Reference no: EM132933651
Questions -
Q1) AAA Company was sued by a competitor for P5,000,000 for infringement of a trademark during 2020. Based on the advice of the legal department, it is probable that AAA will be liable therefore, in its financial statement for the year ended December 31, 2020, an amount of P3,000,000 was accrued as a provision. On February 10, 2021, the Supreme Court decided in favor of the party alleging infringement of the trademark and ordered the defendant to pay a sum of P3,500,000 which was paid the following day. The financial statements of AAA Company were issued on February 15, 2021.
How much provision should have been accrued by AAA Company on December 31, 2020?
A. P3,000,000
B. P4,000,000
C. P5,000,000
D. P3,500,000
Q2) On January 1, 2021, BTS Company sold machinery with a carrying amount of P500,000 for P700,000. The fair value of the asset on this date has been determined to be P650,000. BTS immediately leased the machine back for P150,000 annually, payable in advance for 5 years. The implicit rate is 12%.
If the transfer does not meet the requirements in IFRS 15 to become a sale, how much is the gain on sale-leaseback that BTS needs to recognize?
A. P50,000
B. P0
C. P21,786
D. P150,000
E. P200,000
Q3) Villar Realty sells subdivision lots to various customers on a long-term payment plan. It is the company's policy to collect payment for real property taxes (RPT) from its lot owners on the first day of each month and makes the appropriate payment to the city of Las Pinas on January 31 of the following year. The amounts collected from the lot owners are recorded in an escrow account.
On December 31, 2020, the balance in the escrow accounts of the various lot owners was P300,000. Villar Realty paid the City of Las Pinas for the RPT of the various lot owners on January 31, 2021, totaling P280,000. Monthly collections for the year 2021 totaled P275,000. The company's accounting period ends on December 31.
On December 31, 2021, what amount should Villar Realty show as escrow liability to its subdivision lot owners?
A. P300,000
B. P295,000
C. P280,000
D. P275,000