Test 1

Write your final answer before the number. Use CAPITAL letters only. Erasures, changing of final answer,
and the like will be considered wrong.

1. Costs incurred internally to create intangibles are

a. capitalized.
b. capitalized if they have an indefinite life.
c. expensed as incurred.
d. expensed only if they have a limited life.

2. How should research and development costs be accounted for?

a. Must be capitalized when incurred and then amortized over their estimated useful lives.
b. Must be expensed in the period incurred.
c. May be either capitalized or expensed when incurred, depending upon the materiality of the amounts
involved.
d. Must be expensed in the period incurred unless it can be clearly demonstrated that the expenditure will
have alternative future uses or unless contractually reimbursable.

3. Which of the following methods of amortization is normally used for intangible assets?
a. Sum-of-the-years'-digits
b. Straight-line
c. Units of production
d. Double-declining-balance

4. Maris Corporation acquired a patent on May 1, 2018. Maris paid cash of P25,000 to the seller. Legal fees of
P1,000 were paid related to the acquisition. What amount should be debited to the patent account?
a. P1,000
b. P24,000
c. P25,000
d. P26,000

5. Lopez Corp. incurred P420,000 of research and development costs to develop a product for which a patent
was granted on January 2, 2022. Legal fees and other costs associated with registration of the patent totaled
P80,000. On March 31, 2017, Lopez paid P120,000 for legal fees in a successful defense of the patent. The
total amount capitalized for the patent through March 31, 2017 should be
a. P200,000.
b. P500,000.
c. P540,000.
d. P620,000.

6. Riley Co. incurred the following costs during 2017:

Modification to the formulation of a chemical product P160,000
Trouble-shooting in connection with breakdowns during commercial
production 150,000
Costs of marketing research for new product 200,000
 Seasonal or other periodic design changes to existing products 185,000
Laboratory research aimed at discovery of new technology 215,000
In its income statement for the year ended December 31, 2017, Riley should report research and development
expense of
a. P575,000.
b. P725,000.
c. P415,000.
d. P335,000.

7. A company acquires a patent for a drug with a remaining legal and useful life of six years on January 1,
2015 for P1,200,000. The company uses straight-line amortization for patents. On January 2, 2017, a new
patent is received for a timed-release version of the same drug. The new patent has a legal and useful life of
twenty years. The least amount of amortization that could be recorded in 2017 is
a. P200,000.
b. P40,000.
c. P54,545.
d. P60,000.

8. What is the impairment of an asset?

a. A fall in the market value of an asset so that the recoverable amount is less than carrying amount.
b. A decline in value of an asset so that the recoverable amount is more than carrying amount.
c. An allocation of cost over the useful life of an asset.
d. A change in the estimated useful life of an asset.

9. Marcus Company operates an oil platform in the sea. Marcus Company has provided the amount of
P10,000,000 for the financial costs of the restoration of the seabed, which is the present value of such costs.
Marcus Company has received an offer to buy the oil platform for P16,000,000 and the disposal costs would be
P2,000,000. The value-in-use of the oil platform is approximately P24,000,000 before the restoration costs.
The carrying value of the oil platform is P20,000,000. What amount of impairment loss should Marcus
recognize related to the oil platform?
a. None
b. P4,000,000
c. P6,000,000
d. P8,000,000

Use the following information for the next two questions:

Coward Company purchased a building on January 1, 2020 for a total of P10,000,000. The building has been
depreciated using the straight-line method with a 25-year useful life and no residual value. As of January 1,
2024, Coward is evaluating the building for possible impairment. The building has a remaining useful life of 15
years and is expected to generate cash inflows of P450,000 per year. The estimated recoverable amount of
the building on January 1, 2024 is P5,310,000.

10. How much if the impairment loss that should be recognized on January 1, 2024?
a. None
b. P2,100,000
c. P3,090,000
d. P5,200,000
11. What is the amount of depreciation to be recognized in year 2024?
a. P340,000
b. P354,000
c. P400,000
d. P560,000

12. Factor Company’s cash generating unit has been assessed for impairment and it has been determined that
the unit has incurred an impairment loss of P240,000. The carrying amounts of the assets were as follows:

Building P6,000,000
Equipment 2,000,000
Land 3,500,000
Fittings 2,500,000

The cash generating unit has not recorded any amount of goodwill. What amount of impairment loss should be
allocated to the building?
a. P50,000
b. P62,500
c. P87,500
d. P102,857

13. Which of the following statements is true concerning reversal of an impairment loss?
I. The increased carrying amount of the asset due to a reversal of an impairment loss shall not exceed the
carrying amount that would not have been determined had no impairment loss been recognized in the prior
years.
II. An impairment loss recognized for goodwill shall not be reversed in a subsequent period.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

14. On January 1, 2017, an entity purchased equipment with cost of P10,000,000, useful life of 10 years and
no residual value. The entity used straight line depreciation. On December 31, 2017 and December 31, 2018,
the entity determined that impairment indicators are present. There is no change in useful or residual value.
December 31, 2017 December 31,
2018
Fair Value Less cost of disposal P8,100,000 P8,300,000
Value in use 8,550,000 8,200,000

Which of the following is included in preparing the entry on December 31, 2018?
a. Debit to Impairment loss for the amount of P250,000.
b. Debit to Revaluation Surplus for the amount of P700,000.
c. Credit to Gain on Reversal for the amount of P400,000.
d. Debit to Depreciation expense for the amount of P1,000,000.
15. After impairment testing, interest income on a credit-impaired note receivable is computed by
a. multiplying the present value of the note by the current market rate at year-end.
b. multiplying the present value of the note by the rate used in impairment testing.
c. multiplying the face value of the note by the rate used in impairment testing.
d. no interest income will be recognized because the note is already impaired.

Use the following information for the next two questions:

On December 31, 20x1, Entity A determines that its building is impaired. Entity A gathers the following
information:
Building 2,000,000
Accumulated depreciation
600,000
Fair value less costs of disposal
(FVLCD) 900,000
Value in use (VIU)
1,080,000

16. After the impairment, the building is assessed to have a remaining useful life of six years and no residual
value. How much is the impairment loss?
a. 320,000 b. 180,000 c. 500,000 d. 270,000

17. On December 31, 20x2, Entity A determines an indication that the impairment loss recognized in the prior
period may no longer exist. The revised recoverable amount of the building on December 31, 20x2 is
₱1,280,000. If no impairment loss had been recognized in the prior period, the carrying amount of the
building on December 31, 20x2 would have been ₱1,200,000. How much is the gain on reversal of
impairment on December 31, 20x2?
a. 314,351 b. 312,156 c. 303,315 d. 300,000

18. During the audit of Entity A, a construction aggregates mining company, the auditor pointed out that the
valuation of Entity A’s plant asset may be overstated. The auditor called the board of directors’ attention to
the fact that the plant asset has operated only 55% of its normal operating hours during the year. The
reason for this is that there have been frequent breakdowns in the plant during the period. When
presenting his/her audit findings to the management, the auditor will most likely refer to this Standard.
a. PAS 2 b. PFRS 6 c. PAS 36 d. PAS 40

19. Which of the following analysis on asset impairment is most likely to have been made by a CPA?
(where: RA = recoverable amount; FVLCD = fair value less costs of disposal; VIU = value in use; CA =
carrying amount; IL = impairment loss; > = greater than; < = less than)
a. if “FVLCD > CA,” then, “IL = 0”
b. if “FVLCD < VIU,” then, IL = > 0”
c. if “FVLCD > VIU,” then, “RA = FVLCD,” now, if “CA > RA,” then “IL = RA – CA”
d. if “FVLCD > VIU,” then, “RA = VIU,” now, if “CA < RA,” then “IL = RA – CA”

20. ABC Co. made expenditures for the following:

● Cost incurred on search for alternatives for materials, devices, products, processes,
systems or services ₱10,000
● Cost of final selection of possible alternatives for a new process 8,000
● Trouble-shooting during commercial production 5,000
● Periodic or routine design changes to existing products 3,000
● Modification of design for a specific customer 40,000
● Payments made to XYZ, Inc. for R&D performed by XYZ for ABC 15,000
● Cost of R&D performed by ABC for Alpha Corp. 20,000
How much is recognized as research and development expense?
a. 33,000 b. 42,000 c. 52,000 d. 53,000

21. Which of the following statements is incorrect?

a. An intangible asset acquired through the issuance of the entity’s own equity instrument is generally
valued at the fair value of the intangible asset.
b. The amortization of intangible assets involves an adjusting entry that should not be reversed in the next
accounting period.
c. Some costs of internally generating an intangible asset are treated as outright expenses.
d. All annual payments made by a franchisee to the franchisor should be capitalized as cost of the
franchise.

22. The amortization of intangible assets results primarily from the application of the
a. full-disclosure principle
b. revenue principle
c. cost principle
d. systematic and rational allocation concept

23. In compliance with the disclosure requirements of PAS 38, the amortization of an intangible asset is
recorded as a:
a. debit to retained earnings and a credit to a contra account.
b. debit to retained earnings and a credit to the intangible asset account.
c. debit to amortization expense and a credit to the intangible asset account
d. debit to amortization expense and a credit to an intangible asset contra account.

24. Which of the following confers exclusive right to conduct business in a particular territory
a. Franchise
b. Trademark
c. Patent
d. Copyright

25. The research and development expense of Soundgarden Co. includes which of the following items?
1) Costs of advertising a newly invented product.
2) Billings received by Soundgarden from Black Hole Sun Co. for research activities performed by Black
Hole Sun Co. for Soundgarden.
3) The depreciation on a building used in various R&D projects
4) Billings sent by Soundgarden to Ugly Kid Joe Co. for research activities performed by Soundgarden for
Ugly Kid Joe Co.
5) Costs of materials, labor and overhead incurred in generating a patent. The patent was granted to
Soundgarden during the period.
6) Overhead costs properly allocated to R&D projects of Soundgarden during the period.
7) Training costs of Soundgarden’s employees who are directly involved in R&D projects.
8) The amortization of patents used in Soundgarden’s research activities.

a. 2, 3 & 6
b. 2, 3 & 8
c. 2, 3, 6 & 8
d. 2, 3, 5, 6 & 8

26. Which of the following should be expensed as incurred by the franchisee for a franchise with an estimated
useful life of ten years?
 a. Legal fees paid to the franchisee's lawyers to obtain the franchise
b. Periodic payments to the franchisor based on the franchisee's revenues
c. Amount paid to the franchisor for the franchise
d. Payment to a company, other than the franchisor, for the company's franchise

27. Should the following fees associated with the registration of an internally developed patent be capitalized?
Legal fees Registration fees
a. No No
b. No Yes
c. Yes No
d. Yes Yes

28. Which of the following assets typically are amortized?

Patents Trademarks
a. No No
b. Yes Yes
c. No Yes
d. Yes No

29. What is proper time or time period over which to match the cost of an intangible asset with revenues if it is
likely that the benefit of the asset will last for an indefinite period?
a. Forty years
b. Fifty years
c. Immediately
d. At such time as reduction in value can be quantitatively determined.

30. Which of the following statements concerning patents is correct?

a. Legal costs incurred to successfully defend an internally developed patent should be capitalized and
amortized over the patent’s remaining economic life.
b. Legal fees and other direct costs incurred in registering a patent should be capitalized and amortized
on a straight-line basis over a five-year period.
c. Research and development contract services purchased from others and used to develop a patented
manufacturing process should be capitalized and amortized over the patent’s economic life.
d. Research and development costs incurred to develop a patented item should be capitalized and
amortized on a straight-line basis over seventeen years.
e. None of these

31. Intangible assets, other than goodwill, are accounted for under
a. PAS 38. b. PFRS 8 c. PAS 26 PAS 20

32. ABC Co. made expenditures for the following:

● Cost in activities aimed at obtaining new knowledge ₱10,00
0
● Marketing research to study consumer tastes 5,000
● Cost of developing and producing a prototype model 3,000
● Cost of testing the prototype model for safety and environmental friendliness 40,000
● Cost revising designs for flaws in the prototype model 15,000
● Salaries of employees, consultants, and technicians involved in R&D 20,000
● Cost of conference for the introduction of the newly developed product including fee of a model
hired as endorser 100,000
● Advertising to establish recognition of the newly developed product 30,000
How much is recognized as research and development expense?
a. 68,000 b. 72,000 c. 88,000 d. 94,00

33. Counting Crow’s investment property has a carrying amount of ₱3,600,000 under the fair value model,
before adjustment. If the fair value at year-end is ₱3,000,000, how much should be the gain or loss on
transfer if Counting Crow would shift to cost model?
a. gain of ₱600,000 reported as other comprehensive income
b. loss of ₱600,000 reported as other loss in the income statement
c. loss of ₱600,000 reported in equity as decrease in revaluation surplus
d. zero

34. Which of the following is an investment property?

a. Property that is currently being redeveloped to be sold in the ordinary course of business operations.
b. Property that is currently being developed for future use as owner-occupied.
c. Property that is leased out to another entity under a finance lease
d. Building rented out in an operating lease whereby the owner provides minimal services.

35. Entity A acquires a building for ₱1,000,000. The building is to be leased out under various operating
leases. The building has an estimated useful life of 10 years and zero residual value. Entity A uses the cost
model for its property, plant and equipment and the fair value model for its investment property. At the end
of Year 1, the building is assessed to have a fair value of ₱1,080,000. How much should Entity A recognize
in profit or loss in relation to the building?
a. 80,000 gain on change in fair value
b. 100,000 depreciation
c. 180,000 gain on change in fair value
d. b and c

Use the following information for the next two questions:

On January 1, 20x1, Entity A had the following general borrowings. A part of the proceeds was used to finance
the construction of a qualifying asset:
Principal
12% bank loan (1.5 years) ₱ 1,000,000
10% bank loan (3-year) 8,000,000

Expenditures made on the qualifying asset were as follows:

Jan. 1 ₱ 5,000,000
March 1 4,000,000
August 31 3,000,000
December 1 2,000,000
Construction was completed on December 31, 20x1.

36. How much borrowing costs are capitalized to the cost of the constructed qualifying asset?
a. 1,045,000 b. 971,111 c. 1,026,667 d. 920,000

37. How much is the cost of the qualifying asset on initial recognition?
a. 13,010,000 b. 15,045,000` c. 14,920,000 d. 14,970,900

38. Which of the following is included in government assistance?

a. The construction of infrastructure in developing areas
b. The imposition of trading constraints on competitors
c. Improvement to the general transport and communication network
d. None of these can be included in government assistance.
39. In case of grant related to an asset, which of the following accounting treatment is prescribed?
a. Record the grant at a nominal value in the first year and write off in the subsequent year.
b. Either set up the grant as deferred income or deduct it in arriving at the carrying amount of the asset.
c. Record the grant at fair value in the first year and take it to income in the subsequent year.
d. Take it to the income statement and disclose it as an extraordinary gain.

40. Costs incurred internally to create intangibles are

a. capitalized.
b. capitalized if they have an indefinite life.
c. expensed as incurred.
d. expensed only if they have a limited life.

41. How should research and development costs be accounted for?

a. Must be capitalized when incurred and then amortized over their estimated useful lives.
b. Must be expensed in the period incurred.
c. May be either capitalized or expensed when incurred, depending upon the materiality of the amounts
involved.
d. Must be expensed in the period incurred unless it can be clearly demonstrated that the expenditure will
have alternative future uses or unless contractually reimbursable.

42. PAS 36, Impairment of Assets, applies to which of the following?

I. Inventories
II. Investment properties under cost model
III. Investment in Associates
a. I and II
b. II and III
c. I and III
d. I, II and III
e. Answer not given

43. S1: The recoverable amount of an asset is fair value less cost of disposal or value in use, whichever is
lower.
S2: An intangible assets not yet available for use shall be tested for impairment only when impairment
indicators are present.
S3: The allocation of an impairment loss recognized for a cash generating unit is across the assets of the
unit based on carrying amount, regardless of existence of goodwill
a. True, false, false
b. False, false, false
c. True, true, true
d. False, true, false
e. True, true, false

44. ABC company developed a trademark to distinguish its product from hose of the competitors.
Marketing research to study consumer tastes 400,000
Design cost of trademark 1,500,000
Legal fee of registering trademark 150,000
Advertising to establish recognition of trademark 200,000
Registration fee with intellectual property office 50,000
What amount should be capitalized as cost of trademark?
a. 1,700,000
b. 1,900,000
c. 2,300,000
d. 2,100,000

Use the information for the following two questions. On January 1, 2018, ABC company showed patent of
P1,920,000 with related accumulated amortization of P240,000. The patent was purchased on January 1,
2016 at which date the legal life is 16 years.
On January 1, 2018, the useful life of the patent was determined to be only 8 years from the date of
acquisition.
On January 1, 2018, in connection with the purchase of a trademark from XYZ company, the parties
entered into noncompetition agreement and consulting contract.
ABC company paid XYZ company P800,000, of which three fourths was for the trademark, and one fourth
was for XYZ company’s agreement no to compete for a five year period in the line of business covered by
the trademark. ABC company considered the life of the trademark to be indefinite.
Moreover, ABC agreed to pay XYZ P50,000 annually on January 1 or each year for 5 years.
45. What is the carrying amount of the intangible assets on January 1, 2018?
a. 2,280,000
b. 2,480,000
c. 1,880,000
d. 1,680,000

46. What is the total amortization of intangible assets for 2018?

a. 280,000
b. 440,000
c. 320,000
d. 160,000

47. ABC determined that the electronics division Is a cash generating unit. The entity calculated the value in
use of the division to be P8,000,000. The assets of the cash generating unit at carrying amount are as
follows:
Building 5,000,000
Equipment 3,000,000
Inventory 2,000,000
10,000,000
The entity also determined that the fair value less cost of disposal of the building is P4,500,000.
What is the impairment loss allocated to equipment?
a. 600,000
b. 850,000
c. 900,000
d. 0

Use the information for the following three straight problem questions. On January 1, 2021, ABC acquired a
factory machine at a cost of P2,400,000. It was estimated that the machine’s estimated life is 5 years and with
residual value of p400,000 after such useful life. On December 31, 2022, the entity assessed that impairment
indicators are present and considered the factory machine impaired. The following information gathered on
December 31, 2022:
Fair value 1,100,000
Legal cost and commissions 80,000
Transaction taxes 20,000
Termination benefits and costs associated with business
reorganization 100,000
Net cash flow from the continuing use of the asset 400,000
Annual income taxes 20,000
The residual value, net of necessary costs of disposal, is changed to P200,000. The useful life of the asset is
changed to 6 years from acquisition. The current pe-tax is 10%
48. What is the amount of impairment loss for 2022? 196,000
49. What is the depreciation expense in 2023? 301,000
50. What is the balance of accumulated depreciation as of December 31, 2023? 1,297,000

1. According to PAS 20, government grants are presented in the financial statements using
a. gross presentation.
b. net presentation.
c. a or b
d. functional presentation.

2. Ace Retailers purchased merchandise with a list price of P100,000 subject to a trade discount of 20%
and credit terms of 2/10,n/30. At what amount should Ace Retailers record the cost of this merchandise
if the gross method is used?
a. 100,000 b. 80,000 c. 98,000 d. 78,400

3. If the qualifying asset is financed by specific borrowing, the capitalizable borrowing cost is equal to
a. Actual borrowing cost incurred
b. Actual borrowing cost incurred up to completion of asset.
c. Actual borrowing cost incurred up to completion of asset minus any investment income from the
temporary investment of the borrowing.
d. Zero.

4. All of the following do not qualify as investment property, except

a. Machineries that are held for lease
b. Hotels or motels
c. Agricultural land purchased for appreciation purposes
d. Equipment purchased for an indeterminate purpose

5. Which of the following would not be reported as investment property?

Property owned by the entity and leased out under one or more operating leases.
b. Property held by the entity to be leased out under one or more operating leases
c. Real estate held for an undetermined future use.
d. Property owned by the entity and leased out to another entity under a finance lease.

6. The internal sources of information indicating possible impairment include all of the following, except
a. Obsolesce or physical damage of an asset
b. Significant change in the manner or extent in which the asset is used with an adverse effect on the
entity
c. Evidence that the economic performance of an asset will be worse than expected
d. Significant decrease in the market value of the asset

7. Which of the following disclosure shall be made when the fair value model has been adopted?
a. Depreciation method used
b. The amount of impairment loss recognized
c. Useful life or depreciation rate used
d. Net gains or losses from fair value adjustments
8. When intangible assets are self-generated, costs incurred in the development phase are
a. Capitalized.
b. Capitalized only to the extent of the limits provided under the standards.
c. Expensed or capitalized, as a matter of accounting policy choice and professional judgment.
d. Expensed immediately, unless they meet all of the conditions for capitalization under PAS 38
intangible assets.
9. PERIODIC REGULAR Co. acquired a building on January 1, 20x1 for a total cost of ₱24,000,000 and
classified it as investment property. PERIODIC Co. uses the fair value model for its investment property.
On January 1, 20x5, when the carrying amount of the building is ₱16,000,000, the elevator in the
building was replaced for a total cost of ₱3,200,000. It is impracticable to determine the fair value of the
replaced part. The fair value of the building on December 31, 20x5 is ₱17,200,000. How much is the
loss recognized during the year?
a. 3,200,000 b. 2,000,000 c. no loss d. indeterminable

10. Which of the following statements is incorrect?

a. Goodwill arising from business combination can only be tested for impairment in conjunction
with the cash generating unit to which the goodwill is allocated.
b. Impairment loss recognized on goodwill shall never be reversed.
c. The impairment loss on a cash generating unit (CGU) is allocated to goodwill and the other
assets belonging to the CGU on a pro rata basis.
d. Impairment losses on goodwill are never recognized in other comprehensive income.

11. Which of the following is not accounted for under PAS 38 intangible assets?
a. An externally acquired nonmonetary asset without physical substance that is inseparable but
arises from contractual or other legal rights.
b. An intangible asset, included in the identifiable assets of a company acquired by the entity,
which the entity does not intend to use in its operations.
c. A patent acquired by way of donation from another entity.
d. Goodwill arising from the acquisition of a business.

12. Which of the following depreciation methods will most likely result in the highest amount of reported
profit in the early years of an asset’s useful life?
a. Straight line
b. Double declining balance
c. 150% declining balance
d. Sum-of-the-years’ digits

13. The gain on impairment loss reversal of an asset which is recognized in profit or loss is computed as
a. the difference between the recoverable amount on date of reversal and the carrying amount on date
of reversal
b. the difference between the recoverable amount on date of reversal and carrying amount of the asset
had no impairment loss been recognized previously
c. the difference between the carrying amount of the asset had no impairment loss been recognized
previously and the carrying amount of the asset on the date of reversal
d. the difference between the carrying amount of the asset had no impairment loss been recognized
previously and the recoverable amount on the date of the previous impairment testing.

14. Investment properties are measured as follows:

Initial Subsequent
a. cost fair value
b. cost or fair value cost or fair value
c. fair value fair value
d. cost cost or fair value

15. When intangible assets are self-generated, costs incurred in the development phase are
a. Capitalized.
b. Capitalized only to the extent of the limits provided under the standards.
c. Expensed or capitalized, as a matter of accounting policy choice and professional judgment.
d. Expensed immediately, unless they meet all of the conditions for capitalization under PAS 38
 intangible assets.

1. Government Grants are recognized only when there is reasonable assurance that the entity
a. Will comply with the conditions attaching to them.
a. The grants are received.
a. The grants will be received.
a. A and B
a. A and C

2. In relation to a benefit included in the term ‘government assistance’, are the following statements true or
false according to PAS 20 Government grants and government assistance?
1. The provision of infrastructure in developing areas is a benefit.
2. The imposition of trading constraints on competitors is a benefit.

Statement 1 Statement 2
a. False False
b. False True
c. True False
d. True True

3. On January 1, 20x1, Entity A receives a financial aid from the government amounting to ₱1M as
compensation for losses it has incurred on a recent calamity. How much income from government grant will
Entity A recognize in 20x1?
a. 1,000,000 c. 53,334
a. 100,000 d. 0

4. According to PAS 20, non-monetary grants are measured at

a. the fair value of the non-monetary asset.
a. nominal amount.
a. the amount of cash received or receivable.
a. a or b

5. According to PAS 20, government grants are presented in the financial statements using
a. a gross presentation. c. a or b
a. a net presentation. d. a functional presentation.

Use the following information for the next three questions:

On January 1, 20x1, Entity A received land with fair of ₱200,000 from the government conditioned on the
construction of a building on the lot. Entity A started immediately the construction and it was completed on
December 31, 20x1 for a total cost of ₱1,000,000. The building has an estimated useful life of 10 years and
zero residual value.

6. How much is the income from government grant in 20x1 and 20x2, respectively?
20x1 20x2
a. 0 200,000
a. 200,000 0
a. 0 20,000
a. 20,000 20,000

7. How much is the carrying amount of the building on December 31, 20x2 under the following presentations?
Gross presentation Net presentation
a. 1,000,000 800,000
a. 900,000 720,000
a. 800,000 640,000
a. 800,000 533,333

8. How much is the depreciation expense recognized in 20x3 under the following presentations?
Gross presentation Net presentation
a. 100,000 80,000
a. 100,000 100,000
a. 80,000 100,000
a. 80,000 80,000

9. This is defined as assistance by government in the form of transfer of resources to an entity in return for
past or future compliance with certain conditions relating to the operating activities of the entity
a. Government grant
b. Government assistance
c. Government donation
d. Government aid.

10. Government grant shall be recognized when there is a reasonable assurance that
a. The entity will comply with the conditions of the grant
b. The grant will be received
c. The entity will comply with conditions of the grant and the grant will be received.
d. The grant must have been received.

11. Government grant in recognition of specific costs is recognized as income

a. Over the same period as the relevant expense
b. Immediately
c. Over a maximum of 5 years using straight line
d. Over a maximum of 5 years using sum of digits

12. A government grant that becomes repayable shall accounted for as’
a. Change in accounting estimate
b. Change in accounting policy
c. Both change in accounting estimate and change in accounting policy
d. Neither a nor b

13. Repayment of grant related to income shall be

a. Recognized as component of other comprehensive income
b. Charged to retained earnings
c. Expensed immediately
d. Applied first against the deferred income balance and any excess shall be recognized immediately as an
expense

14. It is an action by government designed to provide an economic benefits specific to an entity or a range of
entities qualifying under certain criteria
a. Government grant
b. Government assistance
c. Government takeover
d. Subvention

15. Government assistance included all of the following except,

a. Free technical advice
b. Provision of guarantee
c. Government procurement policy that is responsible for a portion of the entity’s sales
d. Improved irrigation water system for the benefit of an entire local community

16. Which disclosure is not required in relation to government grant?

a. The accounting policy adopted for government grant including method of presentation adopted in the
financial statements
b. Unfulfilled conditions and other contingencies attaching to government assistance
c. The name of the government agency that gave the grant along with the date of sanction of the grant by the
government agency and the date when cash was received in case of monetary grant
d. The nature and extent of government grant recognized in the financial statements and an indication of other
form of government assistance from which the entity has directly benefited.

ABC company received a government grant of P600,000 related to depreciable asset acquired on January 1,
2018 for P6,600,000. This grant was deducted from the cost of the asset with a useful life of 10 years and
residual value of P500,000. On January 1, 2020, the grant became fully repayable due to noncompliance with
conditions.
17. What is the depreciation for 2018?
a. 600,000
b. 610,000
c. 550,000
d. 660,000

18. What is the depreciation for 2020?

a. 610,000
b. 780,000
c. 730,000
d. 600,000

On January 1, 2018, ABC agreed to provide XYZ with a P5,000,000 three year, zero interest bearing loan
evidenced by promissory note. The prevailing rate of interest for the loan of this type is 10%.
19. What is included in the journal entry to record the loan and grant?
a. Debit discount on note payable P1,250,000
b. Credit deferred grant income P1,250,000
c. Credit note payable P5,000,000
d. All of the above are included in the journal entry

20. What is the interest expense for 2018?

a. 500,000
b. 375,000
c. 125,000
d. 750,000

21. What is the grant income for 2018?

a. 625,000
b. 875,000
c. 500,000
d. 375,000

22. What is the carrying amount of the note payable on December 31, 2019?
a. 5,000,000
b. 4,250,000
c. 4,125,000
d. 4,537,500
ABC received a government grant of P2,000,000 related to a factory building that it bought in January 2018.
The entity’s policy is to treat the grant as deferred income. The entity acquired the building from an industrialist
identified by the government. If the entity did not purchase the building, which was located in the slums of the
city, it would have been repossessed by the government agency. The entity purchased the building for
P12,000,000. The useful life of the building is 10 years with no residual value. On January 1, 2020, the entire
amount of the government grant became repayable by reason of non compliance with conditions attached to
the grant.

23. What is the depreciation of the building for 2018?

a. 1,200,000
b. 1,000,000
c. 600,000
d. 500,000

24. What is the grant income for 2018?

a. 400,000
b. 200,000
c. 100,000
d. 0

25. What is the loss to be recognized resulting from the repayment of the grant in 2020?
a. 1,200,000
b. 2,000,000
c. 1,400,000
d. 400,000

26. According to PAS 23, borrowing costs are capitalized when

a. they relate directly to the acquisition, construction or production of a qualifying asset.
a. the entity chooses to capitalize them.
a. they are material and are expected to be incurred over more than one reporting period.
a. all of these

27. Which of the following is a qualifying asset?

a. Investment property measured at fair value
a. Building that is ready for its intended use upon purchase
a. Inventories that are routinely produced in large quantities on a continuous basis
a. An application software (intangible asset) that takes 3 years to develop

28. An entity starts the capitalization of borrowing costs to the cost of a qualifying asset when
a. expenditures for the asset are being incurred.
a. borrowing costs are being incurred.
a. activities necessary to prepare the asset for its intended use or sale are being undertaken.
a. all of the above conditions are met.

29. In which of the following instances is the capitalization of borrowing costs under PAS 23 would most likely
be suspended?
a. Construction is temporarily stopped for the curing of concrete.
a. Active development is stopped to give time for the engineers to reevaluate a design flaw.
a. The construction of a bridge is disrupted by troubled waters.
a. The construction of a building is discontinued because it is condemned by the government. The
resumption of development is uncertain.
Use the following information for the next two questions:
On January 1, 20x1, Entity A had the following general borrowings. A part of the proceeds was used to finance
the construction of a qualifying asset:
Principal
12% bank loan (1.5 years) ₱ 1,000,000
10% bank loan (3-year) 8,000,000

Expenditures made on the qualifying asset were as follows:

Jan. 1 ₱ 5,000,000
March 1 4,000,000
August 31 3,000,000
December 1 2,000,000

Construction was completed on December 31, 20x1.

30. How much borrowing costs are capitalized to the cost of the constructed qualifying asset?
a. 1,045,000 c. 1,026,667
a. 971,111 d. 920,000

31. How much is the cost of the qualifying asset on initial recognition?
a. 13,010,000 c. 14,920,000
a. 15,045,000 d. 14,971,111

32. PAS 23 does not require which of the following disclosures?

a. The amount of borrowing costs capitalized during the period.
a. The capitalization rate used to determine the capitalizable borrowing costs.
a. Separate presentation of qualifying assets from other assets either on the face of the statement of
financial position or in the notes.
a. PAS 23 requires the disclosure of all of these information.

33. Borrowing costs are defined as

a. Interest expense computed using effective interest method
b. Finance charges in respect of finance leases
c. Exchange differences arising from foreign borrowings to the extent that they are regarded as an adjustment
to interest cost
d. Interest and other costs that an entity incurs in connection with borrowing of funds.

34. Assets that qualify for interest capitalization include

a. Assets under construction for an entity’s own use
b. Assets that ready for their intended use
c. Assets that are not currently being used because of excess capacity
d. All of these assets qualify for interest capitalization

35. Which of the following is not a condition that must be satisfied before interest capitalization can begin on a
qualifying asset?
a. Interest cost being incurred
b. Expenditures for the assets have been made
c. The interest rate is equal to or greater than the entity’s cost of capital
d. Activities that are necessary to get the asset ready for the intended use are in progress.

36. Capitalization of borrowing costs

a. shall be suspended during temporary period of day
b. may be suspended only during extended period of delay in which active development is delayed
c. should never be suspended once capitalization commences
d. shall be suspended only during extended period of delay on which active development is delayed

37. When computing capitalizable interest cost, what is he concept of avoidable interest?
a. The total interest cost actually incurred
b. A cost of capital charged for equity
c. The portion of the total interest which would not have been incurred if expenditures for asset construction
had not been made
d. The portion of average accumulated expenditures on which no interest cost was incurred

38. Which of the following is the recommended approach to handling interest incurred in financing the
construction of property, plant and equipment?
a. Capitalize only the actual interest cost incurred during constructions
b. Charge construction with all cost of funds employed, whether identifiable or not
c. Capitalizable no interest during construction
d. Capitalized interest cost equal to the prime interest rate tines the estimated cost of the asset being
constructed.

39. During the 2015, ABC company constructed a new building at a cost of P3,000,000. The expenditures for
the building, which was finished late 2015, were incurred evenly during the year. The entity had the following
loans outstanding on December 2015.
*10% note to finance specifically construction of the building, dated January 1, 2015, P10M and unpaid
on December 31, 2015. Investment were made on the proceeds from the loan and income of P100K was
realized in 2015.
*12% 20 year bonds payable issued at face value on April 30, 2014 P30,000,000
*8% 5 year note payable, dated March 1, 2014 P10,000,000
What is the amount of interest is capitalized as cost of the new building?
a. 1,550,000
b. 1,450,000
c. 1,400,000
d. 1,500,000

Use the information for the following five questions. ABC company had a 10% P3,000,000 specific
construction loan and 12% P25,000,000 general loan outstanding during 2015 and 2016. The entity began the
self-construction of a building on January 1, 2015 and was completed on December 31, 2016. The expenditure
were made during 2015 and 2016:
January 1, 2015 4,000,000
April 1, 2015 5,000,000
December 1, 2015 3,000,000
March 1, 2016 6,000,000
40. What amount of interest is capitalized as cost of the building in 2015?
a. 3,300,000
b. 1,380,000
c. 900,000
d. 880,000

41. What is the cost of the building to date December 31, 2015?
a. 12,900,000
b. 15,300,000
c. 13,380,000
d. 12,880,000
42. What is the cost of building on December 31, 2016?
a. 18,000,000
b. 20,988,000
c. 19,980,000
d. 10,100,000

43. What amount of interest expense should be reported for 2016?

a. 3,000,000
b. 3,330,000
c. 1,212,000
d. 912,000

44. What is the cost of building, assuming the building was completed on June 30, 2016?
a. 18,000,000
b. 19,884,000
c. 20,868,000
d. 19,377,000

ABC Company purchased a machine for P6,600,000 on January 1, 2015 and received a government grant of
P600,000 towards the capital cost. The policy is to treat the grant as reduction in the cost of the asset. The
machine is to be depreciated on a straight line basis over 5 years with a residual value of P500,000. January
1, 2017, the grant became fully repayable because of noncompliance with conditions.
45. What is the depreciation for 2015?
a. 1,100,000
b. 1,200,000
c. 1,220,000
d. 1,320,000

46. What is the depreciation for 2017?

a. 1,460,000
b. 1,200,000
c. 1,220,000
d. 1,560,000

47. What is the depreciation for 2018?

a. 1,100,000
b. 1,320,000
c. 1,200,000
d. 1,220,000

48. On January 1, 2009, ABC received a grant of P50M from the British Government in order to defray safety
and environmental costs within the area where the enterprise is located. The safety and environmental costs
are expected to be incurred over four years, respectively, P4M, P8M, P12M and P16M. How much income
from government grant should be recognized in 2009?
a. 50,000,000
b. 5,000,000
c. 12,500,000
d. 0

ABC Company has a herd of 8, 2 year old animals as of January 1, 2018. On July 1, 2018 one animal was
born and one animal (age 2.5 years) was purchased for P18,500. No animals were sold or disposed during the
year.
Per unit fair values less estimated costs to sell were as follows:
January 1, 2018
2-year old animal P16,500

July 1, 2018
New Born animal P8,000
2.5 year old animal 20,500

December 31, 2018

New born animal P8,300
0.5 year old animal 8,700
2 year old animal 19,500
2.5 year old animal 21,900
3 year old animal 26,700

49. The gain from change in fair value due to price change for 2018 is
a. 25,700
b. 27,700
c. 33,700
d. 35,700

50. The gain from change in fair value due to physical change for 2018 is
a. 72,800
b. 70,800
c. 64,800
d. 62,800

1. Which of the following would not be reported as investment property?

a. Property owned by the entity and leased out under one or more operating leases.
a. Property held by the entity to be leased out under one or more operating leases
a. Real estate held for an undetermined future use.
a. Property owned by the entity and leased out to another entity under a finance lease.

2. A property is classified as investment property if

a. it is leased out under a finance lease.
a. the owner-occupied portion of the property is significant.
a. the entity provides relatively insignificant ancillary services (e.g., security, janitorial services, and the
like) to the occupants of the property.
a. it is rented between a parent entity and a subsidiary and consolidated financial statements are prepared
for the group.

3. All of the following do not qualify as investment property, except

a. Machineries that are held for lease
a. Hotels or motels
a. Agricultural land purchased for appreciation purposes
a. Equipment purchased for an indeterminate purpose

4. How does the fair value model differ from the revaluation model?
a. Increases in carrying amount above a cost-based measure are recognized in equity
a. Changes in fair value are recognized in profit or loss
a. a and b
a. neither a nor b

5. Select the correct statement.

a. A leasing company should treat all its assets used in providing lease services as investment property.
a. Investment properties that are to be disposed of without further development are treated as investment
property until they are derecognized.
a. All investment properties held for capital appreciation will be classified as held for sale in the long run.
a. Investment properties being re-developed as investment properties on behalf of third parties are
investment properties.

6. Which of the following generally provides the best evidence of fair value of an investment property?
a. Discounted cash flow projections based on reliable estimates of future cash flows.
a. Recent prices on less active markets with adjustments to reflect changes in economic conditions.
a. Current prices for properties of a different nature or subject to different conditions.
a. Current prices on an active market for similar property in the same location and condition.

MODULATE Co. has the following assets.

Vacant building to be leased out under operating lease 4,000,000

Building being constructed for TO ADJUST, Inc. 800,000
Building under construction to be used as office 1,600,000
Building under construction to be rented out under operating lease 400,000
Building rented out to MODULATE’s employees who pay rent at market rates 3,200,000
Office building awaiting disposal 200,000

7. How much is the total investment property?

a. 4,200,000 b. 4,400,000 c. 4,600,000 d. 7,600,000

8. On January 1, 20x1, NURTURE REAR Co. acquired a building with an estimated useful life of 10 years and
residual value of ₱400,000 for a total cost of ₱4,000,000. The fair value of the building on January 1, 20x1 is
₱4,800,000 while the fair value on December 31, 20x1 is ₱5,200,000. NURTURE estimates that if the building
is sold currently on December 31, 20x1, costs to sell amount to ₱200,000. NURTURE uses the straight line
method in depreciating its PPE. NURTURE uses the fair value model for its investment properties. The
year-end adjusting entry will include
a. 360,000 depreciation c. 200,000 unrealized gain
b. 400,000 unrealized gain d. 1,200,000 unrealized gain

9. On December 31, 20x1, DECAPITATE BEHEAD Co. decided to lease out under operating lease one of its
buildings that was previously used as office space. The building has an original cost of ₱12,000,000 and
accumulated depreciation of ₱8,000,000 as of January 1, 20x1. Annual depreciation is ₱400,000.
DECAPITATE Co. uses the fair value model for investment property. The fair value of the building on
December 31, 20x1 is ₱6,000,000. The entry to record the transfer of the building to investment property
includes a
a. credit to gain on reclassification for ₱2,000,000.
a. credit to revaluation surplus for ₱2,000,000.
a. debit to building for ₱12,000,000.
a. credit to revaluation surplus for ₱2,400,000.
10. PERIODIC REGULAR Co. acquired a building on January 1, 20x1 for a total cost of ₱24,000,000 and
classified it as investment property. PERIODIC Co. uses the fair value model for its investment property. On
January 1, 20x5, when the carrying amount of the building is ₱16,000,000, the elevator in the building was
replaced for a total cost of ₱3,200,000. It is impracticable to determine the fair value of the replaced part. The
fair value of the building on December 31, 20x5 is ₱17,200,000. How much is the loss recognized during the
year?
a. 3,200,000 b. 2,000,000
c. no loss d. indeterminable

11. Which of the following noncurrent assets may not be classified as Investment property?
a. Land
b. Building
c. Machinery
d. All of them may qualify

12. Which of the following is not an investment property?

a. Land held for long-term capital appreciation
b. Land held for currently undetermined used
c. Land held as a future plant site
d. Land developed for use as investment property

13. If the entity has not determined that it will use the land either as owner occupied of for short term sale, the
land is classified as
a. Owner occupied property
b. Investment property
c. Noncurrent asset held for sale
d. Other noncurrent asset

14, Which of the following building shall be classified as investment property?

a. Building owned and leaser out to others under finance lease
b. Building leased under finance lease and used for administrative purposes
c. Building that is vacant and held to be sold in the near future
d. Building constructed for future use as investment property

15. A property interest that is held by lessee under an operating lease may be classified and accounted for as
an investment property provided the following criteria are met: (choose the exception)
a. The property meets the definition of investment property
b. The operating lease is accounted for as if it were a finance lease
c. The lessee uses the FV model in measuring the property interest
d. The lessee uses either the cost or FV model in measuring the property interest

16. An entity shall choose which model as its accounting policy for its investment property?
a. Fair value model
b. Cost model
c. Revaluation model
d. Either a or b

17. Which of the following is considered in determining fair valuation of an item of investment property?
I. Transaction cost on disposal II. Accrued operating income
a. I only
b. II only
c. I and II
d. Neither a nor b
18. Linden corporation has investment property that is held to earn rental income. Linden prepares its financial
statements in accordance with PFRS. Linden uses the fair value model for reporting the investment property.
Which of the following is true?
a. Change in fair value are reported as profit or loss in the current period.
b. Change in fair value are reported as other comprehensive income for the period
c. Change in fair value are reported as an extra ordinary gain on the income statement
d. Change in fair value are reported as deferred revenue for the period.

19. An investment property should be measured initially at

a. cost
b. cost less accumulated impairment losses
c. Depreciable cost less accumulated impairment losses
d. Fair value less accumulated impairment losses

20. In case of property held under operating lease and classified as investment property
a. The entity has to account for the investment property under the cost model only
b. The entity has to use the fair value model only
c. The entity has the choice between the cost model and the fair value model
d. The entity needs only to disclose the fair value and can use the cost model under PAS 38

21. Which of the following is not an investment property?

a. Land which the entity has not determined whether it is to be used as owner occupied property or to be held
for sale
b. Property that is being constructed and developed as investment property
c. Building that is vacant but is held to be leased out to operating lessee
d. Property being constructed or developed on behalf of third parties

22. Which statement is incorrect if the property is partly investment property and partly owner occupied
property?
a. If the investment and owner occupied portions could be sold or leased out separately, the portions should
be accounted for as investment property and owner occupied property
b. If the investment and owner occupied portions could not be sold or leased out separately, the property is
investment property only if an insignificant portion is held for manufacturing or administrative purposes
c. When ancillary services are provided by the enterprise to the occupants of the property and these services
are relatively insignificant component of the arrangement, the property is investment property
d. A hotel is normally an investment property because services provided to the guest are an insignificant
component of the arrangement.

Use the information for the following two questions. ABC company completed the construction of a shopping
mall at the end of 2012 for a total cost of P100 million. The mall has an estimated economic life of 25 years.
The mall was constructed for the purpose of earning rentals by letting out space in the shopping mall to
tenants. The company opted to use the fair value model to measure the shopping mall. An independent
valuation expert was used by the company to fair value the shopping mall on an annual basis. According to the
fair valuation expert the fair value of the shopping mall at the end of 2013 and 2014 were P120 million and
P115 million, respectively.
30. How much should be recognized in profit or loss in 2014 as a result of the fair value changes?
a. 23,000,000
b. 15,000,000
c. 5,000,000
d. 0

24. How much is the carrying amount of the shopping mall on December 31, 2014 if ABC used the cost model
a. 100,000,000
b. 115,000,000
c. 96,000,000
d. 92,000,000

Use the information for the following two questions . ABC, Inc, a real estate company, has a property included
in its inventory with a cost of P10,000,000 and net realizable value of P8,000,000 on December 31, 2013.
Because of the decline in the real estate industry, the company decided to lease out the property to a tenant
under an operating lease in 2014 when the fair value of the property was P7,000,000.
25. If the company will use the cost model to measure the investment property, how much should be
recognized in the 2014 profit or loss as a result of the transfer form inventory to investment property?
a. 3,000,000
b. 1,000,000
c. 2,000,000
d. 0

26. If the company will use the fair value model to measure the investment property, how much should be
recognized in the 2014 profit or loss as a result of the transfer form inventory to investment property?
a. 3,000,000
b. 1,000,000
c. 2,000,000
d. 0

27. A gain or loss arising on the initial recognition of a biological asset and from a change in the fair value less
cost to sell of a biological asset should be included in
a. The net profit or loss for the period.
a. The statement of recognized gains and losses.
b. A separate revaluation reserve.
c. A capital reserve within equity.

28. When agricultural produce is harvested, the harvest should be accounted for by using PAS 2 Inventories or
another applicable standard. For the purposes of that Standard, cost at the date of harvest is deemed to be
a. Its fair value less costs to sell at point of harvest.
a. The historical cost of the harvest.
b. The historical cost less accumulated impairment losses.
c. Market value.

29. Land that is related to agricultural activity is valued

a. At fair value.
a. In accordance with PAS 16 Property, Plant, and Equipment or PAS 40 Investment Property.
b. At fair value in combination with the biological asset that is being grown on the land.
c. At the resale value separate from the biological asset that has been grown on the land.

30. An unconditional government grant related to a biological asset that has been measured at fair value less
cost to sell should be recognized as
a. Income when the grant becomes receivable.
a. A deferred credit when the grant becomes receivable.
b. Income when the grant application has been submitted.
c. A deferred credit when the grant has been approved.

31. If a government grant is conditional on certain events, then the grant should be recognized as
a. Income when the conditions attaching to the grant are met.
a. Income when the grant has been approved.
b. A deferred credit when the conditions attached to the government grant are met.
c. A deferred credit when the grant is approved.

32. Where there is a production cycle of more than one year, PAS 41 encourages separate disclosure of the
a. Physical change only.
a. Price change only.
b. Total change in value.
c. Physical change and price change.

33. Which of the following information should be disclosed under PAS 41?
a. Separate disclosure of the gain or loss relating to biological assets and agricultural produce.
a. The aggregate gain or loss arising on the initial recognition of biological assets and agricultural produce
and the change in fair value less cost to sell of biological assets.
b. The total gain or loss from biological assets, agricultural produce, and from changes in fair value less
cost to sell of biological assets.
c. There is no requirement in the Standard to disclose separately any gains or losses.

34. Entity A’s assets have a carrying amount of ₱100,000 before year-end adjustments. The PFRSs require
these assets to be measured at fair value at each reporting date. Location is a characteristic of the assets.
Information at year-end is as follows:
Active Market #1 Active Market #2
Quoted price ₱130,000 Quoted price ₱135,000
Transport costs 10,000 Transport costs 12,000
Costs to sell 2,000 Costs to sell 3,000
If neither Active Market #1 nor Active Market #2 is the principal market, how much is the fair value?
a. 135,000 c. 120,000
a. 132,000 d. 123,000

35. A wine producer company presented the following on December 31, 2021:
Carrying value of the grape vines P1,500,000
Fair value less cost to sell of grapes growing on grape vines
(awaiting ripening) 1,100,000
Fair value less cost to sell of grapes harvested on December 31 800,000
Cost of carrying grape wine (net realizable value, P1,500,000) 1,200,000
Carrying value of production plant 2,800,000
What amount of biological assets shall be presented on December 31, 2021 statement of financial position?
a. 1,100,000 c. 2,600,000
b. 1,900,000 d. 3,400,000

36. On December 31, 2021, a company engaged in raising livestock and production of livestock products,
presented the following information:
Livestock intended for production of meat P2,500,000
Livestock from which milk is produced 1,000,000
Livestock held for sale 400,000
Inventory of Milk 200,000
Inventory of cheese 300,000
Inventory of carcass 150,000
Inventory of sausages and hams 450,000
What amount of biological assets and inventories, respectively, shall be presented on the December 31, 2021,
statement of financial position?

a. P1,000,000 and P3,600,000

b. P3,500,000 and P1,100,000
c. P3,500,000 and P1,500,000
d. P3,900,000 and P1,100,000

37. The following information pertains to a company’s biological assets on December 31, 2021:
Fair value of livestock in an active market P10,600,000
Fair value of livestock in a binding sale agreement 10,900,000
Estimated brokers’ commission 500,000
Estimated transport cost in bringing the asset to the market 250,000
At what amount should the biological assets be reported on the company’s December 31, 2021, statement of
financial position?

a. 9,850,000
b. 10,100,000
c. 10,150,000
d. 10,400,000

38. A company produces milk and sell them to local ice cream producers. It began operations in 2020, by
purchasing milking cows for P850,000. The following information are available in 2021:
Carrying value of the cows on January 1 P1,100,000
Increase in fair value of the cows due to physical
and price changes 250,000
Decrease in fair value of the cows due to harvest 175,000
Net selling price of the cows sold during the year 350,000
Carrying value of unsold milk on December 31 150,000
What is the value of the milking cows on December 31, 2021?

a. 1,175,000
b. 1,025,000
c. 975,000
d. 825,000

39. What amount of unrealized gain on harvested milk should be reported on December 31, 2021?
a. 25,000
b. 150,000
c. 325,000
d. 0, No gain is reported until the milk is sold

A company purchased 1,000, 1.5 years old cattle on June 30, 2020. On December 31, 2020, the company
purchased another 2,000, 3 year old cattle and 500, 2 year old cattle. Per unit fair values less cost to sell were
as follows:

June 30, 2020

1.5 year old cattle 2,750
December 31, 2020
1.5 year old cattle 2,900
2 year old cattle 3,500
3 year old cattle 4,400
4 year old cattle 4,500
December 31, 2021
1.5 year old cattle 3,200
2 year old cattle 3,750
2.5 year old cattle 4,150
 3 year old cattle 4,700
4 year old cattle 5,500

No animals were born or sold in 2020 and 2021. The company records separately the increase in fair value
less cost to sell due to physical change and fair value less cost to sell due to price change.

40. How much was taken to 2021 profit or loss as a gain arising from change in fair value dur to physical
change?
a. 2,050,000
b. 2,300,000
c. 2,625,000
d. 3,025,000

41. How much was taken to 2021 profit and loss as a gain arising from change in fair value due to price
change?
a. 1,575,000
b. 1,225,000
c. 1,025,000
d. 975,000

42. What amount was presented on the December 31, 2021, statement of financial position as biological
assets?
a. 17,225,000
b. 17,500,000
c. 17,600,000
d. 18,050,000

43. Which of the following assets of an entity engaged in agricultural activities are accounted for using IAS 41
Agriculture?
I. Bearer plants
II. Agricultural produce growing on bearer plants
III. Plants cultivated as agricultural produce
IV. Plants cultivated for their fruits and lumber
V. Free standing trees
VI. Government grants related to bearer plants
VII. Government grants related to biological asset measured at its cost less accumulated depreciation
and any accumulated impairment loss
VIII. Land under trees

a. I, II, III, IV, V, VI and VII

b. II, III, IV, V, VI and VII
c. II, III, IV, V and VII
d. II, III, IV and V

44. Which of the following statements is true regarding agricultural produce?

a. The lower between the fair value less cost to sell at the point of harvest and the net realizable value is
deemed cost of an agricultural produce harvested from biological asset subsequently classified as inventory
b. Produce growing on bearer plants is reported as inventory
c. In all cases, an entity measures agricultural produce at the point of harvest at fair value less cost to sell
d. All of these statement are true regarding agricultural produce

45. According to IASB, plants such as grape vine, rubber trees, and oil palms which are used solely to grow
produce over several periods
a. meet the definition of biological assets are within the definition of IAS 16
b. meet the definition of a bearer plants and are within the definition of IAS 16
c. meet the definition of biological assets are within the definition of IAS 41
d. meet the definition of a bearer plants and are within the definition of IAS 41

46. An entity grows coconut trees for their fruit and their lumber. The coconut trees are
a. bearer plants and classified as biological assets
b. not bearer plants and classified as biological assets
c. not bearer plants and not classified as biological assets
d. None of the above statement is correct

47. An entity enters into a contract to sell its biological assets or agricultural produce at a future date. In this
case, the relevant amount to be considered in the determination of fair value less cost to sell is the
a. contract price
b. fair value which reflects the current market conditions in which market participant buyers and sellers would
enter into a transaction
c. carrying amount
d. future value determined using an implied interest rate

48. Biological assets are often physically attached to land, for example, trees in a plantation forest. There may
be no separate market for biological assets that are attached to the land, but an active market may exists for
the plantation forest. In such case, the
a. biological assets are valued at one third of the fair value of the plantation forest
b. value assigned of biological assets is determined by deducting the fair value of the land and land
improvements from the fair value of the plantation forest
c. biological assets, the land, and the land improvement are not reported separately in the statement of
financial position
d. None of the above

49. A government grant related to a biological asset measured at its cost less any accumulated depreciation
and any accumulated impairment losses shall be accounted using
a. IAS 16
b. IAS 20
c. IAS 40
d. IAS 41

50. Which of the following is an agricultural produce?

a. Thread
b. Palm oil
c. Felled trees
d. Fruit trees