INTERMEDIATE ACCOUNTING 1B MILLAN

Duwa Leepa Store construct its own stores

Additional information follows:

Total construction expenditures:

January 1, 2017800,000

May 3, 2017900,000

October 2, 2017500,000

March 1, 2018700,000

August 1, 2018500,000

December 31, 2018500,000

TOTAL3,300,000

Outstanding company debt:

Mortgage related directly to new store; interest rate, 11%; term,

5 years from beginning of construction 900,000

General Liability:

Bonds issued just prior to construction of store; interest rate 8% for 10 years 600,000

Bonds issued just prior to construction; interest rate, 8%; mature in 5 years 1,200,000

Estimated cost of equity capital 11%

1. The capitalizable borrowing cost for 2017 using the traditional method is

A.99,000

B.145,000

C.144,000

D.149,000

Duwa Leepa Store construct its own stores

Additional information follows:

Total construction expenditures:

January 1, 2017800,000

May 3, 2017900,000

October 2, 2017500,000

March 1, 2018700,000

August 1, 2018500,000

December 31, 2018500,000

TOTAL3,300,000

Outstanding company debt:

Mortgage related directly to new store; interest rate, 11%; term,

5 years from beginning of construction 900,000

General Liability:

Bonds issued just prior to construction of store; interest rate 8% for 10 years 600,000

Bonds issued just prior to construction; interest rate, 8%; mature in 5 years 1,200,000

Estimated cost of equity capital 11%

2. The capitalizable borrowing cost for 2017 using the avoidable interest method is

A.161,667

B.151,667

C.148,000

D.148,021

A public limited company, Cromwell Dairy Products produces milk on its farms. As of January 1, Cromwell has a stock of 1,050 cows (average age, 2 years old) and 150 heifers (average age, 1 year old). Cromwell purchased 375 heifers, average 1 year old, on July 1. No animals were born or sold during the year. The unit value less estimated costs to sell were

1 year old animal at December 313,200

2 year old animal at December 314,500

1.5 year old animal at December 313,600

3 year old animal at December 315,000

1 year old animal at Jan 1 and July 13,000

2 year old animal at January 14,000

3. The increase in value of biological assets in the current period due to price changes is

A. 555,000

B. 630,000

C. 1,500,000

D. 460,000

4.The increase in value of biological assets in the current period due to physical change is

A. 590,000

B. 870,000

C. 780,000

D. 720,000

5. The carrying amount of the biological assets as of December 31 is

A. 6,150,000

B. 7,325,000

C. 7,275,000

D. 6,825,000

An entity has these balances in its financial records:

Value of the biological asset at acquisition cost on 12/31/171,200,000

Fair Value surplus on initial recognition at FV on 12/31/171,400,000

Change in FV to 12/31/18 due to growth and price fluctuation200,000

Decrease in FV due to harvest in 2018180,000

6. How much should be recognized in the statement of financial position as of December 31, 2018 related to these biological assets?

A.P1,200,000

B.P2,600,000

C.P2,800,000

D.P2,620,000

7. How much should be recognized in the income statement for the year ended December 31, 2018 related to these biological assets?

A. P200,000

B. P20,000

C. 0

D. P1,420,000

Cute Corporation owns the following properties at 1 January 2018:

Property A

An office building used by Cute for administrative purposes with a depreciated historical cost of P2 million. At 1 January 2018 it had a remaining life of 20 years. After a re-organization on 1 July 2018, the property was leased to a third party and reclassified as an investment property applying Cute's policy of a fair policy model. An independent valuer assessed the property to have a fair value of 2.3 million at 1 July 2018, which had risen to P2.34 million at 31 December 2018.

Property B

Another office building sub-leased to a subsidiary of Cute. At 1 January 2018, it had a fair value of P1.5 million which had risen to P1.65 million at 31 December 2018. At 1 January 2018 it had a remaining life of 15 years.

Determine the amounts that should be recognized by the entity in its separate financial statements in respect of these properties in the year ended in December 31, 2018 for the following:

8. Net amount in profit or loss

A. P490,000

B. P540,000

C. P190,00

D. 140,000

9. Net amount in other comprehensive income

A. P500,000

B. P300,000

C. P350,000

D. 140,000

Katyrenne Company developed a new machine for manufacturing baseballs. Because the machine is considered very valuable, the entity had it patented.

The following expenditures were incurred in developing and patenting the machine:

Purchase of special equipment to be used solely for development of the new machine 1,800,000

Research salaries and fringe benefits for engineers and scientist200,000

Costs of Testing Prototype 200,000

Legal cost for filing a patent 210,000

Fees paid to government patent office 55,000

Drawing required by patent office to be filled with patent application50,000

Litigation costs (successful) 430,000

10. What amount should be capitalized as cost of patent?

A. 245,000

B. 315,000

C. 745,000

D. 265,000

11. What amount of research and development cost should be expensed in the current year?

A. 2,200,000

B. 2,250,000

C. 1,800,000

D. 2,490,000

.On January 1, 2020, 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, 2020 and December 31, 2021, the entity determined that impairment indicators are present. There is no change in useful life or residual value.

December 31, 2020December 31, 2021

Fair value less cost of disposal P8,100,000P8,300,000

Value in use P8,550,000P8,200,000

12. What is the impairment loss for 2020?

A. 0

B. P900,000

C. P450,000

D. P600,000

13. What is the gain on reversal for 2021?

A. 0

B. P600,000

C. P400,000

D. P700,000

14. What is the depreciation for 2022?

A. P1,025,000

B. P950,000

C. P1,000,000

D. P1,050,000

15. On January 1, 2018, Richmond Inc. signed a fixed-price contract to have Builders Associates construct a major plant facility at a cost of P4,000,000. It was estimated that it would take three years to complete the project. Also, on January 1, 2015, to finance the construction cost, Richmond borrowed P4,000,000 payable in 10 annual installments of P400,000, plus interest at the rate of 11%. During 2018, Richmond made deposit and progress payments totaling P1,500,000 under the contract. The excess borrowed funds were invested in short-term securities , from which Richmond realized investment income of P250,000.

What amount should Richmond report as capitalized interest at December 31, 2018?

A.71,500

B.440,000

C.165,000

D.190,000