Baritone Company counted and reported the ending inventory on December 31, 2018 at

P2,000,000. None of the following items were included when the total amount of the ending inventory
was computed:

What is the correct amount of inventory on December 31, 2018?

Select one:

A. 2,350,000

B. 2,750,000

C. 2,500,000

D. 2,900,000

Dairy Company provided the following information for the current year

What is the net income for the current year?

Select one:

A. 650,000

B. 600,000

C. 185,000

D. 130,000

The following are costs excluded from the cost of inventories, except

Select one:

A. Import duties

B. Abnormal amounts of wasted materials, labor or other production costs

C. Administrative overheads that do not contribute to bringing inventories to their present location
and condition

D. Storage costs, unless those costs are necessary in the production process before a further
production stage
How should sales staff commission be dealt with when valuing inventories at the lower of cost and
net realizable value (NRV), according to PAS2 Inventories?

Select one:

A. Deducted in arriving at NRV

B. Added to cost

C. Deducted from cost

D. Ignored

Which of the following is (are) true about biological assets?

Select one:

A. Biological assets do not generally have future economic benefits

B. Biological assets must be valued at cost

C. All of the choices

D. Biological assets are living animals or plants and must be disclosed as a separate item on the
balance sheet

When allocating costs to inventory produced for the period, fixed overhead should be based upon

Select one:

A. The actual amounts of goods produced during the period

B. The lowest production level in the last three periods

C. The normal capacity of production facilities

D. The highest production levels in the last three periods

The net realizable value of the quantity of inventory held to satisfy firm sales or service contracts is
based on the

Select one:

A. Quoted prices in an active market for identical assets

B. General selling prices

C. Contract price.

D. Quoted prices in an active market for similar assets

Jade Company acquired a new milling machine on April 1, 2012. The machine has a special component
that required replacement before the end of the useful life. The asset was originally recorded in two
accounts, one representing the main unit and the other for the special component. Depreciation is
recorded by the straight line method and residual value is disregarded. 

On April 1, 2018, the special component is scrapped and is replaced with a similar component. This
new component is expected to have a residual value of approximately 20% of cost at the end of the
useful life of the main unit, and because of materiality, the residual value will be considered in
calculating depreciation.

What is the total depreciation for 2018?

Select one:

A. 1,100,000

B. 1,350,000

C. 1,087,500

D. 1,175,000

Bensol Co. and Sable Co. exchanged similar trucks with fair values in excess of carrying amounts. In
addition, Bensol paid Sable to compensate for the difference in truck values. As a consequence of the
exchange, Sable recognizes

Select one:

A. A gain determined by the proportion of cash received to the total consideration.

B. A loss determined by the proportion of cash received to the total consideration

C. A gain equal to the difference between the fair value and carrying amount of the truck given up
 D. Neither a gain nor a loss

January 1, 2018, Uptown Company disclosed the following balances

During the current year, the following transactions occurred:

·         Land was acquired for ₱2,000,000 cash as a building site.

·         A plant facility consisting of land and building was acquired In exchange for 200,000 shares of
the entity. On the acquisition date, each share had a quoted price of ₱45 on a stock exchange.
Current appraised values for the land and the building, respectively, are ₱2,000,000 and ₱8,000,000.
The building has an expected life of 40 years with a ₱200,000 residual value.

·         Items of machinery and equipment were purchased at a total cost of ₱4,000,000. Additional
costs incurred were freight and unloading of ₱100,000 and installation ₱300,000. The equipment has a
useful life of ten years with no residual value.

·         Expenditures totaling ₱1,200,000 were made for new parking lot, street and sidewalk at the
entity’s various plant locations. These expenditures had an estimated useful life of fifteen years.

·         Research and development costs amounted to ₱1,100,000.

·         A machine costing ₱200,000 on January 1, 2011 was scrapped on June 30, 2018. Straight line
depreciation had been recorded on the basis of a 10-year life with no residual value.

·         A machine was sold for ₱500,000 on July 1, 2018. Original cost of the machine sold was ₱700,000
on January 1, 2015, and it was depreciated on the straight line basis over an estimated useful life of
eight years and residual value of ₱50,000.

What is the total cost of land on December 31, 2018?

Select one:

A. P8,000,000

B. P7,600,000

C. P7,800,000

D. P6,800,000

According to PAS 38 Intangible assets, which of the following statements about research and
development expenditure is incorrect?

A. In deciding whether development expenditure qualifies to be recognized as an asset, it is

necessary to consider whether there will be adequate finance available to complete the project

B. Development expenditure recognized as an asset must be amortized over a period not exceeding
5 years
 C. Capitalized development expenditure must be disclosed in the statement of financial position
under intangible non-current assets

D. Research expenditure, other than capital expenditure on research facilities, should be recognized
as an expense as incurred

Campbell Corp. exchanged delivery trucks with Highway, Inc. Campbell’s truck originally cost
P2,300,000, its accumulated depreciation was P2,000,000, and its fair value was P500,000.  Highway’s
truck originally cost P2,350,000, its accumulated depreciation was P1,990,000, and its fair value was
P570,000.  Campbell also paid Highway P70,000 in cash as part of the transaction.  The transaction
lacks commercial substance.  What amount is the new book value for the truck Campbell received?

A. P500,000

B. P570,000

C. P300,000

D. P370,000

On June 30, 2017, a flash flood damaged the warehouse and factory of Raptors Corporation,
completely destroying the work in process inventory.  There was no damage to either the raw
materials or finished goods inventories.  A physical inventory taken after the flood revealed the
following valuations:

A review of the books and records disclosed that the gross profit margin historically approximated
34% of sales.  The sales for the first 6 months of 2017 were P428,000.  Raw materials purchases were
P96,000.  Direct labor costs for this period were P130,000, and manufacturing overhead has
historically been applied at 60% of direct labor. 

Compute the value of the work in process inventory lost on June 30, 2017.

A. P271,980

B. P119,020

C. P92,220

D. P135,020
On January 1, 2015, Sunflower Company purchased for P240,000 a machine with a useful life of ten
years and no salvage value.  The machine was depreciated by the double-declining balance method
and the carrying amount of the machine was P153,600 on December 31, 2016.  Sunflower changed to
the straight-line method on January 1, 2017.  Sunflower can justify the change.  What should be the
depreciation expense on this machine for the year ended December 31, 2017?

A. P15,360

B.P24,000

C. P19,200

D. P30,720

An entity controls an asset if

A. The entity has the power to obtain the future economic benefits flowing from the underlying
resource and to restrict the access of others to those benefits

B. The asset is capable of being separated or divided from the entity and sold, transferred, licensed,
rented or exchanged, either individually or together with a related contract, identifiable asset or liability,
regardless of whether the entity intends to do so

C. The asset arises from contractual or other legal rights, regardless of whether those rights are
transferable or separable from the entity or from other rights and obligations

D. The asset will help in generating revenues or reducing future production costs

Bensol Co. and Sable Co. exchanged similar trucks with fair values in excess of carrying amounts.  In
addition, Bensol paid Sable to compensate for the difference in truck values.  As a consequence of the
exchange, Sable recognizes

A. Neither a gain nor a loss

B. A gain equal to the difference between the fair value and carrying amount of the truck given up

C. A loss determined by the proportion of cash received to the total consideration

D. A gain determined by the proportion of cash received to the total consideration