ACTG04-19/ACTG03-18 - Intermediate

Accounting 2
1. Dashboard
2. My courses
3. ACTG04-19/ACTG03-18
4. Quizzes
5. FINAL EXAM
Started on Wednesday, 22 December 2021, 5:43 PM
State Finished
Completed on Wednesday, 22 December 2021, 7:18 PM
Time taken 1 hour 35 mins
Grade 16.00 out of 60.00 (27%)
Question 1
Complete
Mark 1.00 out of 1.00

Flag question

Question text
While only certain leases are currently accounted for as a sale or purchase, there is
theoretic justification for considering all leases to be sales or purchases. The principal
reason that supports this idea is that

a.
a lease reflects the purchase or sale of a quantifiable right to the use of property.

b.
during the life of the lease the lessee can effectively treat the property as if it were owned by
the lessee.

c.
 at the end of the lease the property usually can be purchased by the lessee.

d.
all leases are generally for the economic life of the property and the residual value of the
property at the end of the lease is minimal.

Feedback
The correct answer is:

a lease reflects the purchase or sale of a quantifiable right to the use of property.

Question 2
Complete
Mark 1.00 out of 1.00

Flag question

Question text
The amount to be recorded as the cost of an asset under finance lease is equal to the

a.
 present value of the minimum lease payments.

b.
present value of the minimum lease payments plus the present value of any unguaranteed
residual value.

c.
 carrying value of the asset on the lessor's books.
d.
present value of the minimum lease payments or the fair value of the asset, whichever is
lower.

Feedback
The correct answer is:
present value of the minimum lease payments or the fair value of the asset, whichever is
lower.

Question 3
Not answered
Marked out of 1.00

Flag question

Question text
  Based solely upon the following sets of circumstances indicated below, which set gives
rise to a sales-type or direct-financing lease of a lessor?
    Transfers Ownership       Contains Bargain       Collectibility of Lease       Any Important
       By End Of Lease?         Purchase Option?       Payments Assured?        Uncertainties?

a.
            Yes                                No                                 No                               Yes

b.
            No                                Yes                                Yes                               Yes

c.
        No                                Yes                                Yes                               No
d.
            Yes                                No                                 No                               No

Feedback
The correct answer is:

        No                                Yes                                Yes                               No

Question 4
Complete
Mark 1.00 out of 1.00

Flag question

Question text
 In the earlier years of a lease, from the lessee's perspective, the use of the

a.
operating lease method will cause income to decrease, compared to the finance lease
method.

b.
finance lease method will enable the lessee to report higher income, compared to the
operating lease method.

c.
finance lease method will cause debt to increase, compared to the operating lease method.

d.
operating lease method will cause debt to increase, compared to the finance lease method.
 Feedback
The correct answer is:

finance lease method will cause debt to increase, compared to the operating lease method.

Question 5
Complete
Mark 1.00 out of 1.00

Flag question

Question text
In order to properly record a direct-financing lease, the lessor needs to know how to
calculate the lease receivable. The lease receivable in a direct-financing lease is best
defined as

a.
the present value of minimum lease payments.

b.
 the difference between the lease payments receivable and the fair value of the leased
property.

c.
 the total book value of the asset less any accumulated depreciation recorded by the lessor
prior to the lease agreement.

d.
the amount of funds the lessor has tied up in the asset which is the subject of the direct-
financing lease.

Feedback
The correct answer is:

the present value of minimum lease payments.

Question 6
Complete
Mark 1.00 out of 1.00

Flag question

Question text
The deferred tax expense is the

a.
increase in balance of deferred tax liability minus the increase in balance of deferred tax
asset.

b.
increase in balance of deferred tax asset minus the increase in balance of deferred tax
liability.

c.
increase in balance of deferred tax asset plus the increase in balance of deferred tax
liability.

d.
decrease in balance of deferred tax asset minus the increase in balance of deferred tax
liability
Feedback
The correct answer is:

increase in balance of deferred tax liability minus the increase in balance of deferred tax
asset.

Question 7
Complete
Mark 0.00 out of 1.00

Flag question

Question text
At the December 31, 2019 balance sheet date, Unruh Corporation reports an accrued
receivable for financial reporting purposes but not for tax purposes. When this asset is
recovered in 2020, a future taxable amount will occur and

a.
 total income tax expense for 2018 will exceed current tax expense for 2020.

b.
 Unruh will record an increase in a deferred tax asset in 2020.

c.
 Unruh will record a decrease in a deferred tax liability in 2020

d.
pretax financial income will exceed taxable income in 2020.

Feedback
The correct answer is:

 total income tax expense for 2018 will exceed current tax expense for 2020.

Question 8
Complete
Mark 1.00 out of 1.00

Flag question
 Question text
Tax rates other than the current tax rate may be used to calculate the deferred income tax
amount on the balance sheet if

a.
 it appears likely that a future tax rate will be less than the current tax rate.

b.
 it appears likely that a future tax rate will be greater than the current tax rate.

c.
  the future tax rates have been enacted into law.

d.
it is probable that a future tax rate change will occur.

Feedback
The correct answer is:

  the future tax rates have been enacted into law.

Question 9
Complete
Mark 1.00 out of 1.00

Flag question

Question text
 Recognizing a valuation allowance for a deferred tax asset requires that a company
a.
consider only the positive information in determining the need for a valuation allowance.

b.
pass a recognition threshold, after assuming that it will be audited by taxing authorities.

c.
take an aggressive approach in its tax planning.

d.
consider all positive and negative information in determining the need for a valuation
allowance.

Feedback
The correct answer is:

consider all positive and negative information in determining the need for a valuation
allowance.

Question 10
Complete
Mark 1.00 out of 1.00

Flag question

Question text
A deferred tax liability is classified on the balance sheet as either a current or a noncurrent
liability. The current amount of a deferred tax liability should generally be

a.
totally eliminated from the financial statements if the amount is related to a noncurrent
asset.
b.
based on the classification of the related asset or liability for financial reporting purposes.

c.
the net deferred tax consequences of temporary differences that will result in net taxable
amounts during the next year.

d.
the total of all deferred tax consequences that are not expected to reverse in the operating
period or one year, whichever is greater.
 
 
 
 

Feedback
The correct answer is:
based on the classification of the related asset or liability for financial reporting purposes.

Question 11
Complete
Mark 1.00 out of 1.00

Flag question

Question text
The projected benefit obligation is the measure of pension obligation that

a.
requires pension expense to be determined solely on the basis of the plan formula applied
to years of service to date and based on existing salary levels.
b.
is required to be used for reporting the service cost component of pension expense.

c.
requires the longest possible period for funding to maximize the tax deduction.

d.
is not sanctioned under generally accepted accounting principles for reporting the service
cost component of pension expense.

Feedback
The correct answer is:
is required to be used for reporting the service cost component of pension expense.

Question 12
Complete
Mark 1.00 out of 1.00

Flag question

Question text
The interest on the projected benefit obligation component of benefit expense

a.
may be stated implicitly or explicitly when reported.

b.
reflects the rates at which pension benefits could be effectively settled.

c.
is the same as the expected return on plan assets.
d.
reflects the incremental borrowing rate of the employer.

Feedback
The correct answer is:
reflects the rates at which pension benefits could be effectively settled.

Question 13
Complete
Mark 1.00 out of 1.00

Flag question

Question text
The pre-emptive right of a ordinary shareholder is the right to

a.
exclude preferred shareholders from voting rights.

b.
share proportionately in any new issues of shares of the same class.

c.
receive cash dividends before they are distributed to preferred shareholders.

d.
share proportionately in corporate assets upon liquidation.
 Feedback
The correct answer is:

share proportionately in any new issues of shares of the same class.

Question 14
Complete
Mark 1.00 out of 1.00

Flag question

Question text
 Dividends are not paid on

a.
noncumulative preferred share

b.
nonparticipating preferred share.

c.
treasury ordinary share.

d.
Dividends are paid on all of these.

Feedback
The correct answer is:
treasury ordinary share.

Question 15
Complete
Mark 1.00 out of 1.00
 Flag question

Question text
Which one of the following disclosures should be made in the equity section of the balance
sheet, rather than in the notes to the financial statements?

a.
Conversion or exercise prices

b.
Call prices

c.
Liquidation preferences

d.
Dividend preferences
Feedback
The correct answer is:

Liquidation preferences

Question 16
Complete
Mark 1.00 out of 1.00

Flag question

Question text
The issuer of a 5% ordinary share  dividend to ordinary shareholders preferably should
transfer from retained earnings to contributed capital an amount equal to the
a.
minimum legal requirements

b.
par or stated value of the shares issued

c.
fair value of the shares issued.

d.
book value of the shares issued
Feedback
The correct answer is:
fair value of the shares issued.

Question 17
Complete
Mark 1.00 out of 1.00

Flag question

Question text
 A mining company declared a liquidating dividend. The journal entry to record the
declaration must include a debit to

a.
Share premium

b.
Accumulated Depreciation

c.
Retained Earnings.
d.
Accumulated Depletion
Feedback
The correct answer is:
Share premium

Question 18
Not answered
Marked out of 1.00

Flag question

Question text
Erasa Corp. purchased its own par value share on January 1, 2020 for P20,000 and debited
the treasury share account for the purchase price. The share was subsequently sold for
P12,000. The P8,000 difference between the cost and sales price should be recorded as a
deduction from

a.
retained earnings.

b.
share premium without regard as to whether or not there have been previous net "gains"
from sales of the same class of share included therein.

c.
share premium to the extent that previous net "gains" from sales of the same class of share
are included therein; otherwise, from retained earnings.

d.
net income.

Feedback
The correct answer is:
share premium to the extent that previous net "gains" from sales of the same class of share
are included therein; otherwise, from retained earnings.

Question 19
Not answered
Marked out of 1.00

Flag question

Question text
How is compensation expense measured for equity-settled share-based payments?

a.
Measure between the intrinsic value of options as the difference between market price and
exercise price at measurement date.

b.
Measure the fair value of options using an option-pricing model.

c.
Use the normal hourly rate of the employees.

d.
Measure the difference between the market price and the fair value  of the options.

Feedback
The correct answer is:
Measure the fair value of options using an option-pricing model.

Question 20
Complete
Mark 1.00 out of 1.00
 Flag question

Question text
 Which of the following statements in relation to share options granted to employees in
exchange for their services is false?
I.               The services received shall be measures at the fair value of the employees’
services.
II.              Fair value shall be measured at the date the options vest.

a.
Both I and II

b.
 I only

c.
Neither I nor II

d.
II only

Feedback
The correct answer is:

Both I and II

Question 21
Not answered
Marked out of 2.00
 Flag question

Question text
On January 1, 2020, Gohan Corporation signed a ten-year noncancelable lease for certain
machinery. The terms of the lease called for Gohan to make annual payments of P200,000
at the end of each year for ten years with title to pass to Gohan at the end of this period.
The machinery has an estimated useful life of 15 years and no salvage value. Gohan uses
the straight-line method of depreciation for all of its fixed assets. Gohan accordingly
accounted for this lease transaction as a finance lease. The lease payments were
determined to have a present value of P1,342,016 at an effective interest rate of 8%. With
respect to this finance lease, Gohan should record for 2020

a.
interest expense of P91,362 and depreciation expense of P34,202.

b.
interest expense of P107,361 and depreciation expense of P89,468.

c.
interest expense of P89,468 and depreciation expense of P76,136

d.
lease expense of P200,000.

Feedback
The correct answer is:
interest expense of P107,361 and depreciation expense of P89,468.

Question 22
Not answered
Marked out of 2.00

Flag question
 Question text
On January 1, 2020, Gotenks, Inc. signs a 10-year noncancelable lease agreement to lease
a storage building from Tranks Warehouse Company. Collectibility of lease payments is
reasonably predictable and no important uncertainties surround the amount of costs yet to
be incurred by the lessor. The following information pertains to this lease agreement.
(a)  The agreement requires equal rental payments at the end of each year.
(b) The fair value of the building on January 1, 2020 is P4,000,000; however, the book value
to Tranks is P3,300,000.
(c)  The building has an estimated economic life of 10 years, with no residual value.
Gotenks depreciates similar buildings on the straight-line method.
(d) At the termination of the lease, the title to the building will be transferred to the lessee.
(e)  Gotenks’ incremental borrowing rate is 11% per year. Tranks Warehouse Co. set the
annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by
Gotenks Inc.
(f)  The yearly rental payment includes P10,000 of executory costs related to taxes on the
property.
 
Gotenks, Inc. would record depreciation expense on this storage building in 2020 of
(Rounded to the nearest peso.)

a.
P330,000

b.
P400,000

c.
P0

d.
P650,981
Feedback
The correct answer is:
P400,000

Question 23
Not answered
Marked out of 2.00
 Flag question

Question text
Bulma Company leases a machine from Chichi Corp. under an agreement which meets the
criteria to be a finance lease for Bulma. The six-year lease requires payment of P170,000 at
the beginning of each year, including P25,000 per year for maintenance, insurance, and
taxes. The incremental borrowing rate for the lessee is 10%; the lessor's implicit rate is 8%
and is known by the lessee. Bulma should record the leased asset at
*Use 4 decimal places for PV Factor

a.
P723,943

b.
P694,665

c.
P814,435

d.
P848,760
Feedback
The correct answer is:
P723,943

Question 24
Not answered
Marked out of 2.00

Flag question

Question text
Kiririn Co. purchases land and constructs a service station and car wash for a total of
P360,000. At January 2, 2019, when construction is completed, the facility and land on
which it was constructed are sold to a major oil company for P400,000 and immediately
leased from the oil company by Kiririn Fair value of the land at time of the sale was
P40,000. The lease is a 10-year, noncancelable lease. Kirirn uses straight-line depreciation
for its other various business holdings. The economic life of the facility is 15 years with zero
salvage value. Title to the facility and land will pass to Kiririn at termination of the lease. A
partial amortization schedule for this lease is as follows:
                                           Payments                Interest            Amortization              
Balance  
            Jan. 2, 2019                                                                                                 
P400,000.00
            Dec. 31, 2019       P65,098.13            P40,000.00            P25,098.13           
374,901.87
            Dec. 31, 2020         65,098.13              37,490.19              27,607.94           
347,293.93
            Dec. 31, 2021         65,098.13              34,729.39              30,368.74           
316,925.19
 
.
            What is the amount of the lessee's liability to the lessor after the December 31, 2021
payment?  (Rounded to the nearest peso.)

a.
P374,902

b.
P347,294

c.
P400,000

d.
P316,925

Feedback
The correct answer is:
P316,925

Question 25
Not answered
Marked out of 2.00

Flag question

Question text
Cell Corporation enters into an agreement with Freeza Rentals Co. on January 1, 2020 for
the purpose of leasing a machine to be used in its manufacturing operations. The following
data pertain to the agreement:
(a)        The term of the noncancelable lease is 3 years with no renewal option. Payments of
P310,426 are due on December 31 of each year.
(b)       The fair value of the machine on January 1, 2020, is P800,000. The machine has a
remaining economic life of 10 years, with no salvage value. The machine reverts to the
lessor upon the termination of the lease.
(c)        Cell depreciates all machinery it owns on a straight-line basis.
(d)       Cell's incremental borrowing rate is 10% per year. Cell does not have knowledge of
the 8% implicit rate used by Freeza.
(e)        Immediately after signing the lease, Freeza finds out that Cell Corp. is the defendant
in a suit which is sufficiently material to make collectibility of future lease payments doubtful.
 
            If the present value of the future lease payments is P800,000 at January 1, 2020,
what is the amount of the reduction in the lease liability for Cell Corp. in the second full year
of the lease if Cell Corp. accounts for the lease as a finance lease? (Rounded to the nearest
peso.)

a.
P230,426

b.
P253,469

c.
P246,426
d.
P266,140
Feedback
The correct answer is:
P253,469

Question 26
Not answered
Marked out of 2.00

Flag question

Question text
At the beginning of 2020, Picolo Co. purchased an asset for P900,000 with an estimated
useful life of 5 years and an estimated salvage value of P75,000. For financial reporting
purposes the asset is being depreciated using the straight-line method; for tax purposes the
double-declining-balance method is being used. Picolo Co.’s tax rate is 40% for 2020 and
all future years.
 
At the end of 2020 what is the book basis and the tax basis of the asset?
Book basis                  Tax basis

a.
P735,000                    P465,000

b.
P735,000                    P540,000

c.
P660,000                    P540,000
d.
P660,000                    P465,000

Feedback
The correct answer is:

P735,000                    P540,000

Question 27
Not answered
Marked out of 2.00

Flag question

Question text
Videl Corporation has a deferred tax asset at December 31, 2020 of P120,000 due to the
recognition of potential tax benefits of an operating loss carryforward. The enacted tax rates
are as follows: 40% for 2017–2019; 35% for 2020; and 30% for 2021 and thereafter.
Assuming that management expects that only 50% of the related benefits will actually be
realized, a valuation account should be established in the amount of:

a.
P18,000

b.
P21,000

c.
P60,000
d.
P24,000
Feedback
The correct answer is:

P60,000

Question 28
Not answered
Marked out of 2.00

Flag question

Question text
Popo Company deducts insurance expense of P105,000 for tax purposes in 2018, but the
expense is not yet recognized for accounting purposes. In 2020, 2021, and 2022, no
insurance expense will be deducted for tax purposes, but P35,000 of insurance expense will
be reported for accounting purposes in each of these years. Popo Company has a tax rate
of 40% and income taxes payable of P90,000 at the end of 2021. There were no deferred
taxes at the beginning of 2021.
 What is the amount of the deferred tax liability at the end of 2021?

a.
P0

b.
P42,000

c.
P36,000

d.
P15,000
 Feedback
The correct answer is:
P42,000

Question 29
Not answered
Marked out of 2.00

Flag question

Question text
Shenron, Inc. had pre-tax accounting income of P1,350,000 and a tax rate of 40% in 2020,
its first year of operations. During 2020 the company had the following transactions:
 
Received rent from Master, Co. for 2021 P48,000
Municipal bond income P60,000
Depreciation for tax purposes in excess of book P30,000
depreciation
Installment sales revenue to be collected in 2021 P81,000
 
For 2020 what is the amount of income taxes payable for Shenron, Inc?

a.
P452,400

b.
P490,800

c.
P579,600

d.
P514,800
Feedback
The correct answer is:

P490,800

Question 30
Not answered
Marked out of 2.00

Flag question

Question text
Based on the following information, compute 2020 taxable income for Yamcha Co.
assuming that its pre-tax accounting income for the year ended December 31, 2020 is
P460,000.
                                                            Future taxable
   Temporary difference             (deductible) amount
    
Installment sales    P384,000
Depreciation P120,000
Unearned rent  (P400,000)

a.
P356,000

b.
P564,000

c.
P444,000
 
d.
P964,000

Feedback
The correct answer is:
P356,000

Question 31
Not answered
Marked out of 2.00

Flag question

Question text
Pan Company has a defined-benefit plan. At the end of 2020, it has determined the
following information related to its benefit plan:
Projected benefit obligation                                                           P750,000
Accumulated benefit obligation                                                        660,000
Fair value of plan assets                                                                    610,000
 
The amount of pension liability that is reported in Pan's balance sheet at the end of 2020 is

a.
P90,000

b.
P140,000

c.
P50,000

d.
P150,000
Feedback
The correct answer is:
P140,000

Question 32
Not answered
Marked out of 2.00

Flag question

Question text
 Ordinary share, P1 par                                                                 P4,800,000
Share premium in Excess of Par— Ordinary share                           550,000
Preferred 8 1/2% share, P50 par                                                    2,000,000
Share premium in Excess of Par—Preferred share                           400,000
Retained Earnings                                                                          1,500,000
Treasury ordinary share  (at cost)                                                     150,000
 
The total shareholders' equity of Uub Corporation is

a.
P7,600,000

b.
P9,250,000

c.
P9,100,000

d.
P7,750,000
Feedback
The correct answer is:
P9,100,000

Question 33
Not answered
Marked out of 2.00
 Flag question

Question text
Bulla Company issues 4,000 shares of its P5 par value ordinary share having a fair value of
P25 per share and 6,000 shares of its P15 par value preferred share having a fair value of
P20 per share for a lump sum of P204,000. What amount of the proceeds should be
allocated to the preferred share?

a.
P95,625

b.
P127,500

c.
P182,750

d.
P111,273
Feedback
The correct answer is:
P111,273

Question 34
Not answered
Marked out of 2.00

Flag question

Question text
 Dende Company acquired 8,000 shares of its own ordinary shares at P20 per share on
February 5, 2019, and sold 4,000 of these shares at P27 per share on August 9, 2020. The
fair value of Dende's ordinary share was P24 per share at December 31, 2019 and P25 per
share at December 31, 2020. The cost method is used to record treasury share
transactions. What account(s) should Dende credit in 2020 to record the sale of 4,000
shares?

a.
Treasury Share for P80,000 and Retained Earnings for P28,000.

b.
Treasury Share for P96,000 and Retained Earnings for P12,000.

c.
Treasury Share for P80,000 and Share premium from Treasury Share for P28,000.

d.
Treasury Share for P108,000
Feedback
The correct answer is:

Treasury Share for P80,000 and Share premium from Treasury Share for P28,000.

Question 35
Not answered
Marked out of 2.00

Flag question

Question text
An analysis of shareholders' equity of Pachy Corporation as of January 1, 2020, is as
follows:
      Ordinary share, par value P20; authorized 100,000 shares;
            issued and outstanding 90,000 shares                                                       
P1,800,000
      Share premium in excess of par                                                                               
700,000
      Retained earnings                                                                                                        
760,000
      Total                                                                                                                           
P3,260,000
Pachy uses the cost method of accounting for treasury share and during 20202 entered into
the following transactions:
Acquired 2,500 shares of its shares for P75,000.
Sold 2,000 treasury shares at P35 per share.
Sold the remaining treasury shares at P20 per share.
Assuming no other equity transactions occurred during 2020 what should Pachy report at
December 31, 2020 as total share premium?

a.
P715,000

b.
P705,000

c.
P700,000

d.
P695,000
Feedback
The correct answer is:

P705,000

Question 36
Not answered
Marked out of 2.00
 Flag question

Question text
Oolong’s Corporation has an investment in 10,000 shares of Chiatze Company ordinary
share with a cost of P436,000. These shares are used in a property dividend to
shareholders of Oolong’s. The property dividend is declared on May 25 and scheduled to be
distributed on July 31 to shareholders of record on June 15. The fair value per share of
Chiatze share is P63 on May 25, P66 on June 15, and P68 on July 31. The net effect of this
property dividend on retained earnings is a reduction of

a.
P660,000

b.
P630,000

c.
P436,000

d.
P680,000
Feedback
The correct answer is:
P436,000

Question 37
Not answered
Marked out of 2.00

Flag question

Question text
The shareholders' equity section of Karin Corporation as of December 31, 2019, was as
follows:
Ordinary share, par value P2; authorized 20,000 shares;
      issued and outstanding 10,000 shares                                      P  20,000
Share premium in excess of par                                                          30,000
Retained earnings                                                                                95,000
                                                                                                         P145,000
On March 1, 2020, the board of directors declared a 15% share dividend, and accordingly
1,500 additional shares were issued. On March 1, 2018  the fair value of the sharewas P6
per share. For the two months ended February 28, 2020, Karin sustained a net loss of
P10,000.
What amount should Karin report as retained earnings as of March 1, 2020?

a.
P82,000

b.
P92,000

c.
P86,000

d.
P76,000
Feedback
The correct answer is:
P76,000

Question 38
Not answered
Marked out of 2.00

Flag question

Question text
On January 1, 2019, Goku Company granted 100 share options each to 500 employees,
conditional upon the employee’s remaining in the company’s employ during the vesting
period. The share options vest at the end of a three- year period. On grant date, each share
option has a fair value of P30. The par value per share is P100 and the option price is P120.
 
      On December 31, 2020, 30 employees have left and it is expected that on the basis of a
weighted average probability, a further 30 employees will leave before the end of the three-
year period. On December 31, 2021, only 20 employees actually left and all of the share
options are exercised on  such date.
 
      What is the compensation expense that should be recognized for 2021?

a.
P470,000

b.
P500,000

c.
P380,000

d.
P880,000

Feedback
The correct answer is:
P470,000

Question 39
Not answered
Marked out of 2.00

Flag question

Question text
On January 1, 2019, Freeza Company granted 60,000 share options to employees. The
share options will vest at the end of three years provided the employees remain in service
until then. The option price is P60 and the par value per share is P50. At the date of grant,
the entity concluded that the fair value of the share options cannot be measured reliably.
The share options have a life of 4 years which means that the share options can be
exercised within one year after vesting.
 
      The share prices are P62 on December 31, 2019, P66 on December 31, 2020, P75 on
December 31, 2021 and P85 on December 31, 2022. All share options were exercised on
December 31, 2022.
 
      What is the compensation expense for 2022?

a.
P660,000

b.
P600,000

c.
P0

d.
P900,000

Feedback
The correct answer is:
P600,000

Question 40
Not answered
Marked out of 2.00
 Flag question

Question text
Vegeta Company has granted 200 share appreciation rights to each of its 500 employees
on January 1, 2019. The rights are due to vest on December 31, 2021 with payment being
made on December 31, 2021. Only 80% of the awards vest. Share prices are:
 
January 1, 2019 (predetermined price)                                  150
December 31, 2019                                                                180
December 31, 2020                                                                210
December 31, 2021                                                                190
 
How should the settlement of the share appreciation rights be accounted for on December
31, 2021?
 

a.
Payment of P3,200,000 and no gain is recorded.

b.
Payment of P4,800,000 and no gain is recorded.

c.
Payment of P3,200,000 and gain of P1,600,000 recorded.

d.
Payment of P1,600,000 and gain of P3,200,000 recorded.
 Feedback
The correct answer is:

Payment of P3,200,000 and gain of P1,600,000 recorded.