SHOW THE SOLUTION AND EXPLAIN THOROUGHLY.

Case 1

On January 1,2019, an entity granted 100 share options each to 500 employees,

conditional upon employees' remaining in the entity's employ during the vesting period.

The share option vest at the end of 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.

1. What is the compensation expense for 2019?

a. 500,000

b. 250,000

c. 750,000

d. 450,000

2. What sis the compensation expense for 2020?

a. 880,000

b. 380,000

c. 440,000

d. 500,000

3. What is the compensation expense for 2021?

a. 600,000

b. 880,000

c. 380,000

d. 470,000

4. What amount was credited to share premium when the options were exercised on

December 31,2021?

a. 2,250,000

b. 2,350,000

c. 900,000

d. 0

Case 2

An entity accounted for noncurrent assets using the cost model. On July 1, 2019, the

entity classified an equipment as held for sale. At the date, the carrying amount was

P5,000,000, the fair value was estimated at P3,500,000 and the cost of disposal at

P100,000. On December 31, 2019, the equipment was sold for net proceeds of

P2,500,000.

5. What amount should be reported as an impairment loss for 2019?

a. 1,600,000

b. 2,500,000

c. 1,500,000

d. 900,000

6. What amount should be reported as loss on disposal for 2019?

a. 1,500,000

b. 2,500,000

c. 1,600,000

d. 900,000

Case 3

An entity identified the following segment for the current year:

Segment Revenue Profit Assets

A 10,000,000 1,750,000 20,000,000

B 8,000,000 1,400,000 17,500,000

C 6,000,000 1,200,000 12,500,000

D 3,000,000 550,000 7,500,000

E 4,000,000 575,000 5,500,000

F 2,000,000 525,000 3,000,000

7. What are the reportable segments?

a. SEGMENT A, B and C

b. SEGMENT A, B, C and D

c. SEGMENT A, B, C, D and E

d. SEGMENT A, B, C, D, E and F

Case 4

An entity reported the following segment profit or loss for the current year

Segment 1 7,000,000 profit

Segment 2 3,000,000 profit

Segment 3 4,000,000 loss

Segment 4 1,000,000 profit

Segment 5 500,000 loss

8. What are the reportable segments?

a. SEGMENT 1,2,3,4 and 5

b. SEGMENT 1 and 2

c. SEGMENT 1,2 and 3

d. SEGMENT 1,2,3 and 4

Case 5

An entity reported revenue of P50,000,000, excluding intersegment sales of

P10,000,000, expenses of P47,000,000 and net income of P3,000,000 for the current

year. Expenses included payroll costs of P15,000,000. The combined asset of all

segment totaled P45,000,000

9. What is the minimum amount of sales to a major customer?

a. 5,000,000

b. 4,000,000

c. 4,500,000

d. 6,000,000

10. What is the minimum amount of external revenue to be disclosed by reportable

segments?

a. 30,000,000

b. 45,000,000

c. 33,750,000

d. 37,500,000

Case 6

An entity and its divisions reported the following for the current year:

Sales to unaffiliated customers 40,000,000

Intersegment sales of product similar to

those sold to unaffiliated customers 12,000,000

Interest earned on loans to other operating

segments 1,000,000

The entity and all of its divisions are engaged solely in manufacturing operations.

11. To qualify as reportable segment, the segment revenue should at least be what

amount?

a. 5,300,000

b. 4,100,000

c. 5,200,000

d. 4,000,000

Case 7

During the current year, Puff Company incurred P5,000,000 in exploration cost for each

of 20 oil wells drilled in the current year, in West Mindanao. Of the 20 well drilled, 14

were dry holes. The entity used the successful effort method of accounting. None of the

oil found is depleted in the current year.

12. What oil exploration expense should be reported in the current year?

a. 50,000,000

b. 30,000,000

c. 70,000,000

d. 0

Case 8

During the current year, Puppy Company incurred P4,000,000 in exploration cost for

each 15 oil sells drilled in the current year. Of the 15 wells drilled, 10 were dry holes. Th

entity used the successful effort method of accounting. The entity deleted 30% of the oil

discovered in the current year.

13. What amount of exploration cost would be reported in the year- end statement of

financial position?

a. 42,000,000

b. 14,000,000

c. 20,000,000

d. 6,000,000

Case 9

During 2019 Lovely Company purchased trading securities with the following cost and

market value on December 31,2019

Security Cost Market value

A 1,000 shares 200,000 300,000

B 10,000 shares 1,700,000 1,600,000

C 20,000 shares 3,100,000 2,900,000

Total 5,000,000 4,800,000

The entity sold 10,000 shares of security B on January 15,2020 for P150 per share

14. What amount of unrealized gain or loss should be reported in the income statement

for 2019?

a. 200,000 loss

b. 200,000 gain

c. 300,000 loss

d. 300,000 gain

15. What amount should be reported as loss on sale of trading investment in 2020?

a. 200,000 gain

b. 200,000 loss

c. 100,000 gain

d. 100,000 loss

Case10

On January 1,2019, Glen Company leased a building to Mix Company for 10-year term

at an annual rental of P500,000. At inception of the lease, Glen received P2,000,000

covering the first two years rent of P1,000,000 and a security deposit of P1,000,000.

This deposit will not be returned to Mix Company upon expiration of the lease but will be

applied to payment of rent for the last two years of the lease.

16. What portion of the P2,000,000 should be reported as current liability on December

31, 2019?

a. 1,500,000

b. 1,000,000

c. 500,000

d. 0

17. What portion of the P2,000,000 should be reported as noncurrent liability on

December 31,2019?

a. 2,000,000

b. 1,000,000

c. 1,500,000

d. 0

Case 11

At the beginning of current year, Panorama Company leased a building form a lessor

with the following pertinent information

Annual rental payable at the end of each year 1,000,000

Initial direct cost paid 400,000

Lease incentive received 100,000

Leasehold improvement 200,000

Purchase option that is reasonably certain to be exercised 500,000

Lease term 5 years

Useful life of building 8 years

Implicit interest rate 10%

PV of an ordinary annuity of 1 for 5 periods at 10% 3.79

Present value of 1 for 5 periods at 10% 0.62

18. What is the cost of the right of use asset?

a. 4,500,000

b. 4,400,000

c. 4,700,000

d. 4,600,000

19. What is the depreciation for current year?

a. 880,000

b. 900,000

c. 550,000

d. 575,000

20. What is the interest expense for current year?

a. 410,000

b. 379,000

c. 450,000

d. 429,000