1. Mega Company and its subsidiaries have a provided you list of property items they own:

Land held by Mega for undetermined future use 10 million

A vacant building owned by Mega and to be leased out under an operating lease 20 million

Property held by a subsidiary of Mega, a real estate firm in the ordinary course of business 50 million

Property held by Mega for use in production 12 million

A hotel owned by Mega's subsidiary, the subsidiary also provides security services to its guests 60 million

A building owned by Mega being leased out to Vega, one of Mega's subsidiaries, under operating leases 25 million

What amount shall be shown as Investment Property in the consolidated statement of financial position of Mega and its subsidiaries?

a. P20 million b. P30 million c. P85 million d. P90 million

2. Shoshin, Inc. owns land and buikling in Manila used for operations and administration. The company uses the cost model and provides you with the following information on January 1, 2022:

Land: Cost P20,000,000 Fair value 28,000,000

Building: Cost 40,000,000 Accumulated depreciation 10,000,000 Fair value 35,000,000

On this date, the company transferred its business operations to Ortigas Center and leased out the land and building above interested business under operating leases. The company uses the fair value model for all of its investment property.

How much gain shall be reported in profit or loss resulting from this reclassification from owner occupied proper investment property?

a. P0 b. P5 million c. P8 million d. P13 million

3. Del Company operates a retail grocery store that required by law to collect refundable deposits of P5 on soda cans. Information for the current year are as follows: Liability for refundable deposit -Jan 1 P150,000 Cans of soda sold 110,000 Soda cans returned 100,000

What amount should be reported as current liability for deposit on December 31?

4. Sachi Company had a property with a carrying amount of P15,000,000 held for sale in the ordinary course of business. On August 1, 2022, Sachi commenced an operating lease with Sanjo Company; hence, the property was reclassified from inventory to investment property.

The fair value of this property on August 1, 2022 was P20,000,000 with cost to sell estimated at P1,000,000.

If the investment property will be carried at fair value, what is the amount of revaluation to be recognized in profit or loss in Sachi's 2022 statement of comprehensive income as a result of this reclassification?

a. P0 b. P1,000,000 c. P14,000,000 d. P5,000,000

5. The Emem Company acquired a building on January 1, 2022 for P18,000,000. At that date, the building had a useful life of 40 years. The fair value of the building was P20,000,000 at December 31, 2022. The building was appropriately classified as investment property and accounted for using the cost model.

What amounts shall be presented in the statement of financial position at December 31, 2022 and recognized in profit or loss for the year then ended, respectively?

a. P20,000,000 and P0 b. P18,000,000 and P0 c. P20,000,000 and gain of P2,000,000 d. P17,550,000 and expense of P450,000

6. At the beginning of the current year, Zafril Company acquired an investment property for P48 million. In the acquisition, Zafril made a 30% down payment and issued a 5-year, noninterest-bearing note for the remainder. The equal amount of P6,720,000 is payable at the end of each year. The prevailing market rate of interest for similar instrument is 12%. To complete the transaction, Zafril Company paid transaction costs amounting to P500,000. Round off present value factors P6,720,000 is pa to three decimal places.

What is the correct cost of the investment property at acquisition date?

a. P48,000,000 b. P39,125,600 c. P38,625,600 d. P24,225,600

7. The Beyonce Company acquired a building on January 1, 2022 for P18,000,000. At that date, the building had a useful life of 40 years. The fair value of the building was P20,000,000 at December 31, 2022. The building was appropriately classified as investment property and accounted for using the fair value model.

What amounts shall be presented in the statement of financial position at December 31, 2022 and recognized in profit or loss for the year then ended, respectively?

a. P20,000,000 and P0 b. P18,000,000 and P0 c. P20,000,000 and gain of P2,000,000 d. P17,550,000 and expense of P450,000

8. Ugas Company reported three items in its investment Property category, with the following details:

Fair Value Fair Value Initial Cost Dec. 31, 2022 Dec. 31, 2021 Property A 5,400,000 8,000,000 6,400,000 Property B 6,900,000 4,200,000 6,000,000 Property C 6,600,000 7,800,000 7,200,000

All of them were acquired in 2021 with a useful life of 10 years. The company's policy is to use the fair value model for all its Investment property.

What is the net amount reported in profit or loss for the year ended December 31, 2022 relating to Ugas Company's investment property?

a. P 400,000 b. P 700,000 c. P 1,100,000 d. P 1,890,000

9. The Diane Company has a single investment property acquired on July 1, 2019 for P11,400,000. The property has an estimated useful life of 40 years and an estimated residual value of P600,000. The company's accounting period ends on December 31 and uses the straight-line method of depreciation, computed to the nearest month. The fair values of the property at the end of each year follows:

2019 - P11,700,000 2020 - P11,960,000 2021 - P12,000,000 2022 - P11,700,000

Using the cost model, what is the amount reported in the 2022 profit or loss?

a. P135,000 b. P270,000 c. P300,000 d. P(300,000)

10. Use data of MC 9. Under the fair value model, what is the amount reported in the 2022 profit or loss?

a. P135,000 b. P270,000 c. P300,000 d. P[300,000)

11. San Jose Realty Corporation acquired a tract of land January 1, 2020 for P20 million. Transaction costs paid by San Jose relating to its acquisition amounted to P800,000. The tract of land was subdivided into 400 residential lots, having an area of 200 square meters each, after making provision for public and common roads, incurring additional cost of P6,200,000. At December 31, 2021, the market value per lot was P250,000.

As of December 31, 2022, 380 lots were sold and the market value of each lot had increased to P270,000. On this date, the company decided to transfer the remaining unsold lots into investment property that is to be carried under the fair value model.

What amount of gain should San Jose Realty recognize as a result of the transfer from inventory to investment property?

a. P5,400,000 b. P4,500,000 c. P4,050,000 d. P1,350,000

12. On January 1, 2021, Livingstyle Company purchased a patent for an immune system boosting drink called Infra for P800,000. The patent is determined to have an indefinite life.

During 2022, a competitor introduced a new product that is in direct competition with Infra; hence, the patent was tested for possible impairment. Data gathered suggests that the patent still has an indefinite life, but the cash flows to be generated from the asset have been reduced to either P40,000 per year (with 50% probability) or to P80,000 per year (with 50% probability). The appropriate risk-free interest rate is 8% and the risk-adjusted interest rate is 10%.

What is the impairment loss recognized in the accounts for the year ended December 31, 2022?

a. P200,000 b. P400,000 c. P800,000 d. 0

13. Statement 1: When an entity believes that the carrying value of an intangible asset with limited useful life cannot be fully recovered from its use or sale, it is tested for possible impairment. Statement 2: An internally generated goodwill arising from high employee morale, superior management team, and advantageous geographical locations shall be recognized in the accounts.

a. Both statements are true b. Both statements are false c. Statement 1 is true; Statement 2 is false d. Statement 1 is false; Statement 2 is true (PLEASE EXPLAIN WHY FALSE)