Since 1977
FAR
First Pre-board (SET A)
1. The purpose of the IFRS Advisory Council is to:
a. Police the application of International Accounting
Standards.
b. Monitor international adoption of International
Accounting Standards.
c. Represent users and preparers of accounts and so
influence the IASB in their agenda decisions.
d. Organize the funding of the IASB.
2. This organization is dedicated to ensuring that the
global markets can operate in an efficient and effective
basis
a. International Financial Reporting Standards
Foundation
b. International Accounting Standards Board
c. Financial Accounting Standards Board
d. International Organization of Securities
Commissions
3. Lakers Company received P12,000 from a tenant on
December 1 for four months' rent of an office. This
rent was for December, January, February, and March.
If Lakers debited Cash and credited Rental Income for
P12,000 on December 1, the necessary adjustment
December 31 would include
a. A debit to Rental Income of P3,000
b. A credit to Rental Income of P3,000
c. A debit to Unearned Rental Income of P9,000
d. A credit to Unearned Rental Income of P9,000
4. The Supplies on Hand account balance at the
beginning of the period was P6,600. Supplies totaling
P12,825 were purchased during the period and debited
to Supplies on Hand. A physical count shows P3,825
of Supplies on Hand at the end of the period. The
proper journal entry at the end of the period
a. debits Supplies on Hand and credits Supplies
Expense for P9,000.
b. debits Supplies Expense and credits Supplies on
Hand for P15,600.
c. debits Supplies Expense and credits Supplies on
Hand for P12,825.
d. debits Supplies on Hand and credits Supplies
Expense for P15,600.
5. Which statement is incorrect regarding the Conceptual
Framework?
a. It establishes the concepts that underlie financial
reporting.
b. It is a coherent system of concepts that flow from
an objective.
c. It is based on individual concepts developed by
each member of the IASB.
d. None of the above.
6. Which of the following groups of users of accounts is
interested primarily in the efficiency of a company?
a. Management c. Investors
b. Customers d. Lenders
7. According to the Conceptual Framework, the
fundamental qualitative characteristic of relevance
includes
a. Predictive value and feedback value.
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OCAMPO/OCAMPO
October 2019
b. Verifiability, neutrality, and representational
faithfulness.
c. Predictive value and confirmatory value.
d. Comparability and timeliness.
8. Non-current assets should be measured at cost less
depreciation rather than enforced sales value. The
concept applied in this statement is:
a. Going concern c. Comparability
b. Relevance d. Understandability
9. Under IFRS, LIFO is not permitted for financial
reporting purposes. Why?
a. The use of LIFO is not permitted in the United
States.
b. The use of LIFO may not match the costs of
recently purchased inventory with current prices.
c. The use of LIFO results in inventories being
recognized in the statement of financial position at
amounts that may bear little relationship to recent
cost levels of inventories.
d. The use of LIFO results in a measurement of profit
or loss for the period that is consistent with the
measurement of inventories in the statement of
financial position.
10. When a decline in the price of materials indicates that
the cost of the finished products exceeds net realizable
value, the materials are written down to net realizable
value. In such circumstances, which of the following is
the best available measure of the net realizable value
of materials?
a. The replacement cost.
b. General selling prices.
c. Fair value less costs to sell.
d. Quoted prices in an active market for identical
assets.
11. In your review of Hug Company, you find that a
physical inventory on December 31, 2019, showed
merchandise with a cost of P441,000 was on hand at
that date. You also discover the following items were
all excluded from the P441,000.
a. Merchandise of P61,000 which is held by Hug on
consignment. The consignor is Kisses Company.
b. Merchandise costing P38,000 which was shipped
by Hug f.o.b. buyer to a customer on December
31, 2019. The customer was scheduled to receive
the merchandise on January 2, 2020.
c. Merchandise costing P46,000 which was shipped
by Hug f.o.b. shipping point to a customer on
December 29, 2019. The customer was scheduled
to receive the merchandise on January 2, 2020.
d. Merchandise costing P83,000 shipped by a vendor
f.o.b. buyer on December 30, 2019, and received
by Hug on January 4, 2020.
e. Merchandise costing P51,000 shipped by a vendor
f.o.b. buyer on December 31, 2019, and received
by Hug on January 5, 2020.
The adjusted cost of Hug Company's inventory at
December 31, 2019 should be
a. P538,000 c. P479,000
b. P530,000 d. P441,000
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EXCEL PROFESSIONAL SERVICES, INC.

12. On August 1, Miami Company recorded purchases of December 26 23,000

inventory of P80,000 and P100,000 under credit terms December 28 8,000
of 2/15, net 30. The payment due on the P80,000
purchase was remitted on August 14. The payment Purchases:
due on the P100,000 purchase was remitted on August Placed in stock 120,000
29. Under the net method and the gross method, these In transit, FOB shipping point 50,000
purchases should be included at what respective net In transit, FOB destination 33,000
amounts in the determination of cost of goods
available for sale? The inventory as of December 31, 2019 is
Net Method Gross Method a. P1,675,800 c. P1,663,000
a. P178,400 P176,400 b. P1,657,000 d. P1,668,667
b. P176,400 P180,000
c. P176,400 P178,400 16. An entity (a pet shop) purchases dogs from breeders
d. P180,000 P176,400 that it then sells. The dogs should be measured at
a. Cost
13. In November 2019, Detroit Company entered into a b. Lower of cost or net realizable value
non-cancellable contract to purchase inventory for c. Fair value less costs to sell
P120,000 in March 2020. The value of the inventory d. Cost less accumulated depreciation and
was expected to be worth P130,000 at the time of accumulated impairment losses
purchase. On December 31, 2019, the market value
of the inventory was P100,000. Which of the following 17. The following figures relate to inventory held at 31
items would be reported in the 2019 comprehensive December 2018:
income statement?
a. P100,000 included in cost of goods sold Cost of materials P100,000
b. P20,000 gain on purchase commitments Net realizable value of materials 90,000
c. P20,000 loss on purchase commitments
 Estimated costs to convert materials
d. Nothing would be reported on the comprehensive into finished goods 50,000
income statement Estimated selling price of finished goods 160,000
Estimated costs to sell 5,000
14. A physical inventory taken on December 31, 2019
resulted in an ending inventory of P1,440,000. Circus The entity should recognize loss on write-down of
Company suspects some inventory may have been inventory of materials of
taken by employees. To estimate the cost of missing a. P15,000 c. P5,000
inventory, the following were gathered: b. P10,000 d. Nil
Inventory, Dec. 31, 2018 P1,280,000
Purchases during 2019 5,640,000 18. Which statement is incorrect regarding gains and
Cash sales during 2019 1,400,000 losses on biological assets?
Shipment received on December 26, a. A gain may arise on initial recognition of a
2019, included in physical inventory, 40,000 biological asset.
but not recorded as purchases b. A loss may not arise on initial recognition of a
Deposits made with suppliers, entered biological asset.
as purchases. Goods were not 80,000 c. A gain or loss on biological assets measured at fair
received in 2019 value less costs to sell shall be included in profit or
Collections on accounts receivable, 7,200,000 loss for the period in which it arises.
2019 d. None of the above.
Accounts receivable, January 1, 2019 1,000,000
Accounts receivable, Dec. 31, 2019 1,200,000 Use the following information for the next three questions.
Gross profit percentage on sales 40% A public limited company, Cromwell Dairy Products,
produces milk on its farms. As of January 1, Cromwell has
At December 31, 2019 what is the estimated cost of a stock of 1,050 cows (average age, 2 years old) and 150
missing inventory? heifers (average age, 1 year old). Cromwell purchased
a. P200,000 c. P240,000 375 heifers, average age 1 year old, on July 1. No animals
b. P160,000 d. P320,000 were born or sold during the year. The unit values less
estimated costs to sell were
15. The physical inventory of Golden State Company as of
December 26, 2019 totaled P1,965,000. In trying to 1 - year old animal at December 31 P4,800
establish the December 31 inventory, the accountant 2 - year old animal at December 31 6,750
noted the following transactions from December 27 to 1.5 - year old animal at December 31 5,400
December 31, 2019. 3 - year old animal at December 31 7,500
1 - year old animal at Jan. 1 and July 1 4,500
Sales (20% markup on cost) P 600,000 2 - year old animal at January 1 6,000
Credit memos issued:
For goods returned on: 19. The increase in value of biological assets in the current
December 15 27,000 period due to price changes is
December 20 35,000 a. P2,250,000 c. P945,000
December 29 36,000 b. P 832,500 d. P690,000
For goods delivered to
customers not in accordance 9,500 20. The increase in value of biological assets in the current
with specifications period due to physical changes is
Credit memos received: a. P 885,000 c. P1,305,000
For goods returned on: b. P1,080,000 d. P1,170,000
December 10 17,000

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EXCEL PROFESSIONAL SERVICES, INC.

21. The carrying amount of the biological assets as of QUESTIONS:

December 31 is Determine the adjusted balance of the following as of
a. P10,987,500 c. P10,912,500 December 31, 2019 in accordance with PIC Q&A 2012-02:
b. P10,237,500 d. P 9,225,000 22. Land
a. P9,800,000 c. P10,500,000
Use the following information for the next five questions. b. P9,590,000 d. P13,790,000
Presented below is the Property, Plant and Equipment
section of New-Look Company’s statement of financial 23. Buildings
position as of December 31, 2018: a. P9,450,000 c. P9,750,000
b. P9,240,000 d. P8,540,000
Land P 700,000
Buildings 5,600,000 24. Leasehold improvements
Leasehold improvements 3,500,000 a. P4,550,000 c. P4,480,000
Machinery and equipment 4,200,000 b. P4,025,000 d. P4,760,000

The following transactions occurred during 2019: 25. Machinery and equipment
a. P5,449,500 c. P5,540,500
 Land site number 102 was acquired for P7,000,000. b. P5,425,000 d. P5,439,000
Additionally, to acquire the land the entity paid a
P420,000 commission to a real estate agent. Costs of 26. In accordance with PIC Q&A No. 2012-02, it is
P105,000 were incurred to clear the land. During the appropriate for an entity to account for the carrying
course of clearing the land, timber and gravel were value of the old building as part of the cost of the new
recovered and sold for P35,000. building (constructed for rental to others), in which of
the following?
 A second tract of land (site number 103) with a a. An entity acquired a piece of land with existing
building was acquired for P2,100,000. Based on building with the intention to demolish the old
reliable information at the time of acquisition, fair building right away in order to construct a new
value of land is P1,400,000 and the building P700,000. building on its site as part of its planned
Shortly after acquisition, the building was demolished redevelopment.
at a cost of P210,000. A new building was constructed b. An entity acquired a piece of land with existing
for P2,800,000 plus the following costs: building with the intention to initially use the old
building as an owner-occupied property and then
Excavation fees P 77,000 demolish it in a future period and replace it with a
Architectural design fees 56,000 new building.
Building permit fee 7,000 c. Both a and b.
d. Neither a nor b.
The building was completed and occupied on
September 1, 2019. 27. A non-current asset was purchased on the first day of
an accounting period, 1 January 2017 for P34,000 and
 A third tract of land (site number 104) was acquired depreciated by 20% per annum using the reducing
for P4,200,000. The entity is undecided regarding its balance method. On 30 June 2019 the asset was sold,
future use. realizing a loss on disposal of P2,100. What were the
proceeds of sale?
 Extensive work was done to a building occupied by the a. P14,900 c. P19,660
entity under a lease agreement. The total cost of the b. P17,484 d. P21,684
work was P875,000, which consisted of the following:
28. The carrying value of company’s property and
Particulars Amount Useful life equipment was P200,000 at 1 August 2018. During
Painting of ceilings P 70,000 One year the year ended 31 July 2019, the company sold
Electrical work 245,000 Ten years equipment for P25,000 on which it made a loss of
Construction of extension 560,000 Thirty P5,000. The depreciation charge for the year was
to current working area years P20,000. What was the carrying value of property and
equipment at 31 July 2019?
The lessor paid one-half of the costs incurred in a. P150,000 c. P160,000
connection with the extension to the current working b. P155,000 d. P180,000
area.
29. Bubblegum Company takes a full year’s depreciation in
 During December 2019, costs of P455,000 were the year of an assets acquisition, and no depreciation
incurred to improve leased office space. The related in the year of disposition. Data relating to one
lease will terminate on December 31, 2021, and is not depreciable asset acquired in 2017, with residual value
expected to be renewed. of P400,000 and estimated useful life of 8 years, at
December 31, 2018 are:
 A group of new machines was purchased under a
royalty agreement which provides for payment of Cost P5,400,000
royalties based on units of production for the Accumulated depreciation 2,362,500
machines. The invoice price of the machines was
P525,000, freight costs were P14,000, unloading Using the same depreciation method in 2017 and
charges were P10,500, and royalty payments for 2019 2018, how much depreciation should Bubblegum
were P91,000. record in 2019 for this asset?
a. P625,000 c. P659,375
b. P703,125 d. P759,375

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EXCEL PROFESSIONAL SERVICES, INC.

Use the following information for the next five questions. recognized and relevant professional qualification and
On 1 January 2018, Kalipay Corporation acquired two has recent experience in the location and category of
assets within the same class of plant and equipment. the investment property being valued?
Information on these assets follows: a. An entity is encouraged, but not required, to
measure the fair value of investment property on
Cost Expected useful life that basis.
Machine A P200,000 5 years b. An entity shall disclose the extent to which the fair
Machine B 120,000 3 years value of investment property is determined on that
basis.
The machines are expected to generate benefits evenly c. An entity need not disclose the fact the fair value
over their useful lives. The class of plant and equipment is of investment property is not determined on that
measured using the revaluation model. basis.
d. None of the above.
At 31 December 2018, information about the assets
follows: 37. On 1 January 2018 Kabila Corporation acquired an
investment property (building) in a remote location for
Fair value Expected useful life P100,000. After initial recognition, the entity
Machine A P168,000 4 years measures the investment property using the cost-
Machine B 76,000 2 years depreciation-impairment model, because its fair value
cannot be measured reliably without undue cost or
On 1 July 2019, machine B was sold for P64,000 cash. On effort on an ongoing basis.
the same day, Kalipay Corporation acquired machine C for
P160,000 cash. Machine C has expected useful life of four At 31 December 2018, management:
years.  assessed the building’s useful life at 50 years from
the date of acquisition
At 31 December 2019, information on the machines  presumed the residual value of the building to be
follows: nil (given that the fair value cannot be determined
reliably)
Fair value Expected useful life  assessed that the entity will consume the building’s
Machine A P122,000 3 years future economic benefits evenly over 50 years
Machine C 137,000 1.5 years from the date of acquisition
 declined an unsolicited offer to purchase the
QUESTIONS: building for P130,000. This is a ‘one-off’ offer that
is unlikely to be repeated in the foreseeable future.
30. The amount to be recognized in 2018 profit or loss
related to the revaluation of the assets is The entity should measure the carrying amount of the
a. P8,000 c. (P4,000) building on 31 December 2018 at:
b. P4,000 d. P0 a. P 98,000 c. P130,000
b. P100,000 d. P127,400
31. The amount to be recognized in 2018 comprehensive
income related to the revaluation of the assets is 38. PAS 38 applies to all intangible assets other than:
a. P8,000 c. (P4,000) I. financial assets
b. P4,000 d. P34,000 II. exploration and evaluation assets
III. expenditure on the development and extraction of
32. The gain or loss on sale of Machine B is minerals, oil, natural gas, and similar resources
a. P26,000 gain c. P 666 gain IV. intangible assets arising from insurance contracts
b. P 7,000 gain d. P12,000 loss issued by insurance companies
V. intangible assets covered by another PFRS, such as
33. The total depreciation for the year 2019 is intangibles held for sale, deferred tax assets, lease
a. P81,000 c. P128,333 assets, assets arising from employee benefits, and
b. P62,000 d. P101,000 goodwill

34. The amount to be recognized in 2019 profit or loss
related to the revaluation of the assets is
a. (P7,000) c. (P1,000)
b. (P3,000) d. P0
35. Which of the following distinguishes investment
property from owner occupied-property?
a. Investment property is held to earn rentals.
b. Investment property is normally classified as a
noncurrent asset.
c. Investment property generates cash flows largely
independently of the other assets held by an
entity.
d. Investment property does not generate cash flows
largely independently of the other assets held by
an entity.
36. Which statement is incorrect regarding measurement
of fair value of investment property on the basis of a
valuation by an independent valuer who holds a
a. I, II, III, IV & V c. I, II, IV & V
b. I, II, III, & IV d. None of the choices
39. PAS 38 requires an entity to recognize an intangible
asset, whether purchased or self-created (at cost) if,
and only if: it is probable that the future economic
benefits that are attributable to the asset will flow to
the entity; and the cost of the asset can be measured
reliably. Which of the following statement is incorrect
a. PAS 38 recognition requirement applies whether an
intangible asset is acquired externally or generated
internally. PAS 38 includes additional recognition
criteria for internally generated intangible assets.
b. The probability of future economic benefits must
be based on reasonable and supportable
assumptions about conditions that will exist over
the life of the asset.
c. The probability recognition criterion is not always
considered to be satisfied for intangible assets that

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EXCEL PROFESSIONAL SERVICES, INC.
are acquired separately or in a business
combination.
d. If an intangible item does not meet both the
definition of and the criteria for recognition as an
intangible asset, PAS 38 requires the expenditure
on this item to be recognized as an expense when
it is incurred.
40. Which of the following statements about intangible
assets is true?
a. An intangible asset must be separable.
b. An intangible asset may be revalued where a fair
value can be established through use of an expert
valuer.
c. Goodwill can never be revalued.
d. Development costs may be capitalized if the
criteria laid down in PAS 38 are met.
41. Which of the following are conditions which must be
met in order to capitalize development costs according
to PAS 38?
I. Resources are available to complete the project
II. There is a contract to sell or written commitment
to use the item under development
III. Completion of the asset is technically feasible
a. III only c. I and III only
b. I and II only d. I, II and III
42. Miya Company incurred the following costs during the
current year:
Laboratory research aimed at discovery
of new knowledge P 750,000
Design of tools, jigs, molds and dies
involving new technology 220,000
Quality control during commercial
production including routine testing 350,000
Equipment acquired two years ago,
having an estimated useful life of 5
years with no residual value, used in
various R and D projects 1,500,000
Research and development services
performed by Stone Company for
Metal Company 230,000
Research and development services
performed by Miya Company for Kaye
Company 20,000
What amount of research and development expense
should be reported in the current year?
a. P1,200,000 c. P1,870,000
b. P1,500,000 d. P2,170,000
43. Lesley Company commenced operations in the current
year. A number of expenditures were made during the
current year that were debited to one account
intangible assets.
State incorporation fees and legal costs
related to Organizing the corporation P 100,000
Fire insurance premium for three-year
period 60,000
Purchase of a copyright 200,000
Legal fees for filing a patent on a new
product resulting from an R&D project 50,000
Legal fees for successful defense of the
patent developed from the project 10,000
Entered into a 10-year franchise
agreement with a franchisor 500,000
Advertising cost 150,000
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Purchase of all of the outstanding ordinary 5,000,000
shares of an acquire. On the date of
purchase, the acquire had total assets of
P6,000,000 at fair value and total
liabilities of P2,200,000 at fair value.
What total amount should be reported as intangible
assets?
a. P1,950,000 c. P2,050,000
b. P1,960,000 d. P2,350,000
44. An entity purchases the brand name of a product on 1
January 2019 for P30 million. The management feels
that the brand has an indefinite useful life and have
therefore not charged any amortization in the year
ended 31 December 2019. Which of the following is
true?
a. Amortization should be charged based on an
assumed maximum useful life of 20 years.
b. Amortization should be charged based on an
assumed maximum useful life of 50 years.
c. There is no requirement to charge amortization,
however the brand must be tested for impairment
when indications of impairment arise.
d. There is no requirement to charge amortization,
however the brand must be tested for impairment
each year and in addition, whenever there are
indications of impairment.
45. Granger Company acquired a patent for a drug with a
remaining legal and useful life of six years on January
1, 2017 for P5,400,000. On January 1, 2019, a new
patent is received for an improved version of the same
drug. The new patent has a legal and useful life of
twenty years. What is the amortization expense for
2019?
a. P900,000 c. P180,000
b. P200,000 d. P300,000
46. Layla Company is interested in computing the goodwill
to be recognized in the purchase of ABC Company in
January 2019. The following information was taken
from the records of ABC.
Net income Net assets
2014 P 360,000 P1,600,000
2015 388,000 1,800,000
2016 288,000 1,900,000
2017 380,000 2,000,000
2018 394,000 2,100,000
P1,810,000 P9,400,000
Goodwill is measured by capitalizing excess earning at
40% with normal return on average net assets at
10%. What is the acquisition cost of ABC Company?
a. P2,535,000 c. P2,315,000
b. P2,100,000 d. P2,305,000
47. Which of the following statement is correct
a. An entity adopting PFRS 6 shall not continue to use
the accounting policies applied immediately before
adopting the PFRS.
b. PFRS 6 effectively modifies the application of PAS
36 to exploration and evaluation assets recognized
by an entity under its accounting policy.
c. An entity treats exploration and evaluation assets
as addition to property, plant and equipment or
intangible assets of assets and make the
disclosures required by either PAS 16 or PAS 38
consistent with how the assets are classified.
d. All of the statements are correct
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EXCEL PROFESSIONAL SERVICES, INC.
Use the following information for the next four questions.
In 2014, Washington Corporation acquired a mine.
Because the mine is located deep in the mountains,
Washington was able to acquire the mine for the low price
of P50,000. In 2015, Washington constructed a road to
the silver mine costing P5,000,000. Improvements to the
mine made in 2015 cost P750,000. Because of the
improvements to the mine and the surrounding land, it is
estimated that the mine can be sold for P600,000 when
the mining activities are complete.
During 2016, five buildings were constructed near the
mine site to house the mine workers and their families.
The total cost of the five buildings was P1,500,000.
Estimated residual value is P250,000. In 2014, geologists
estimated 4 million tons of ore could be removed from the
mine for refining. During 2017, the first year of
operations, only 5,000 tons of ore were removed from the
mine. However, in 2018, workers mined 1 million tons of
ore. During that same year, geologists discovered that the
mine contained 3 million tons of ore in addition to the
original 4 million tons. Improvements of P275,000 were
made to the mine early in 2018 to facilitate the removal of
the additional ore. Early in 2018, an additional building
was constructed at a cost of P225,000 to house the
additional workers needed to excavate the added ore. This
building is not expected to have any residual value.
In 2019, 2.5 million tons of ore were mined and costs of
P1,100,000 were incurred at the beginning of the year for
improvements to the mine.
QUESTIONS:
(Round off depletion and depreciation rates to two decimal
places)
48. Depletion for 2018
a. P1,300,000 c. P1,820,000
b. P 780,000 d. P 870,000
49. Depreciation for 2018
a. P250,000 c. P490,000
b. P180,000 d. P210,000
50. Depletion for 2019
a. P1,950,000 c. P2,150,000
b. P2,425,000 d. P2,275,000
51. Depreciation for 2019
a. P 525,000 c. P625,000
b. P1,225,000 d. P450,000
52. Irethel Company acquired a tract of land containing an
extractable natural resource. The entity is required by
the purchase contract to restore the land to a condition
suitable for recreational use after it has extracted the
natural resource.
Geological survey indicated that the recoverable
reserves would be 2,500,000 tons and that the
extraction will be completed in five years.
Relevant cost information follows:
Land P9,000,000
Exploration and development cost 1,000,000
Expected cash flow for restoration cost 1,500,000
Credit-adjusted risk free interest rate 10%
PV of 1 at 10% for 5 periods 0.62
What is the depletion charge per ton of extracted
material?
a. P4.00 c. P3.97
b. P4.37 d. P3.60
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53. To the extent that the benefit is improved access to
ore, the entity shall recognize production stripping
costs as
a. Inventory
b. Stripping activity asset
c. Exploration and evaluation asset
d. Any of the above
Use the following information for the next four (4)
questions:
In 2015, Hanabi 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 to 2016 cost of 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 2017, 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 2018, the first year of operations, only 500,000
tons of silver ore were removed from the mine.
However, in 2019, workers mine, 1,000,000 tons if silver.
During that same year, geologists discovered that the
mine contained 3,000,000 tons of silver ore in the addition
to the original 4,000,000 tons.
Development costs of P1,300,000 were made to the mine
early in 2019 to facilitate the removal of the additional
silver.
Early in 2019, 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.
54. What is depletion for 2018?
a. P718,750 c. P725,000
b. P650,000 d. P643,750
55. What is the depletion for 2019?
a. P1,300,000 c. P900,000
b. P1,525,000 d. P700,000
56. What is the depreciation of building for 2018?
a. P250,000 c. P318,750
b. P225,000 d. P343,750
57. What is the depreciation of building for 2019?
a. P300,000 c. P500,000
b. P450,000 d. P290,000
58. Roger Mining Company constructed a building costing
P2,800,000 on the mine property. The estimated
residual value will not benefit the entity and will be
ignored for purposes of computing depreciation.
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EXCEL PROFESSIONAL SERVICES, INC.

The building has an estimated life of 10 years. The III. An impairment loss relating to goodwill cannot be
total estimated recoverable output from the mine is reversed.
500,000 tons. The production of the first four years of
operations was: a. III only c. I, II and III
b. I and II only d. None of them
First year 100,000 tons
Second year 100,000 tons 63. Karrie Company has two cash generating units. At
Third year Shut down, no output year-end, the carrying amounts of the assets of one
Fourth year 100,000 tons cash generating unit are:

What is the depreciation for the fourth year? Inventory 200,000

a. P490,000 c. P210,000 Accounts receivable 300,000
b. P560,000 d. P336,000 Plant and equipment 6,000,000
Accumulated depreciation 2,600,000
59. Which of the following statement is correct in Patent 850,000
identifying an asset that may be impaired Goodwill 100,000
a. At the end of each reporting period, an entity may
not assess whether there is any indication that an The accounts receivable are regarded as collectible.
asset may be impaired (i.e. its carrying amount The fair value less cost of disposal of the inventory is
may be higher than its recoverable amount). equal to the carrying amount. The patent has a fair
b. PAS 36 has a list of external and internal indicators value less cost of disposal of P750,000. At year-end,
of impairment. If there is no indication that an the entity undertook impairment testing of the cash
asset may be impaired, then the asset's generating unit and determined the value in use of the
recoverable amount must be calculated. unit at P4,050,000.
c. The recoverable amounts of the following types of
intangible assets (an intangible asset with an What is the impairment loss allocated to the plant and
indefinite useful life, an intangible asset not yet equipment?
available for use and goodwill) are measured a. P800,000 c. P600,000
annually only when there is any indication that it b. P700,000 d. P560,000
may be impaired.
d. In some cases, the most recent detailed calculation Use the following information for the next two (2)
of recoverable amount made in a preceding period questions:
may be used in the impairment test for that asset On January 1, 2018, Warrior Company purchased
in the current period equipment with cost of P11,000,000, useful life of 10 years
and residual value. The entity used straight line
Use the following information for the next two (2) depreciation.
questions:
Kimmy Company purchased four convenience store On December 31, 2018 and December 31, 2019, the entity
buildings on January 1, 2013 for a total of P25,000,000. determined that impairment indicators are present. There
The buildings have been depreciated using the straight-line is no change in the useful life or residual value.
method with a 20-year useful life and 10% residual value. December 31, December 31,
2018 2019
On January 1, 2019, the entity has converted the buildings Fair value less cost of
into a hotel and restaurant. Because of the change in the disposal P8,100,000 P8,400,000
use of the buildings, the entity is evaluating the buildings Value in use 8,550,000 8,200,000
for possible impairment.
64. What is the impairment loss for 2018?
The entity estimated that the buildings have a remaining a. P1,800,000 c. P2,450,000
useful life of 10 years, that their residual value will be b. P1,350,000 d. P0
zero, that undiscounted net cash inflows from the buildings
will total P1,500,000 per year, and that the current fair 65. What is the gain on reversal of impairment for 2019?
value of the four buildings totals P10,000,000. a. P400,000 c. P800,000
b. P250,000 d. P0
The appropriate discount rate is 12%. The present value of
an ordinary annuity of 1 at 12% for 10 periods is 5.65. 66. On December 31, 2018, Elite Company acquired the
following three intangible assets:
60. What amount of impairment loss should be recognized
for 2019? A trademark for P3,000,000. The trademark has 4
a. P8,250,000 c. P7,500,000 years remaining in its legal life. It is anticipated that
b. P9,775,000 d. P0 the trademark will be renewed in the future
indefinitely.
61. What amount should be recorded as depreciation for
2019? Goodwill for P500,000.
a. P1,000,000 c. P847,500
b. P900,000 d. P762,750 A customer list for P2,100,000. By contract, the entity
has exclusive use of the list for five years. However, it
62. Which of the following statements is/are true? is expected that the list will have an economic life of 3
I. An impairment loss relating to a CGU is allocated years.
to goodwill in the first instance.
II. Corporate assets must always be allocated to On December 31, 2019, before any adjusting entries
individual CGUs. for the year were made, the following information was
assembled:

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EXCEL PROFESSIONAL SERVICES, INC.
 Because of a decline in the economy, the
trademark is now expected to generate cash flows
of just P105,000 per year.
 The cash flow expected to be generated by the
cash generating unit to which the goodwill is
related is P200,000 per year for the next 20 years.
The carrying amounts of the assets and liabilities
of the cash generating unit are:
Identifiable assets P3,500,000
Goodwill 500,000
Liabilities 1,100,000
It is reliably determined that the cash flows of the
cash generating unit cannot be computed without
consideration of the liabilities.
 The cash flows expected to be generated by the
customer list are, P800,000 in 2020 and P500,000
in 2021.
Assuming the appropriate discount rate is 6%. What is
the impairment loss allocated to identifiable assets of
the CGU? (Round-off present value factors to two
decimal places)
a. P110,000 c. P500,000
b. P610,000 d. P0
67. Held-for-sale classification is the assets need to be
disposed of through sale. Therefore, operations that
are expected to be wound down or abandoned would
not meet the definition (but may be classified as
discontinued once abandoned).
An entity that is committed to a sale involving loss of
control of a subsidiary that qualifies for held-for-sale
classification under PFRS 5 classifies all of the assets
and liabilities of that subsidiary as held for sale, even if
the entity will retain a non-controlling interest in its
former subsidiary after the sale.
A 'disposal group' is a group of assets, possibly with
some associated liabilities, which an entity intends to
dispose of in a single transaction.
a. True; True; True c. False; False; True
b. True; True; False d. False; False; False
68. On January 1, 2019, Master Corporation determined to
sell a group of assets within its shoe manufacturing
division, as it believed it was cheaper to buy the parts
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from China. The assets that it wanted to sell had the
following carrying amounts:
Factory P22,000,000
Accumulated depreciation (14,000,000)
Raw materials 3,800,000
Spare parts 2,200,000
The management of CDO calculated the fair value less
costs to sell of the disposal group to be P14,400,000.
The assets were sold on February 15, 2019 for
P15,400,000, with selling costs amounting to
P700,000.
Before income taxes, how much should be recognized
as gain (loss) on sale of the disposal group?
a. P300,000 c. P1,000,000
b. P700,000 d. (P1,300,000)
69. On April 1, 2019, Nana Company has a piece of
machinery with a cost of P1,000,000 and accumulated
depreciation of P750,000. On April 1, Nana decided to
sell the machine within 1 year. As of April 1, 2019, the
machine had an estimated selling price of P100,000
and a remaining useful life of 2 years. It is estimated
that selling costs associated with the disposal of the
machine will be P10,000. On December 31, 2019, the
estimated selling price of the machine had increased to
P105,000, with estimated selling costs increasing to
P16,000. The gain on reversal of impairment loss on
December 31, 2019 is
a. P160,000 c. P44,000
b. P 50,000 d. P 0
70. Which statement is incorrect regarding government
assistance for purposes of PAS 20?
a. Government assistance is action by government
designed to provide an economic benefit specific to
an entity or range of entities qualifying under
certain criteria.
b. Government assistance not in the form of transfers
of resources to an entity in return for past or
future compliance with certain conditions relating
to the operating activities of the entity are called
government grants.
c. All government assistance are government grants.
d. Government assistance include benefits provided
only indirectly through action affecting general
trading conditions, such as the provision of
infrastructure in development areas or the
imposition of trading constraints on competitors.
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