pl,200,000 for 2015 and Pl,500,000 for
2016. The discount rate is 10%. The present value of 1 at 10% is .909 for one period and .826 for two
periods. Under the projected unit credit method, what is the estimated pension liability on December 31,
2015?
a. 600,000
c. 520,500
b. 545,280
d. 900,000
4. Lawin Company provided the following information in the financial statements:
Cash dividends to ordinary shares for 2014
30,000
Net income for 2014
250,000
Market price of share, December 31, 2014
25
Ordinary shareholders' equity, December 31, 2013
4,400,000
Ordinary shareholders' equity, December 31, 2014
5,000,000
Outstanding ordinary shares, December 31, 2014
160,000
Preference dividends for 2014
100,000
What is the book value per ordinary share for 2014?
a. 26.88
c. 30.62
b. 31.25
d. 27.50
On July 1, 2014, East Company purchased as a long-term investment P5,000,000 face amount, 8% bonds
of Rand Company for P4,615,000 to yield 10% per year. The bonds pay interest semiannually on January
1 and July 1.
R4ACADS-FINACC-EXTRA[1]
5.How much is the total interest income in 2015?
a. 200,000.00
b. 232,287.50
c. 466,189.38
d. 233,901.88
6.During the current year, Beam Company paid P100,000 cash and traded inventory, which had a carrying amount
of P2,000,000 and a fair value of P2,100,000, for other inventory in the same line of business with a fair
value of P2,200,000. What amount should be recorded as cost of the inventory received in exchange?
a. 2,100,000
c. 2,300,000
b. 2,200,000
d. 2,000,000
7. On December 31,2014, Czar Company exchanged 100,000 ordinary shares of P50 par value for the following
assets:
* A trademark valued at P1,500.000.
* A building, including land, valued at P6,500,000 (20% of the value is for the land).
* A franchise right. No estimate of the value is available at the date of exchange.
The ordinary share of Czar Company is selling at P90 on the date of exchange.
What amount should be recognized as measurement of the franchise on the date of exchange?
a. 1,500,000
c. 0
b. 1,000,000
d. 2,000,000
8. On January 1,2013, Bay Company acquired a land lease for 21 years with no option to renew. The lease required
the lessee to construct a building in lieu of rent. The building, completed on January 1,2014, at a cost of
P8,400,000, is depreciated using the straight line method. At the end of the lease, the building's estimated
fair value is P4,200,000. The useful life of the building is 25 years. What is the carrying amount of the
building on December 31, 2014?
a. 8,232,000
c. 7,980,000
b. 8,190,000
d. 8,064,000
9. On January 1, 2014, Paye Company purchased Che Company at a cost that resulted in recognition of goodwill
of P2,000,000. During the first quarter of 2014, Paye Company spent an additional P800,000 on
expenditures designed to develop and maintain goodwill by training and hiring new employees. Due to
these expenditures, on December 31, 2014, Paye Company estimated that the benefit period of goodwill
was indefinite. In the December 31, 2014 statement of financial position, what amount should be reported
as goodwill?
a. 1,900,000
c. 2,000,000
b. 2,660,000
d. 1,800,000
R4ACADS-FINACC-EXTRA[1]
10. Bronze Company operates a production line which is treated as a cash generating unit. At year-end, the carrying
amounts of the noncurrent assets of this cash generating unit are:
Intangibles-goodwill
1,100,000
Tangibles-plant and machinery
2,200,000
At year-end, the recoverable amount of the production line is estimated at P2,700,000.
What are the revised carrying amounts of the intangible and tangible noncurrent assets, respectively?
a. 500,000 and 2,200,000
c. 800,000 and 1,900.000
b. 900,000 and 1,800,000
d. 1,100,000 and 1,600,000
ANSWER KEY:
1. ANS: B
PBO after amendment
PBO before amendment
Past service cost
1,900,000
1,300,000
600,000
TOP: Service cost | Past service cost
2. ANS: A
Fair value of plan assets
3,450,000
Projected benefit obligation
5,700,000
P / ABC – credit balance
(2,250,000)
In accordance with PAS 19R, the defined benefit obligation is equal to the projected benefit obligation.
TOP: Accrued benefit cost
3. ANS: B
2014
2015
2016
Total current service cost
Date
300,000 x .826
300,000 x .909
300,000 x 1.000
Current service cost
247,800
272,700
300,000
820,500
Interest cost
Present value
R4ACADS-FINACC-EXTRA[1]
Dec. 31, 2014
Dec. 31, 2015
Dec. 31, 2016
247,800
272,700
300,000
-24,780
54,720
247,800
545,280
900,000
TOP: Accrued benefit cost
4. ANS: B
Book value per ordinary share
(5,000,000 / 160,000 shares)
31.25
TOP: Book value per ordinary share | Preference share | non-cumulative | non-participating
5. ANS: C
TOP: Interest Income, Semi-annual, Total
6. ANS: B
Fair value of inventory given
Cash payment
Inventory received
2,100,000
100,000
2,200,000
TOP: Acquisition By Exchange | Fair value of asset given up plus cash paid
7. ANS: B
Fair value of shares issued
Fair value of trademark
Fair value of land
Fair value of building
Measurement of franchise
(100,000 x 90)
(20% x 6,500,000)
(80% x 6,500,000)
9,000,000
(1,500,000)
(1,300,000)
(5,200,000)
1,000,000
TOP: Franchise
8. ANS: C
Building
8,400,000
Depreciation for 2014
(8,400,000 / 20)
(420,000)
Carrying amount - December 31,2014
7,980,000
The building was completed on January 1,2014, one year from the date of the lease on January
1,2013. Thus, the remaining lease term is 20 years which is shorter than the life of the building of
25 years. The estimated fair value of the building at the end of the lease is ignored in computing
depreciation because legally, the building becomes the property of the lessor when the contract is
terminated.
TOP: Leasehold & Leasehold Improvement, Carrying amount
9. ANS: C
Cost of goodwill-January 1,2014
2,000,000
R4ACADS-FINACC-EXTRA[1]
The cost of developing and maintaining goodwill of P800,000 is expensed outright.
PAS 38, paragraph 107, provides that goodwill or an intangible asset with an indefinite useful
life shall not be amortized but tested for impairment annually and whenever there is an
indication that the intangible asset may be impaired.
TOP: Goodwill
10. ANS: A
Carrying amount of cash generating unit
3,300,000
Value in use
2,700,000
Impairment loss
600,000
The impairment loss is applied against the goodwill only. Thus, goodwill has an adjusted balance
of P500,000 and the balance of the machinery remains the same at P2,200,000.
TOP: Carrying amount