1.

When the revaluation surplus is realized because of the use of the asset or disposal of the asset, it may be transferred directly to
a. Retained earnings
b. Income
c. Share capital
d. Share premium

2. Seaside company applied revaluation accounting to plant asset with carrying amount of 4,000,000 on January 1, 2017, useful life of 4 years and no
residual value. Depreciation is calculated on the straight line basis.

On December 31, 2017, independent appraisers determined that the asset has a fair value of
3,750,000. What is included in the journal entry to record depreciation for 2017?
a. Debit accumulated depreciation 1,000,000.
b. Debit depreciation 250,000
c. Credit accumulated depreciation 250,000
d. Debit depreciation 1,000,000

3. What is the revalued amount of property, plant and equipment?

a. Fair value
b. Depreciated replacement cost
c. Replacement Cost
d. Fair value and depreciated replacement cost

4. What is the recoverable amount of an asset?

a. Fair value less cost of disposal
b. Value in use
c. Fair value less cost of disposal or value in use, whichever is higher.
d. Fair value less cost of disposal or value in use, whichever is lower.

5. An impairment loss is the amount by which

a. The carrying amount of an asset exceeds recoverable amount.
b. The carrying amount of an asset exceeds value in use
c. The carrying amount of an asset exceeds the fair value less cost of disposal
d. The recoverable amount of an asset exceeds carrying amount.

6. The reversal of an impairment loss on a revalued asset shall be credited to income equal to the amount of impairment loss previously recognized
and the remainder to revaluation surplus.
a. True
b. False
7. The most common method of computing depletion is Accumulated depreciation 1,500,000
a. Percentage of depletion method Goodwill 1,000,000
b. Decreasing charge method
c. Straight line The management determined the value in use of the cash generating
d. Production method unit at 8,500,000.

8. Depreciation of equipment used in mining operations is based on The fair value less cost of disposal for the inventory was greater than
the useful life of the equipment or the useful life of the wasting asset, the carrying amount.
whichever is shorter. If the useful life of the equipment is shorter, the Required: Prepare journal entry to recognize the impairment loss.
output method is used.
a. True 4. At the beginning of the current year, Peace company provided the
b. False following account balances relating to real properties:

9. Depletion expense Land 1 3,000,000

a. Is usually part of cost of goods sold. Land 2 5,000,000
b. Includes tangible equipment cost in the depletable cost Land 3 7,000,000
c. Excludes intangible development cost from the depletable cost.
d. Exclude restoration cost from the depletable cost. On same date, the entity revalued land at fair value. The fair values
on this date of Land 1, 2 and 3 are 3,500,000, 6,000,000 and
10. All of the following factors are considered in determining the 9,000,000, respectively. At the current year end, Land 2 was sold for
useful life of an asset, except 7,500,000.
a. Expected usage of the asset
b. Expected physical wear and tear What is the revaluation surplus at the beginning and at the end of the
c. Technical obsolescence current year?
d. Residual value
5. Seaside company applied revaluation accounting to plant asset
11. A method which excludes residual value from the base for the with carrying amount of 4,000,000 on January 1, 2017, useful life of
depreciation calculation is 4 years and no residual value. Depreciation is calculated on the
a. Straight line straight line basis. On December 31, 2017, independent appraisers
b. Sum of year’s digit determined that the asset has a fair value of 3,750,000.
c. Double declining balance
d. Output method What is the amount of revaluation surplus credited in the journal
entry to record the revaluation on December 31, 2017.
12. Which of the following must be known when using the Sum of
year’s digit method? 6. Lavender Company provided the following data related to a
a. Acquisition cost machinery on the date of revaluation:
b. Useful life
c. Both a and b Cost Replacement Cost
d. None of a and b Machinery 9,000,000 15,000,000
Accumulated depreciation 3,600,000
1. At year end, Bullheaded Company determined that there had been
a significant decrease in market value of an equipment and compiled Life in years 25 years
the following information:
What is the journal entry to record the first piecemeal realization of
Original cost of equipment 5,000,000 the revaluation surplus?
Accumulated depreciation 3,000,000
Expected undiscounted net future cash inflows related to the 7. Rigorous Company purchased a machine on July 1, 2017 for
Continued use of the equipment 1,750,000 6,000,000. The machine has an estimated useful life of five years and
Fair value less cost of disposal of equipment 1,250,000 residual value of 800,000. The machine is being depreciated by the
150% declining balance method.
What amount of impairment loss should be recognized for the current
year? What amount should be recorded as depreciation expense on the
a. 3,250,000 machine for 2018?
b. 3,750,000
c. 750,000 8. Ambitious Company showed the following schedule of depreciable
d. 250,000 assets on January 1, 2017.

Asset Cost Accumulated Acquisition Residual

2. Bronze Company operates a production line which is treated as a
Depreciation
cash generating unit. At year end, the carrying amounts of the
A 4,000,000 2,560,000 2015 400,000
noncurrent assets of the cash generating unit are:
B 2,000,000 1,440,000 2014 200,000
C 2,800,000 1,344,000 2014 560,000
Goodwill 1,100,000
Plant and machinery 2,200,000
The useful life of each asset is 5 years. The entity takes a full
depreciation in the year of acquisition and No depreciation in the year
At year end, the recoverable amount of the production line is
of disposition.
estimated at 2,700,000.
Asset C was sold for 1,700,000 on June 30, 2017.
What are the revised carrying amounts of the goodwill and plant and
Asset C was depreciated using the straight line method.
machinery, respectively?
a. 500,000 and 2,200,000
What is the gain on sale of Asset C?
b. 900,000 and 1,800,000
c. 1,100,000 and 1,600,000
9. On January 1, 2015, Mogul company acquired equipment to be
d. 800,000 and 1,900,000
used in the manufacturing operations. The equipment has an
estimated useful life of 10 years and an estimated residual
3. Unison Company has various cash generating units. One cash
value of 50,000. The depreciation applicable to this equipment was
generating unit has the following carrying amount of assets at year
240,000 for 2017 computed under the sum of year’s digit method.
end:
What was the acquisition cost of the equipment?
Cash 600,000
Inventory 1,400,000
Land 2,500,000
Plant and equipment 9,000,000
10. 40-15 On July 1, 2017, Lethargic Company, a calendar year
entity, purchased the rights to a mine. The total purchase price was
14,000,000 of which 2,000,000 was allocable to the land.

Estimated reserves were 1,500,000 tons. The entity expects to extract

and sell 25,000 tons per month.

The entity purchased new equipment on July 1, 2017. The equipment

was purchased for 8,000,000 and had a useful life of 8 years.

However, after all the resource is removed, the equipment will be of

no use and will be sold for 500,000.

What is the depletion for 2017?

a. 1,200,000
b. 2,400,000
c. 1,950,000
d. 1,400,000

11. 40-18 In 2017, Newshen company paid 1,000,000 to purchase

land containing total estimated 160,000 tons of extractable mineral
deposits. The estimated value of the property after the mineral has
been removed is 200,000.

Extraction activities began in 2017, and by the end of the year,

20,000 tons had been recovered and sold.

In 2018, geological studies indicated that the total mineral deposits

had been underestimated by 25,000
tons.

During2018, 30,000 tons were extracted and 28,000 tons were sold.
What is the depletion rate per ton in 2018?
a. 4.24 b. 4.32 c. 4.85 d. 5.19

12. 40-16 At the beginning of the current year, Nili company

purchased a coal mine for 30,000,000. Removable coal is estimated
at 1,500,000 tons.

The entity is required to restore the land at an estimated cost of

3,600,000. The land is estimated to have a value of 3,150,000 after
restoration.

The entity incurred 7,500,000 of development cost preparing the

mine for production. During the current year, 450,000 tons were
removed and 300,000 tons were sold.

What total amount of depletion should be recorded for the current

year?
a. 11,385,000
b. 10,305,000
c. 3,870,000
d. 7,590,000

13. Queen Company purchased a varnishing machine for P3,000,000

on January 1, 2017. The entity received a government grant of
P500,000 in respect of this asset. The accounting policy is to
depreciate the asset over 4 years on a straight line basis and to treat
the grant as deferred income. What amount of income from the
government grant is recognized in 2017?

14. On January 1, 2017, Humble company received a government

grant of 60,000,000 to compensate for costs to be incurred in planting
trees over a period of 5 years. The entity will incur such costs at
2,000,000 for 2017, 4,000,000 for 2018, 6,000,000 for 2019,
8,000,000 for 2020, and 10,000,000 for 2021. What amount of
income from the government grant is recognized for 2017?