1.

Selected records from the accounting records of Malakas Company are as follows:
Net accounts receivable at Dec. 31, 2005
1,900,000
Net accounts receivable at Dec. 31, 2006
1,000,000
Account receivable turnover
5:1
Inventory at Dec. 31, 2005
1,100,000
Inventory at Dec.31, 2006
1,200,000
Inventory turnover
4:1
What is the amount of gross margin?
a. 5,000,000
c.5,200,000
b. 5,150,000
d.5,300,000

2. The following information for 2006 is provided by Guam Company:

Sales
50,000,000
Cost of Sales
30,000,000
Selling Expenses
5,000,000
General and Administrative Expenses
4,000,000
Interest Expense
2,000,000
Gain on early extinguishment of long term debt
500,000
Correction of Inventory error, net of income tax-credit
1,000,000
Investment Income-equity method
3,000,000
Gain on expropriation
2,000,000
Income tax expense
5,000,000
Dividends declared
2,500,000
What is the amount of finance cost?
a. 1,200,000
c. 1,500,000
b. 2,000,000
d. 1,800,000

3. Dakak Company issued bonds with a face value of P4, 000,000 and with a stated
interest rate of 10% on Jan. 01, 2008. The interest is payable semiannually on June
30 and December 31. The bonds mature on every December 31 at a rate of P2,
000,000 per year for 2 years. The prevailing rate for the bonds is 8%. The present
value of 1 at 4% is as follows:
One period
0.9615
Two periods
0.9426
Three periods
0.8990
Four periods
0.8548
What is the present value of the bonds on January 1, 2008?
a. 4,111,400
c.4,099,600
b. 4,263,400
d.4,252,580

4. On January 1, 2004, Loyal Company purchased an equipment for P8, 000,000. The
equipment is depreciated using straight line method based on a useful life of 8 years
with no residual value. On January 1, 2007, after 3 years, the equipment was
revalued at a replacement cost of 12,000,000 with no change in residual value. On
June 30, 2007, the equipment was sold for 10,000,000. What is the effect of the June
30, 2007 transaction to the retained earnings?
a.2, 500,000 increase
c. 5,000,000 increase
b.3,250,000 increase
d. 5,750,000 increase

5. A natural resources property was purchased by Nge Wang Company for 6,000,000.
The output was estimated to be 1,500,000 tons. Nge Wang Company purchased a
mining equipment at a cost of 8,000,000 and has a useful life of 10 years but is
capable of exhausting the resource in8 years. Production is as follows:
1st Year
150,000 tons
2nd Year
225,000 tons
rd
3 Year
None
th
4 Year
225,000 tons
What is the carrying amount of the mining equipment at the end of four years?
a. 4,800,000
c. 4,200,000
b. 4,000,000
d. 4,500,000

6. Danhag Company has determined its 2008 Net Income is P3,000,000.In the first
time audit of company financial statements, you determined he following errors:
P400, 000 revenue received in advanced during 2008was credited to revenue
account.P100, 000 was earned in 2008, P200,00 will be earned in 2009 and the
remainder will be earned in 2010.
A P150, 000 was recognized as a loss resulting from a change in inventory
valuation method during 2008.
What will be the adjusted Net Income during 2008?
a.2, 800,000
c..2, 850,000
b.3,150,000
d.2,600,000

7. Lathan Company was organized on January 1,2006 with the following capital
structures:
12%Cumulative preference share,P100 par ,with liquidation value of
P120,50,000 shares authorized, issued and outstanding 20,000 shares,P2,500,000.
Ordinary Share Capital, par value P50, authorized 80,000 shares, issued and
outstanding 20,000 shares, P1, 200,000.
The net income for the years December 31, 2006 and December 31, 2007 were P2,
000,000 and 3,000,000, respectively. No dividends were declared. What is the
December 31, 2008 book value per ordinary share?

a.256
c.291

c.260
d.285

8. Meninqiuz Company provided the following information for the 2008:

Total Assets at December 31
4,500,000
Share Capital at December 31
2,000,000
Share Premium at December 31
200,000
Treasury Stock (at cost)
300,000
The debt-to-equity ratio is 25% at December 3, 2008. What is the retained earnings
unappropriated on December 31, 2008?
a.1, 400,000
c.2, 300,000
b.1, 100,000
d.1, 700,000

9. Felicia Co. owns 20% royalty interest in an oil well. Felicia receives royalty payments
on January 31 for the oil sold between June 1 and November 30, and July 30 for oil
sold between December 1 and May 31 Production report shows the following sales:
June 1, 2006-November 30, 2006
4,050,000
December1, 2006-December 31, 2006
675,000
December 1, 2006-may 31, 2007
5,400,000
June 1, 2007-November 30, 2007
4,387,500
December 1, 2007-December31, 2007
945,000
What amount should Felicia report as royalty revenue for 2007?
a.1, 890,000
c.2, 011,500
b.1, 944,000
d.2, 146,000

10. Assume the following balances at the end of the current year:
Capital Liquidated
1,800,000
Accumulated Depletion
2,500,000
Retained Earnings
1,500,000
Depletion based on 50,000 units extracted @P20 per unit
1,000,000
Inventory of resource deposit 5,000 units
What is the maximum dividend that can be declared by the company?
a. 2,100,000
c.2, 200,000
b.2, 000,000
d.1, 500,000

11. Marie Company sells gift certificates redeemable only when merchandise is
purchased. These gift certificates have an expiration date of two years after issuance
date. Upon redemption or expiration, Marie recognizes the unearned revenue as
realized. Information for 2007 as follows:
Gift certificate payable 12/31/2006
520,000

Gift certificate payable 12/31/2007

Gift certificate redeemed
Expired gift certificates
Cost of goods sold
How much Gift certificates sold during the year?
a. 1,800,000
b. 1,500,000

680,000
1,560,000
80,000
80%
c.. 1,640 ,000
d. 1,760,000

12. Zee Company provided the following information concerning its defined benefit plan
in its memorandum records on January 1, 2007.
Fair Value of plant assets
5,100,000
Unamortized past service cost
210,000
Unrecognized Actuarial Loss
610,000
Projected Benefit Obligation
(4,500,000)
Prepaid/Accrued benefit cost
1,410,000
During the current year, the entity determined that its Current service cost was 600,000
and the interest cost is 10%. The expected return was 10% but the actual return was
12%. Past service cost and any actuarial gain or loss should be amortized over 10
years. Other related information is as follows:
Contribution to the plan
720,000
Benefits paid to retirees
900,000
Decrease in PBO due to changes in actuarial assumptions
120,000
What is the balance of prepaid/ accrue benefit cost account on December 31, 2007?
a. 1,530,000
c. 1,770,000
b. 1,560,000
d. 1,680,000

13. PRC Company began selling a new calculator that carried a two year warranty
against defects in 2007.
PRC projected the estimated warranty cost (as a percent of sales) as follows:
First year warranty
4%
Second year warranty
10%
Sales and actual warranty repairs were:
2007
2008
Sales
5,000,000
9,000,000
Actual warranty repairs
390,000
900,000
What is the estimated warranty liability on December 31, 2007?
a. 670,000
c. 700,000
b. 790,000
d. 650,000

14. On December 31, 2007 Colt Company is experiencing extreme financial pressure and
is in default in meeting interest payment on its long term note of P6, 000,000 due on
December 31, 2009. The interest rate is 12% payable every December 31.
In an agreement with the creditor, Colt obtained the following changes in the terms of
note:
a. The accrued interest on December 31, 2007 is forgiven.
b. The principal is reduced by 500,000.
c. The new interest rate is 8%.
d. The new date of maturity is December 31, 2011.
The present value of 1 at12% for four periods is 0.6355 and the present value of an
ordinary annuity of 1 at 12% for four periods is 3.0373.
How much is the gain or loss on extinguishment?
a. 2,504,750
c. 1,888,338
b. 1,168,338
d. 0

15. East Company leased machinery from Chin Company on January 1, 2007 for a 10year period (useful life of 20 years)
Equal annual payments under the lease are P200,000 and are due on January 1 of each
year starting January 1, 2007.
The present value at January 1, 2007 of the lease payments over the lease term
discounted at 10% was 1,352,000. The lease was appropriately accounted for as
finance lease by East because there is a very nominal bargain purchase option.
What is interest expense for 2008?
a. 106,720
c. 200,000
b. 115,200
d. 0

16. The Cloak Corporation received the following report from its actuary at the end of
the year:
01/01/06
Unrecognized past service cost
Accumulated benefit obligation
Fair Value of pension plan assets
Actuarial net gain
Benefits paid during the year
Contribution made during the year
Current service cost
Expected rate of return
Settlement rate
Ave. working lives of employees

500,000
6,000,000
5,800,000
800,000

01/31/06
450,000
6,400,000
6,276,000
?
680,000
520,000
495,000
10%
12%
20 years

What is the amount of net benefit expense to be charged against income for the year
2006?
a. 675,000
b. 685,000

c. 716,000
d. 875,000

17. Francisco Company was organized on January 2, 2006 with 300,000 ordinary shares
with a P6 par value authorized. During 2006, Francisco had the following stock
transactions:
January 2
Issued 60,000 shares at P10 per share
March 8 Issued 20,000 shares at P11 per share.
May 9
Purchased 7,500 shares at P12 per share.
July 2
Issued 15,000 shares at P13 per share.
August 17 Sold 5,000 treasury shares at P14 per share.
Francisco uses the FIFO method for purchase-sale purposes.
If Francisco uses the cost method to record treasury stock transactions, how much would
be the Share Premium at December 31,2006?
a. 445,000
b. 455,000

c. 465,000
d. 485,000

18. Genius Company reported an Accumulated Profits balance of P300,000at December

31,2005. In June 2006, Genius discovered that merchandise costing P100,000 had
not been included in the inventory in its 2005 financial statements. Assume Genius
has 35% tax rate.
What amount should Genius report as adjusted beginning Accumulated Profits and
Losses on January 1, 2006?
a. 235,000
b. 365,000

c. 300,000
d. 400,000

19. In 2004, Power Designs Corporation sold a layout design to Mass,Inc. and will
receive royalties of future revenues associated with the said layout design. On
December 31,2005, Power Designs reported royalties receivable of P75,000 from
Mass, Inc. During 2006, Power Designs received royalty payments of P200,000.
Mass,Inc. reported revenues of P1,500,000 in 2006 from the layout design.
In its 2006 Income Statement, what amount should Power Designs report as royalty
revenue?

a. 125,000
b. 175,000

c. 200,000
d. 300,000

20. The following pertains to an operating sale and leaseback of equipment by Harbor
Co. on December 31,2005:
Sales price
420,000
Carrying amount
520,000
Monthly lease payment
37,334
Present value of lease payments/Fair Market Value
420,000
Estimated remaining life
12 years
Lease term
1 year
Implicit rate
12%
What amount of deferred loss should Harbor report at December 31, 2005?
a. 0
b. 37,334

c. 100,000
d. 200,000

21. The Puncher Co. launched a sales promotional campaign on June 30, 2006. For every
ten empty packs returned to Puncher, customers will receive an attractive food
container. The company estimates that only 30% of the packs reaching the market
will be redeemed. Additional information are as follows:

Sales of food packs

Food containers purchased
Prizes distributed to customers

Units
3,000,000
60,000
37,000

Amount
P9,000,000
180,000

At the end of the year, Puncher recognized a liability equal to the estimated cost of
potential prizes outstanding.
What is the amount of this estimated liability?
a. 69,000
b. 90,000

c. 159,000
d. 180,000

22. Green Company has 2,000,000 shares of ordinary shares outstanding on December
31, 2005. An additional 100,000 shares are issued on April 1, 2006 and 240,000 more
on September 1. On October 1, Green issued P3,000,000 of 9% convertible bonds.
Each bond is convertible into 40 shares of ordinary shares. At the time of issue of the
convertible bonds, the market rate of the bonds without conversion option is equal
to its nominal rate. No bonds have been converted.

The number of shares to be issued in computing basic earnings per share and diluted
earnings per share on December 31, 2006 would be:
a. 2,155,000 & 2,155,000
b. 2.155.000 & 2,275,000

c. 2,155,000
d. 2,540,000

23. Tarzana Company reported total purchases of P3,200,000 in its accrual basis
financial statement on December 31,2006. Additional information revealed the
following:
Accounts Payable, December 31,2005
Accounts Payable, December 31,2006

P 900,000
1,250,000

What is the amount of purchases under the cash basis on December 31,2006?
a. 2,850,000
b. 3,550,000

c. 4,100,000
d. 4,450,000

24. On March 31, 2005 Mr. Right Enterprise traded in an old machine having a carrying
amount of P1,600,000 and paid cash difference of P600,000 for a new machine
having a total cash price of P2,000,000.
On March 31,2005, what amount of loss should Mr. Right recognize on this exchange?
a. P
0
b. P200,000

c. P400,000
d. P600,000

25. On April 30, 2005, Shark Corporation purchased for P 30 per share all 200,000 of Fins
Corporations outstanding ordinary share. On this date, Fins balance sheet showed
net assets of P 5,000,000. Additionally, the fair value of Fins identifiable assets on
the same date was P600,000 in excess of their carrying amount.
What amount should Shark report as goodwill in its April 30, 2005 consolidated balance
sheet?
a. P 0
b. P400,000

c. P600,000
d. P 1,000,000

26.
In 2008, Paul Hypermarket awards loyalty points to customers who use Paul
Hypermarkets own credit card to pay for purchases. The award is at the rate of one point
for every P250 charged to the card and each point entitles the customer to a certain credit
against future purchases, without time limit. Paul Hypermarket estimates the fair value of
each point at P4 and in 2008, P250,000,000 is charged to the Paul Hypermarkets credit
card. None of the customers have claimed their corresponding credit points during 2008.
The amount to be reported as revenue for 2008 by Paul Hypermarket is
a.
P250,000,000 b.
P249,000,000 c.
P246,000,000 d.
P245,000,000
Use the following information for numbers 27 and 28
On January 1, 2006 Luke Company, a financial services entity which is also involved in
real estate development, has purchased a plot of land in Makati City for P2,000,000
which it intends to develop and eventually sell. On July 1, 2006, Luke Company
purchased 10 passenger vehicles for a total consideration of P2,500,000. Luke
Companys intention was to use the passenger vehicles to transport Luke Companys
employees. Luke Company uses the straight-line depreciation method for the passenger
vehicles with no expected salvage value and an estimated useful life of 8 years.
On December 31, 2007, Luke Company entered in a lease agreement with John Company
for its land in Makati City and its passenger vehicles. Development cost incurred until
December 31, 2007 was P700,000. The fair values of the land in Makati City and the 10
passenger vehicles were P2,950,000 and P2,181,250 respectively. Assets classified by
Luke Company as investment properties are presented at fair value.
At the end of 2008, the fair values of land and 10 passenger vehicles were 3,100,000 and
P2,201,250 respectively.
27.
The gain (loss) to be reported in 2007 in relation to the reclassification to
investment property is
a.
0
b.
150,000
c.
250,000
d.
400,000
28.
a.

The revaluation surplus balance at December 31, 2008 is

0
b.
150,000
c.
355,577
d.

482,500

29.
Before year-end adjusting entries, Bass Company's account balances at December
31, 2001, for accounts receivable and the related allowance for uncollectible accounts
were P500,000 and P45,000, respectively. An aging of accounts receivable indicated that
P62,500 of the December 31 receivables are expected to be uncollectible. The net
realizable value of accounts receivable after adjustment is
a.P482,500.
b. P437,500.
c. P392,500.
d. P455,000.
30.
Isaac Co. assigned P500,000 of accounts receivable to Dixon Finance Co. as
security for a loan of P420,000. Dixon charged a 2% commission on the amount of the
loan; the interest rate on the note was 10%. During the first month, Isaac collected
P110,000 on assigned accounts after deducting P380 of discounts. Isaac accepted returns
worth P1,350 and wrote off assigned accounts totaling P3,700.
The amount of cash Isaac received from Dixon at the time of the transfer was
a.
P378,000.
b. P410,000.
c. P411,600.
d. P420,000.

31.
On June 1, 2008, Oslo Corp. sold merchandise with a list price of P15,000 to
Mead on account. Oslo allowed trade discounts of 30% and 20%. Credit terms were 2/15,
n/40 and the sale was made f.o.b. shipping point. Oslo prepaid P300 of delivery costs for
Mead as an accommodation. On June 12, 2008, Oslo received from Mead a remittance in
full payment amounting to
a.
P8,232
b. P8,526.
c. P8,532.
d P8,397.
32.
In January 2008, Jenks Mining Corporation purchased a mineral mine for
P4,200,000 with removable ore estimated by geological surveys at 3,000,000 tons. The
property has an estimated value of P400,000 after the ore has been extracted. Jenks
incurred P1,150,000 of development costs preparing the property for the extraction of
ore. During 2008, 340,000 tons were removed and 300,000 tons were sold. For the year
ended December 31, 2008, Jenks should include what amount of depletion in its cost of
goods sold?
a.
P430,667
b. P380,000
c. P495,000
d. P561,000
33.
Down Co. bought a trademark from Cater Corp. on January 1, 2008, for
P112,000. An independent consultant retained by Down estimated that the remaining
useful life is 50 years. Its unamortized cost on Cater's accounting records was P56,000.
Down decided to write off the trademark over the maximum period allowed. How much
should be amortized for the year ended December 31, 2008?
a.
P1,120.
b. P1,400.
c. P2,240.
d. P2,800.
Use the following information for questions 34 and 35
On January 2, 2008, Hernandez, Inc. signed a ten-year non-cancelable lease for a heavy
duty drill press. The lease stipulated annual payments of P70,000 starting at the end of
the first year, with title passing to Hernandez at the expiration of the lease. Hernandez
treated this transaction as a capital lease. The drill press has an estimated useful life of 15
years, with no salvage value. Hernandez uses straight-line depreciation for all of its plant
assets. Aggregate lease payments were determined to have a present value of P420,000,
based on implicit interest of 10%.
34.
In its 2008 income statement, what amount of interest expense should Hernandez
report from this lease transaction?
a.
P0.
b. P26,250
c. P35,000.
d. P42,000.
35.
In its 2008 income statement, what amount of depreciation expense should
Hernandez report from this lease transaction?
a.
P70,000.
b. P46,667.
c. P42,000.
d. P28,000.

36.

On October 31, 2008, Beta Company engaged in the following transactions:

Obtained a P500,000, six-month loan from City Bank, discounted at 12%. The
company pledged P500,000 of accounts receivable as security for the loan.
Factored P1,000,000 of accounts receivable without recourse on a non notification
basis with Hype Company. Hype charged a factoring fee of 2% of the amount of
receivables factored and withheld 10% of the amount factored.
What is the total cash received from the financing of receivables?
a. P1,320,000
b. P1,350,000
c. P1,380,000
d. P1,470,000
37.
The closing inventory of Gandhi Company amounted to P284,000 at December
31, 2008. This total includes two inventory lines about which the inventory taker is
uncertain.
Item 1 500 items which had cost P15 each and which were
included at P7,500. These items were found to have been defective at the balance sheet
date. Remedial work after the balance sheet date cost P1,800 and they were then sold for
P20 each. Selling expenses were P400.
Item 2 100 items that had cost P10 each but after the balance sheet
date, these were sold for P8 each with selling expenses of P150.
What figure should appear in Gandhis balance sheet for inventory?
a. P283,650
b. P283,950
c. P284,000
d. P284,300
38.
In reconciling the Cash in bank of Yna Company with the bank statement balance
for the month of November 2008, the following data are summarized:
Book debits for November, including October CM for note collected, P60,000
P
800,000
Book credits for November, including NSF of P20,000 and service charge of P800 for
October
620,000
Bank credits for November including CM for November for bank loan of P100,000 and
October deposit in transit for P80,000
700,000
Bank debits for November including October outstanding checks of P170,800 and
November service charge of P200
600,000
What is the amount of outstanding checks for November ?
a. P 20,000
b. P170,200
c. P171,000
d. P191,000

39.
Accrued salaries payable of P5,000 were not recorded at December 31, 2006.
Supplies on hand of P2,000 at December 31, 2007 were erroneously treated as expense
instead of supplies inventory. Neither of these errors were discovered nor corrected. The
effect of these two errors would cause:
(a)
2007 net income to be understated by P7,000 and December 31, 2007 retained
earnings to be understated by P2,000.
(b)
2006 net income and December 31, 2006 retained earnings to be understated by
P5,000 each.
(c)
2006 net income to be overstated by P5,000 and 2007 net income to be
understated by P2,000.
(d)
2007 net income and December 31, 2007 retained earnings to be understated by
P2,000 each.

40.
Nick and Carter are partners who share profits and losses in the ratio of 7:3,
respectively. Their respective capital accounts are as follows:
Nick
P35,000
Carter
P30,000
They agreed to admit Brian as a partner with a one-third interest in the capital and
profits and losses, upon an investment of P25,000. The new partnership will begin with a
total capital of P90,000. Immediately after Brians admission, what are the capital
balances of Nick, Carter, and Brian, respectively?
a. P30,000; P30,000; P30,000
c. P31,667; P28,333; P30,000
b. P31,500; P28,500; P30,000
d. P35,000; P30,000; P25,000

41.
At December 31, Miga and Migo are partners with capital balances of P40,000
and P20,000, and they share profits and losses in the ratio of 2:1, respectively. On this
date Ami invests P17,000 in cash for a one-fifth interest in the capital and profit of the
new partnership. Assuming that goodwill is not recorded, how much should be credited
to Amis capital account on December 31?
a. P12,000
b. P15,000
c. P15,400
d. P17,000
42. On January 1, 2009, Rockets Corporation issued a P 3 million 6% convertible bonds
at par. The bonds are redeemable at a premium of 10% on December 31, 2012 or it may
be converted into ordinary shares on the basis of 50 shares for each P 1,000 bond at the
option of the holder. The interest rate of the equivalent bond without the conversion
rights would have been 10%. The issuance of convertible bonds on January 1, 2009
increased the entitys equity by (Round-off present value factors to four decimal places)
a. P 175, 518

b. P 380, 418

c. P 73,068

d. P 0

43. Detroit Corp. sells equipment with a carrying amount P 150,000 to Pistons Corp. for
P170,000 when the equipments fair value is P 100,000 and then enters into a cancelable
operating lease agreement to use the equipment for two years. In the current year, how
much profit would Detroit Corp. record on the sale of the equipment.
a. P 20,000

b. P 70,000

c. P 50,000

d. Nil

44. Cavaliers Corporation made an accounting profit before tax of P 40,000 for the year
ended June 2009. Included in the accounting profit were the following items of revenue
and expenses.
Donations to political parties ( non deductible)
P 5,000
Depreciation machinery ( 20%)
15,000
Annual leave expense
5,600
Rent revenue
12,000
For the tax purposes the following applied:
Annual leave paid
P 6,500
Rent receive
10,000
Depreciation rate for machinery
25%
Income tax rate
35%
Calculate the current tax liability for the year ended 30 June 2009
a. P 13,423
b. P 15,750
c. P 14,000

d. P 15,050

45. An entity grants to an employee the right to choose either 1,000 phantom shares, ie a
right to a cash payment equal to the value of 1,000 shares or 1,200 shares. The grant is
conditional upon the completion of three years service.
At grant date, the entitys share price is P 50 per share. At the end of years 1 and 2, the
share price is P 52 and P 55 respectively. The entity estimates that the grant date fair
value of the share alternative is P 48 per share.
Computer for the amount to be recognize as compensation expense in year 2.
a. P 21,867
b. P 15,750
c. P 14,000
d. P15,050
46. A director of an entity receives a retirement benefit of 10% of his final salary per
annum for his contractual period of 3 years. The director does not contribute to the
scheme. His anticipated salary over the three years is Year 1 P100,000, Year 2 P120,000
and Year 3 P144,000. Assume a discount rate of 5%. The pension liability at the end of
the second year is
a. P 29,520
b. P 22, 500

c. P 27,429
d. P 26,775

47. Magic Company had the following capital during the 2008 and 2009:
Preference share capital, P 100 par, 10% cumulative, 100,000 shares
Ordinary share capital, P 100 par, 400,000 shares

P 10,000,000
40,000,000

Magic reported profit of P 8,000,000 for the year ended December 31, 2009. Magic paid
no preference share dividends during 2008 and paid P 1,500,000 preference share
dividends during 2009. On January 31, 2010, prior to the date that financial statements
are authorized for issue, Magic distributed 10% ordinary share dividend.
In its 2009 income statement, what amount should Magic report as basic earnings per
share?
a. P 17.50

b. P16.25

c. P 15.91

d. P 14.77

48. Victoria Company had purchased equipment for P 10,000,000 on January 1, 2007.
The equipment had a 5 year life and a residual value of 1,000,000. Victoria Company
depreciated the equipment using the straight line method. On December 31, 2009,
Victoria questioned the recoverability of the carrying amount of this equipment. On
December 31, 2009 the undiscounted expected net future cash flows related to the
continued use and eventual disposal of the equipment totaled P 4,800,000. The
equipments fair value on December 31, 2009 is P 4,000,000 while the discounted cash
flows related to the equipment is P 4,200,000. After any loss on impairment has been
recognized, what is the carrying amount of the equipment.?
a. P 4,200,000
b. P 4,000,000

c. P 4,600,000
d. P 4,800,000

49. On January 1, 2009 Major Company purchased a uranium mine for P 800,000. On
that date, Major estimated that the mine contained 1,000 tons of ore. At the end of the
productive years of the mine, Major Company will be required to spend P 4,200,000 to
clean up the mine site. The appropriate discount rate is 8%, and it is estimated that it will
take approximately 14 years to mine all of the ore. Major uses the productive output
method of depreciation. During 2009, Major extracted 100 tons of ore from the mine.
Compute the amount of depreciation for 2009.
a. P 114,408
b. P 80,000

c. P 223,000
d. P 500,000

50. Citimart Inc. was granted a parcel of land by a local government authority. The
condition attached to this grant was that Citimart Inc. should clean up this land and lay
roads by employing laborers from the village in which the land is located. The entire
operation will take three years and is estimated to cost P 100 million. This amount will be
spent in this way: P 20 million each in the first and second years and P 60 million in the
third year. The fair value of this land is currently P 120 million. How much should be
recognize as income from government grant at the end of the first year?
a. P 20,000,000
b. P 24,000,000

c. P 40,000,000
d. P 0