Dagupan
Accountancy Review
- DARe
1.
Biological Assets and
Investments
FAR – QUIZ 3
FAR Quiz #3
Forester Company on adoption of PAS 41 has reclassified certain assets as biological assets. The total value of the forest
assets is P6,OOO,000 which comprises:
Freestanding trees
Land under trees
Roads in forests
5,100,000
600,000
_ 300,000
6,000,000
In Forester Company's statement of financial portion, how much of the forest assets shall be classified as biological
assets?
a. 5,100,000
c. 5,400,000
b. 5,700,000
d. 6,000,000
2.
Colombia Company is a producer of coffee. The entity is considering the valuation of its harvested coffee beans.
Industry practice is to value the coffee beans at market value and uses as reference a local publication "Accounting
for Successful Farms".
On December 31, 2018, the entity has harvested coffee beans costing P3,000,000 and with fair value less cost to sell of
P3,500,000 at the point harvest.
Because of long aging and maturation process after harvest, the harvested coffee beans were still on hand on
December 31,2018. On such date, the fair value less cost to sell is P3,900,000 and the net realizable value is P3,200,000.
The coffee beans inventory shall be measured at
a. 3,000,000
c.
b. 3,500,000
d.
3,200,000
3,900,000
Use the following information for the next two questions.
Joan Company provided the following data:
Value of biological asset at acquisition cost on December 31,2017
Fair valuation surplus on initial recognition at fair value on December 31, 2017
Change in fair value to December 31, 2018 due to growth and price fluctuation
Decrease in fair value due to harvest
P 600,000
700,000
100,000
90,000
3.
What is the carrying amount of the biological asset on December 31, 2018?
a. 1,400,000
c. 1,300,000
b. 1,310,000
d. 1,490,000
4.
What is the gain from change in fair value of biological asset that should be shown in the 2018 income statement?
a. 100,000
c. 710,000
b. 800,000
d. 10,000
Use the following information for the next three questions.
Honey Company has a herd of 10 2-year old animals on January 1, 2018. One animal aged 2.5 years was purchased on
July 1, 2018 for PI08, and one animal was born on July 1, 2018. No animals were sold or disposed of during the year. The
fair value less to sell per unit is as follows:
2 - year old animal on January I
1.5 - year old animal on July 1
New born animal on July 1
2 - year old animal on December 31
2.5 - year old animal on December 31
Newborn animal on December 31
2 - year old animal on December 31
0.5 - year old animal on December 31
100
108
70
105
111
72
120
80
5.
What is the fair value of the biological assets on December 31,2018?
a. 1,400
c. 1,440
b. 1,320
d. 1,360
6.
What is the gain from change in fair value of biological assets to be recognized in 2018?
a. 222
c. 300
b. 292
d. 332
7.
What is the gain from change in fair value due to price change?
a. 292
c. 237
b. 222
d. 55
8.
At the beginning of current year, Claudia Company purchased marketable equity securities to be held as “trading” for
P5,000,000. The entity also paid commission, taxes and other transaction cost amounting to P200,000. The securities
had a market value of P5,500,000 at year-end. No securities were sold during the year. The transaction costs that
would be incurred on the disposal of the investment are estimated at P100,000.
What amount of unrealized gain or loss on these securities should be reported in the income statement for the current
year?
a. 500,000 unrealized gain
c. 400,000 unrealized gain
b. 500,000 unrealized loss
d. 400,000 unrealized loss
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- DARe
9.
FAR – QUIZ 3
Biological Assets and
Investments
On December 31, 2014, Charlton acquired an investment for P500,000 plus a purchase commission of P10,000. The
investment is designated as financial asset at fair value through other comprehensive income. On December 31, 2014,
quoted market price of the investment is P500,000. If the investment were sold, a commission of P15,000 would be paid.
On December 31, 2014, the investment should be carried at
a. P510,000
c. P485,000
b. P495,000
d. P500,000
10. Information about Echague Company’s portfolio securities measure at fair value through other comprehensive income
is as follows:
Aggregate cost – December 31, 2013
Unrealized gains– December 31, 2013
Unrealized losses – Dec. 31, 2013
Net realized gains during 2013
P9,000,000
500,000
2,000,000
300,000
On January 1, 2013 Echague reported an unrealized loss of P400,000 as a component of shareholders’ equity. In its
December 31, 2013 shareholders’ equity, Echague should report what amount of unrealized loss?
a. P2,000,000
c. P1,500,000
b. P1,100,000
d. P1,200,000
11. Mia Company acquired an equity investment a number of years ago for P3,000,000 and classified it as at fair value
through other comprehensive income. On December 31, 2015, the cumulative loss recognized in other comprehensive
income was P400,000 and the carrying amount of the investment was P2,600,000.
On December 31, 2016, the issuer of the equity instrument was in severe financial difficulty and the fair value of the equity
investment had fallen to P1,200,000.
What cumulative amount of unrealized loss should be reported as component of other comprehensive income in the
statement of changes in equity for the year ended December 31, 2016?
a. 1,400,000
c. 1,000,000
b. 1,800,000
d.
0
Use the following information for the next two questions.
Pompey Inc. carries the following marketable equity securities on its books at December 31, 2012 and 2013. All securities
were purchased during 2012 and there were no beginning balances in any market adjustment accounts.
Financial Assets through Profit or Loss:
Cost
C Company
E Company
R Company
Total
P 500,000
260,000
700,000
P1,460,000
Financial Assets through OCI:
Cost
T Company
S Company
Total
P4,200,000
1,000,000
P5,200,000
Fair value
12/31/12
12/31/13
P 260,000
P 400,000
400,000
400,000
600,000
500,000
P1,260,000
P1,300,000
Fair value
12/31/12
12/31/13
P3,600,000
P3,600,000
1,200,000
1,400,000
P4,800,000
P5,000,000
12. The net amount to be recognized in the 2013 profit or loss is
a. P240,000
b. P200,000
c.
d.
P160,000
P 40,000
13. The net amount to be recognized in 2013 as other comprehensive income is
a. P240,000
c. P160,000
b. P200,000
d. P 40,000
14. Lasam Company received dividends from its investments in ordinary shares during the year 2013 as follows:

A share dividend of 20,000 shares from A Company when the market price of A’s shares was P30 per share.

A cash dividend of P2,000,000 from B Company in which Lasam owns a 20% interest.

A cash dividend of P1,500,000 from C Company in which Lasam owns a 10% interest.

10,000 ordinary shares of D Company in lieu of cash dividend of P20 per share. The market price of D Company’s
shares was P180. Lasam holds originally 100,000 ordinary shares of D Company. Lasam owns 5% interest in D
Company.

A liquidating dividend of P2,000,000 from E Company. Lasam owns a 5% interest in E Company.

A dividend in kind of one ordinary share of X Company for every 5 ordinary shares of F Company held. Lasam holds
200,000 F Company shares which have a market price of P50 per share. The market price of X Company’s ordinary
share is P30 per share.
What amount of dividend income should Lasam report in its 2013 income statement?
a. P4,500,000
c. P6,300,000
b. P5,700,000
d. P5,900,000
15. On August 1, 2014, Dasol Co. acquired 80, P1,000, 9% bonds at 97 plus accrued interest. The bonds were dated May 1,
2014, and mature on April 30, 2018, with interest paid each October 31 and April 30. The bonds will be added to Dasol’s
held for trading portfolio. The preferred entry to record the purchase of the bonds on August 1, 2014 is
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A.
Trading securities
P79,400
Cash
P79,400
B. Trading securities
P77,600
Interest Receivable
1,800
Cash
P79,400
C. Trading securities
P77,600
Interest Revenue
1,800
Cash
P79,400
D. Trading securities
P80,000
Interest Revenue
1,800
Discount on Debt Securities
P 2,400
Cash
79,400
16. On January 1, 2014, Joseph Corporation purchased P1,000,000 10% bonds for P927,880 (including broker’s commission
of P20,000). Joseph’s business model is to hold the investment to collect contractual cash flows. The bonds were
purchased to yield 12%. Interest is payable annually every December 31. The bonds mature on December 31, 2018.
On December 31, 2014 the bonds were selling at 99. How much is the carrying amount the investment in bonds on
December 31, 2014?
A. P961,626
C. P939,226
B. P916,534
D. P990,000
17. On June 30, 2014, Aileen Corp. purchased a two-year bond at par. The bond had a stated principal amount of
P10,000,000, which Aileen Corp. will receive on June 30, 2016. The stated coupon interest rate was 10% per year, which
is paid semiannually on December 31 and June 30. The bonds are designated as financial asset at fair value through
profit or loss. On December 31, 2014, the bonds are quoted at 101.1. How much should be recognized in profit or loss
as of December 31, 2014 related to this bond investment?
A. P167,468
C. P110,000
B. P 78,567
D. P
0
18. On January 1, 2014, SMB Company acquired the entire issue of Beerman’s P6,000,000 12% serial bonds. The bonds were
purchased to yield 10%. Bonds of P2,000,000 mature at annual intervals beginning December 31, 2014. Interest is
payable annually on December 31. What is the carrying amount of the investment in bonds on December 31, 2014?
A. P6,105,650
C. P4,304,622
B. P4,105,650
D. P3,820,702
19. On January 1, 2013, Alameda Company purchased bonds with face value of P 5,000,000. The business model of the
entity in managing the financial asset is to collect contractual cash flows that are solely payments of principal and
interest and also to sell the bonds in the open market. The entity paid P 4,600,000 plus transaction costs of P 142,000. The
bonds mature on December 31, 2016 and pay 6 % interest annually on December 31 of each with 8% effective yield.
The bonds are quoted at 105 on December 31, 2014. The bonds are sold at 110 on December 31, 2014.
The gain on sale on these bonds in the 2014 income statement.
A. 500,000
C. 592,931
B. 250,000
D. 758,000
20. On October 1, 2013, Alaska Company purchased 4,000 of the P 1,000 face value, 10% bonds of Philadelphia Company
for P 4,400,000 which includes accrued interest of P 100,000. The bonds, which mature on January 1, 2020, pay interest
semi-annually on January 1 and July 1. Alaska uses the straight line method of amortization and appropriately
recorded the bonds as held to maturity.
The carrying amount of the bonds shown in Alaska’s December 31, 2013 statement of financial position at
A. 4,284,000
C. 4,300,000
B. 4,288,000
D. 4,400,000
21. On July 1, 2013, Charlize Company paid P 1,198,000 of 10%, 20-year bonds with a face amount of P 1,000,000. Interest is
paid on December 31 and June 30. The bonds were purchased to yield 8%. Charlize uses the effective interest method
to recognize interest income from this held for collection investment.
The carrying amount of bonds in December 31, 2013 statement of financial position is
A. 1,207,900
C. 1,195,920
B. 1,198,000
D. 1,193,050
22. On January 1, 2013, Panasonic Company purchased as a held for collection investment P 5,000,000 face value of Sony
Company’s 8% bonds for P4,562,000. The bonds were purchased to yield 10% interest. The bonds mature on January 1,
2018 and pay interest annually on December 31. Panasonic uses the interest method of amortization.
The carrying amount (rounded to nearest P 100) should Panasonic report in its December 31, 2014 statement of financial
position is
A. 4,680,020
C. 4,618,000
B. 4,662,000
D. 4,562,000
Use the following information for 23 - 24:
On January 1, 2013, Rockford Company purchased 5-year bonds with face value of P 8,000,000 and stated interest of
10% per year payable semi annually January 1 and July 1. The bonds were acquired to yield 8%. Present value factors
are:
Present value of an annuity of 1 for 10 periods at 5% 7.72
Present value of an annuity of 1 for 10 periods at 4% 8.11
Present value of 1 for 10 periods at 4%
0.6756
23. What is the purchase price of the bonds?
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A. 7,382,400
B. 8,617,600
C.
D.
8,648,800
7,351,200
24. What is the carrying value of the bond investment on December 31, 2013?
A. 8,594,752
C. 8,538,542
B. 8,540,704
D. 8,302,848
25. On January 1, 2013, Angelina Company purchased serial bonds with face value of P 3,000,000 and stated 12% interest
payable annually every December 31. The bonds are to be held for collection with a 10% effective yield. The bonds
mature at an annual instalment of P 1,000,000 every December 31.
The rounded present value of 1 at 10% for:
One period
0.91
Two periods
0.83
Three periods
0.75
What is the present value of the serial bonds on January 1, 2013?
A. 3,106,800
C. 3,045,000
B. 3,060,000
D. 3,149,400
26. On October 1, 2014, North Company purchased a debt security having a face value of P3,000,000 with an interest rate
of 10% for P3,200,000 including the accrued interest. A total of P 50,000 was incurred and paid by North Company
which is in relation to the acquisition of the debt instrument. North Company’s business model in managing the financial
asset is to collect contractual cash flows that are solely payments of principal and interest and also to sell the bonds in
the open market. The bonds mature on January 1, 2019, and pay interest semi-annually on January 1 and July 1. On
December 31, 2014, the bonds had a market value of P3,400,000.
What is the carrying amount of the investment in debt security to be reported in the december 31, 2014 statement of
financial position?
A. P 3,125,000
C. P 3,200,000
B. P 3,400,000
D. P3,250,000
27. Melrose Company purchased a held to maturity instruments with a face value of P 5,000,000 on July 1, 2014. The 5-year
12% bonds were issued on January 2, 2014 and will mature on January 2, 2019. Interest is payable annually every
December 30. Melrose rate of interest for a similar debt instrument at the time of acquisition is 10% that is also the
market rate of interest for a similar debt instrument at the time the instrument was issued.
PV factor of 12% after 5 years
0.567
PV factor of 10% after 5 years
0.621
PV factor of annuity of 12% after 5 years 3.605
PV factor of annuity of 10% after 5 years 3.791
What is the fair value of the debt instrument at the time of acquisition?
A. P 5,348,580
C. P 5,648,580
B. P 5,626,000
D. P 5,679,600
28. On July 1, 2013, Korn Corporation acquired a held for collection security in Conrad Company’s 10-year 12% bonds, with
face value of P 5,000,000, for P 5,386,300. Interest is payable semi-annually on January 1 and July 1. The bonds mature
on July 1, 2018. Bonds effective rate is 10%. On December 31, 2014, Korn Corporation sold its debt instrument for P
5,500,000.
The gain that Korn Corporation recognize as a result of the disposal is
A. P 144,485
C. P 210,434
B. P 176,604
D. P 245,956
29. On July 1, 2009, Diamond, Inc, paid P1,000,000 for 100,000 ordinary shares (40%) of Ashley Corporation. At that date the
net assets of Ashley totaled P2,500,000 and the fair values of all of Ashley's identifiable assets and liabilities were equal to
their book values. Ashley reported net income of P500,000 for the year ended December 31, 2009, of which P300,000
was for the six months ended December 31, 2009. Ashley paid cash dividends of P250,000 on September 30, 2009.
Diamond does not elect the fair value option for reporting its investment in Ashley. In its income statement for the year
ended December 31, 2009, what amount of income should Diamond report from its investments in Ashley?
a. P 80,000
c. P120,000
b. P100,000
d. P200,000
30. On January 1, 2009, Solana Co. purchased 25% of Orr Corp.'s ordinary shares; no goodwill resulted from the purchase.
Solana appropriately carries this investment at equity and the balance in Solana’s investment account was P480,000 at
December 31, 2009. Orr reported net income of P300,000 for the year ended December 31, 2009, and paid dividends
totaling P120,000 during 2009. How much did Solana pay for its 25% interest in Orr?
a. P435,000
c. P510,000
b. P525,000
d. P585,000
31. Investor company acquired a 40% interest in an associate for P3,000,000. The investor is part of a consolidated group.
In the financial period immediately following the date on which it became an associate, the investee took the following
action:

revalued assets up to fair value by P500,000

generated profits of P1,600,000

declared a dividend of P300,000
The balance in the investor’s account of ‘Shares in associate’, after equity accounting has been applied, is:
a. P3,000,000
c. P3,720,000
b. P3,960,000
d. P3,840,000
32. On January 1, 2009, Julius Corporation acquired 25% of the shares of Caesar, Inc. for P425,000. At this date all the
identifiable assets and liabilities of Caesar, Inc. were recorded at amounts equal to fair value, and the equity of Caesar
consisted of the following:
Share capital
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General reserve
Asset revaluation surplus
Retained earnings
300,000
200,000
200,000
In 2009, Caesar reported net income of P250,000. P50,000 of the asset revaluation surplus was realized in 2009. Caesar
paid a P40,000 dividend and transferred P30,000 to general reserve. What is the carrying amount of the investment in
Caesar, Inc. as of December 31, 2009?
a. P477,500
c. P465,000
b. P490,000
d. P482,500
33. Intor Company acquired 20% of the ordinary shares of Intee Company on January 1, 2008. At this date, all the
identifiable assets and liabilities of Intee were recorded at fair value. An analysis of the acquisition showed that
P200,000 of goodwill was acquired. Intee Company recorded a profit of P1,000,000 for 2009 and paid dividend of
P700,000 during the same year. The following transactions have occurred between the two entities.



In December 2009, Intee sold inventory to Intor for P1,500,000. This inventory had previously cost Intee P1,000,000 and
remains unsold by Intor in December 31, 2009.
In November 2009, Intor sold inventory to Intee at a before tax profit of P300,000. Half of this was sold by Intee before
December 31, 2009.
In December 2008, Intee sold inventory to Intor for P1,800,000. This inventory had cost Intee P1,200,000. At December
31, 2008, this inventory remained unsold by Intor. However, it was all sold by Intor in 2009.
Ignoring income tax, Intor company shall report a "share of profit of associate" in 2009 at
a. P200,000
c. P160,000
b. P190,000
d. P140,000
Use the following information for questions 1 to 4.
Buyong, Inc. completed the construction of a building at the end of 2007 for a total cost of P100 million. The building is
estimated to be economically useful for 25 years. The building was constructed for the purpose of earning rentals under
operating leases. The tenants began occupying the building after its completion. The company opted to use the fair value
model to measure the building. An independent valuation expert was used by the company to estimate the fair value of the
building on an annual basis. According to the expert the fair values of the building at the end of 2012, 2013 and 2014 were
P104 million, P118 million and 116 million, respectively.
The company’s business expanded in 2013. As a result, the company started to use the building in its operations on January
1, 2014. Because of the change in use, the company reclassified the building from investment property to property, plant
and equipment.
34. How much should be recognized in profit or loss in 2012 as a result of the completion of the building at the end of 2012?
a. P18,000,000
c. P4,000,000
b. P16,000,000
d. P
0
35. The depreciation expense in 2013 is
a. P4,000,000
b. P4,720,000
c. P4,160,000
d. P
0
36. How much should be recognized in profit or loss in 2013 as a result of the fair value changes?
a. P18,000,000
c. P14,000,000
b. P12,000,000
d. P
0
37. How much is the carrying amount of the building on December 31, 2014?
a. P118,000,000
c. P113,083,333
b. P116,000,000
d. P113,280,000
38. Han, Inc. owns a building purchased on January 1, 2010 for P100 million. The building was used as the company’s head
office. The building has an estimated useful life of 25 years. In 2014, the company transferred its head office and
decided to lease out the old building. Tenants began occupying the old building by the end of 2014. On December
31, 2014, the company reclassified the building as investment property to be carried at fair value. The fair value on the
date of reclassification was P70 million. How much should be recognized in the 2014 profit or loss as a result of the
transfer from owner-occupied to investment property?
a. P14,000,000
c. P10,000,000
b. P 4,000,000
d. P
0
39. The following information relates to noncurrent investment that Maddela Corporation placed in trust as required by the
underwriter of its bonds:
Bonding sinking fund balance, January 1, 2013
2013 additional investment
Dividends on investment
Interest income
Administration costs
Carrying amount of bonds payable
P4,500,000
900,000
150,000
300,000
100,000
6,000,000
What amount should Maddela report in its December 31, 2013 statement of financial position related to its noncurrent
investment for bond sinking fund requirements?
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A. P5,750,000
B. P5,850,000
C. P5,950,000
D. P3,950,000
40. On March 1, 2013, Saguday Company adopted a plan to accumulate P20,000,000 by September 1, 2013. Saguday
plans to make four annual deposits to a fund that will earn interest at 10% compounded annually. Saguday made the
first deposit on September 1, 2013. Future amount factors at 10% for 4 periods are:
Ordinary annuity of 1
4.64
Annuity of 1 in advance
5.11
Saguday should make four annual deposits of (rounded to the nearest P100)
A. P5,000,000
C. P4,310,000
B. P3,913,900
D. P4,102,000
41. On January 1, 2013, Carly Company decided to begin accumulating a fund for asset replacement five years later. The
company plans to make five annual deposits of P30,000 at 9% each January 1 beginning in 2013. The following 9%
interest factors may be used.
Future Value of Ordinary
Present Value of
Annuity of 1 at 9%
Periods
Ordinary Annuity
4
3.2397
4.5731
5
3.8897
5.9847
6
4.4859
7.5233
What will be the balance in the fund on January 1, 2018?
A. P195,700
C. P179,540
B. P163,500
D. P150,000
42. During 2013, Stone Co. pays an insurance premium of P31,800 on a P900,000 life insurance policy covering the
president. The cash surrender value of the policy will increase from P165,000 to P175,200 during 2013. Dividends
received from the insurance company during 2013 totaled P6,300. Insurance expense for 2013 is
A. P31,800.
C. P21,600.
B. P25,500.
D. P15,300.
43. Casiguran Corp. took out a P5,000,000 insurance policy on the life of its president on January 1, 2005. Given below are
data on this policy:
2012
2013
Annual dividend
P 3,880
P4,210
Cash surrender value, 12/31
138,030
189,350
Annual premium
121,040
121,040
The life insurance expense for Casiguran Corp. for 2013 would be
A. P64,100
C. P116,830
B. P65,510
D. P121,040
😊 END 😊
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