Reference no: EM132600219

Questions -

Q1. The following items relate to the acquisition of a new machine by Mars Corp in 2020: Invoice price of the machinery - P2,000,000; Cash discount not taken - P40,000; Freight on new machine - P10,000; Cost of removing the old machine - P12,000; Loss on disposal of the old machine - P150,000; Gratuity paid to operator of the old machine who was laid off - P70,000; Installation cost of new machine - P60,000; Repair cost of new machine damaged in the process of installation - P8,000; Testing costs before machine was put into regular operation - P15,000; Salary of engineer for the duration of the trial run - P40,000; Operating cost during the first month of regular use - P250,000; Cash allowance granted because the new machine proved to be of inferior quality - P100,000. How much should be recognized as the cost of the new machine?

Q2. Carnation Company purchased a P5,000,000 12% face value bonds, 10 years, on May 1, 2020 for P5,122,200. The bonds are dated May 1, 2020 with interest payable May 1 and November 1. Bond premium is amortized following the effective interest method. The effective interest rate is 11%. What is the total amortization of discount for the year 2020?

Q3. On October 1, 2019, Venus Company purchased machinery for P1,900,000. Salvage value was estimated to be P100,000. The machinery will be depreciated over eight years using the sum-of-years'-digits method. If depreciation is computed on the basis of the nearest full month, how much should Venus record depreciation expense for 2020 on this machinery?

Q4. Saturn Corporation, one of the largest mining company, purchased 20 hectares of land for P60,000,000. The company expected to extract 5 million tons of mine from this land over the next 20 years at which time, residual value shall be P3,000,000. The following costs were also incurred related to the mining activities: Successful exploration cost, P5,000,000 and cost of P800,000 for mining equipment. During the first 2 years of the mine's operations, 300,000 tons were mined each year and sold for P80 per ton. How much would be the depletion expense for the first year?

Q5. An entity determined that the electronics division is a cash generating unit. The entity calculated the value in use of the division at P8,000,000. The carrying amounts of the assets are building P5,000,000, equipment P3,000,000 and inventory P2,000,000. The entity also determined that the fair value less cost of disposal of the building is P4,500,000. What is the impairment loss on building?

Q6. Tangerine Company acquired P3,000,000 face value 10% bonds as financial asset at amortized cost, on June 30, 2018 for P3,210,000, excluding brokerage of P150,000 and accrued interest. The bonds pay interest semiannually on May 1 and November 1. The remaining life of the bonds on the date of acquisition is 3 years. Straight-line amortization is employed. On December 31, 2018, the bonds were sold for P3,500,000 plus accrued interest. What is the gain on the sale of the bonds?

Q7. An asset Pluto Company was acquired on January 1, 2020 for P800,000 and is expected to have a 5-year useful life. Straight-line method of depreciation will be used. At January 1, 2022, the asset is appraised as having a sound value (depreciated replacement cost) of P720,000. What is the replacement cost of the asset on January 1, 2022?

Q8. On January 1, 2019, White Co. acquired Black Co. bonds with a face value of P900,000 at 105 plus accrued interest. The interest of 12% per annum is payable semi-annually on January 1 and July 1. The bonds were issued on January 1, 2019. Bonds of P300,000 mature at annual intervals beginning January 1, 2020. The total amortization of discount for the year 2019 following the bond outstanding method is?