The CS company self constructed an asset for its own use.

Construction started on
January 1 2017 and the asset was completed on December 31 2017. The company
had a two year 18% loan of P500,000, specifically obtained to finance the asset
construction funds not yet needed during the construction were temporarily invested
in short term debt securities yielding a P10,000 interest revenue. The company also
had a general borrowings amounting to P600,000, 5-year term with interest of 20%
and P1,000,000, 10-year term with interest of 18% were used in part in the self
construction.
Cost incurred during the year were as follows:
January 1- P400,000
April 1- 500,000
August 1- 480,000
December 1- 180,000
1. How much is the total capitalized interest?
a. 171,875
b. 155,000
c. 165,000
d. 91,875
B corp. purchased a machinery on January 1 2015, at a cost of P1,000,000. It is being
depreciated using the straight line method over its projected useful life of 10years. At
December 31 2016, the asset’s fair value was P1,200,000. Accordingly, an entry was
made on that date to recognize the revaluation write up.
A revaluation was made again on December 31 2018 wherein the sound value of the
asset was determined to be P570,000. The company has the policy of transferring any
revaluation surplus to retained earnings as the asset is being used up.
2. How much is the revaluation surplus on December 31 2016?
a. 500,000
b. 400,000
c. 1,200,000
d. 0
3. How much is the revaluation/impairment loss for the year 2018?
a. 330,000
b. 70,000
c. 30,000
d. 0
On January 1 2017, Y company obtained a franchise from E corp. to sell for 20 years
E’s products. The initial franchise fee as agreed upon shall be P6,000,000 and shall be
payable in cash, P1,000,000, when the contract is signed and the balance in four
equal installments thereafter, as evidenced by a non interest bearing note. The
agreement provides that the franchisor shall provide the necessary initial services
required under a franchise contract. The agreement also provides that 5% of the
revenue from the franchise must be paid to the franchisor. Revenue from the franchise
for 2017 was P5,000,000. The prevailing interest rate for this type of note is 12%. PV
of P1 for 4 periods at 12% is 0.6355 and PV of ordinary annuity for 4 periods at 12% is
3.0373.
4. How much is the total amount charged against revenues for the year 2017?
a. 458,875
b. 945,426
c. 239,831
d. 489,831
E company sells DVDs for P6,300 each and offers to each customer a three year
service contract for an additional P600. The company sold 300 and 250 service
contracts for cash in 2017 and 2018, respectively. Expenses relating to the service
contracts for 2017 amounted to P5,250 while for 2018, expenses amount to P6,000.
Past records of the company indicate that the pattern of repairs has been 20% in the
year of sale, 30% in the second year and 50% in the third year. Sales of the contracts
are made evenly during the year.
5. How much is the unearned service contract revenue at December 31 2019?
a. 165,000
b. 142,500
c. 109,500
d. 97,500
6. How much is the service revenue at December 31 2019?
a. 165,000
b. 142,500
c. 109,500
d. 97,500

N inc., places a coupon in each box of its product. Customers may send in ten
coupons and P3,000, and the company will send them a CD. Sufficient CDs were
purchased at P5.40 a piece. During 2017, 1,260,000 boxes were sold. It was estimated
that a total of 5% of the coupons will be redeemed. In 2017, 18,000 coupons were
redeemed.
7. How much is the liability for premiums outstanding as of December 31 2017?
a. 15,120
b. 10,800
c. 24,300
d. 43,200
The following costs are generally incurred by R corp.
Goodwill purchased in a business combination 500,000
Cost of developing website for the promotion and advertisement of 150,000
the entity’s products and services
Cost incurred in the corporation’s formation and organization 230,000
Operating losses incurred in the start-up of the business 130,000
Initial franchise fees paid 175,000
Continuing franchise fees paid 50,000
Internally generated goodwill 800,000
Cost of purchasing a patent from an inventor 137,000
Cost of leasehold improvement 70,000
Legal costs incurred in successfully defending a patent 55,500
Internally generated customer list 40,000
 Cost of purchasing a trademark 250,000
Computer software for a computer controlled machine that cannot 325,500
operate without that specific software
8. How much from the above items can be recognized as intangible assets including
goodwill?
a. 1,132,000
b. 1,387,500
c. 1,172,000
d. 1,062,000
A truck owned and operated by O Corp. was involved in an accident with an auto
driven by Suzuki on December 12 2017. O Corp. received notice on December 24 2017
of a lawsuit for P350,000 damages for a personal injury suffered by Suzuki. O’’s
counsel believes that it is probable that Suzuki will be successful against the company
for an estimated amount in the range between P100,000 and P400,000. Each point
within that range of amounts is considered as likely as any other plant. On December
25 2017, an employee filed a P1,500,000 lawsuit against O Corp. for damages suffered
when one of O’s equipment malfunctioned in august of 2017. The legal counsel of the
company believes that it is probable that O will pay the damages ranging between
P500,000 to P1,000,000 but P850,000 is considered to be the best estimate of the
obligation. On march 1 2018, the employee has offered to settle the lawsuit out of
court for P950,000 and the company accepted the offer. The financial statements were
authorized to be issued on march 31 2018.
9. How much is total provision that should be recognized as of December 31 2017?
a. 1,100,000
b. 1,200,000
c. 850,000
d. None of the choices
On January 1 2017, S Inc. issued P5,000,000 face value, 5-year bonds at 109. Each
P1,000 bonds issued with one detachable share warrant, each of which entitled the
bondholder to purchase 15 shares of P10 par ordinary share at P20. At issuance date,
the market value of each of the bonds without warrant sells at 99. The stated rate on
the bonds is 11% payable annually every January 1 starting January 1 2018.
10. How much should be credited to share premium upon exercise of the warrants
assuming 60% of the warrants were exercised?
a. 450,000
b. 750,000
c. 900,000
d. 1,200,000