Reference no: EM133149216

Question 1 - The Masion Company completed the following transactions in the year to December 31, 2022:

I. Sold a car for P9,250 to the uncle of Masion's finance director.

II. Sold goods to the value of P12,400 to Ryzza, a company owned by the daughter of Masion's managing director. Ryzza has no other connection with Masion.

Which transactions, if any, require disclosure in the financial statements of Masion under PAS24?

a. Transaction (1) only

b. Transaction (2) only

c. Both transactions

d. Neither transaction

Question 2 - Masisay Corp. carries its inventory at the lower of cost and net realizable value. At December 31, 2022, the cost of inventory, determined under the first-in, first-out (FIFO) method, as reported in its financial statements for the year then ended, was P10 million. Due to severe recession and other negative economic trends in the market, the inventory could not be sold during the entire month of January 2023. On February 10, 2023, Masisay Corp. entered into an agreement to sell the entire inventory to a competitor for P6 million. Presuming the financial statements were authorized for issuance on February 15, 2023, should Masisay Corp. recognize a write-down of P4 million in the financial statements for the year ended December 31, 2022?

a. Yes, a write-down should be recognized by an amount to be determined with reference to the active market and not solely on the basis of the agreement to sell entered into by Masisay.

b. No, since the agreement to sell was entered into after the financial statements were authorized for issue.

c. Yes, Masisay Corp. should recognize a write-down of P4 million in the financial statements for the year ended December 31, 2022.

d. No, unless Masisay changed its method of accounting to Specific Identification or Weighted Average which is more appropriate for its inventory.