The closing inventory of Tigreal Corp. amounted to

P116,400 excluding the following:

• 400 items which had cost P4 each. All were sold

after the reporting period for P3 each, with

selling expenses of P200 for the batch.

• 200 different items which had cost P30 each.

These items were found to be defective at the

end of the reporting period. Rectification work

after the statement of financial position date

amounted to P1,200, after which they were sold

for P35 each, with selling expenses totaling

P300.

Which of the following total figures should appear in

the statement of financial position of Tigreal Corp. for

inventory?

The following figures relate to inventory held at the

end of the reporting period:

Cost of materials P100,000

Net realizable value of materials 90,000

Estimated costs to convert materials

into finished goods 50,000

Estimated selling price of finished goods 160,000

Estimated costs to sell 5,000

The entity should recognize loss on write-down of

inventory of materials of

Cupcake Co. started 2020 with P94,000 of

merchandise inventory on hand. During 2020,

P400,000 in merchandise was purchased on account

with credit terms of 1/15, n/45. All discounts were

taken. Purchases were all made f.o.b. shipping point.

Cupcake paid freight charges of P7,500. Merchandise

with an invoice amount of P5,000 was returned for

credit. Cost of goods sold for the year was P380,000.

Cupcake uses a perpetual inventory system.

What is ending inventory assuming Cupcake uses the

gross method to record purchases?

Memphis Corp. is a large soft drink bottler that

requires new bottling equipment. After negotiating

with several suppliers, Memphis decided to accept a

special offer from Gasol Corporation. Gasol will

deliver the equipment with a list price of P100,000 to

Memphis on July 1, 2020 with the following payment

terms:

• A deposit of P20,000 is due on June 1, 2020.

• Cash on delivery of P20,000 is due on July 1,

2020.

• Three additional payments are to be made

annually from July 1, 2021 to July 1, 2023 of

P20,000.

• Gasol will waive its normal interest charge of 6%

per year to facilitate the sale.

The equipment is expected to last 5 years, with a

residual value of P20,000. Memphis has a December

31 year end.

What should be the depreciation expense

for the year ended 31 December 2020?

Michael Corporation has a machine costing P480,000,

with an annual depreciation of P96,000, and has

accumulated depreciation of P240,000 on December

31, 2019. On April 1, 2020, when the machine has a

fair value of P192,000, it is exchanged for a similar

machine with a fair value of P576,000 and the proper

amount of cash is paid.

The loss to be recognized on exchange is

Dallas Company purchased a tooling machine in 2010

for P600,000. The machine was being depreciated on

the straight-line method over an estimated useful life

of 20 years with no salvage value. At the beginning

of 2020, Dallas paid P120,000 to overhaul the

machine. As a result of this improvement, Dallas

estimated that the useful life of the machine would be

extended an additional 5 years.

The depreciation to be recognized in 2020 is

A non-current asset was purchased on the first day of

an accounting period, 1 January 2018 for P34,000 and

depreciated by 20% per annum using the reducing

balance method. On 30 June 2020 the asset was sold,

realizing a loss on disposal of P2,100.

What were the proceeds of sale?

An entity’s Equipment has a carrying amount of

P67,460. An equipment costing P15,000 had been

sold for P4,000, making a loss on disposal of P1,250.

No entries had been made for this disposal.

What is the correct carrying amount of the entity’s Equipment?

Karina Company purchased a patent on January 1,

2017, for P3,570,000. The patent was being

amortized over its remaining legal life of 15 years.

During 2020 Karina determined that the economic

benefits of the patent would not last longer than ten

years from the date of acquisition.

What amount should be reported in the statement of financial position as patent, net of accumulated amortization, at December 31, 2020?

In January 2020, an entity purchased a mineral mine

for P3,400,000 with removable ore estimated by

geological surveys at 2,000,000 tons. The property

has an estimated value of P200,000 after the ore has

been extracted. The company incurred P1,000,000 of

development costs preparing the mine for production.

During 2020, 500,000 tons were removed and

400,000 tons were sold.

What is the amount of depletion that the entity should expense for 2020?

Naruko Company received a P1,800,000 subsidy from

the government to purchase manufacturing equipment

on January 2, 2020. The equipment has a cost of

P3,000,000, a useful life of five years, and no salvage

value. Naruko depreciates the equipment using sumof-

the-years’ digits method.

If Naruko chooses to account for the grant as deferred income, the grant income to be recognized in 2020 is