Reference no: EM133180980
Questions -
Q1. Bergs Company has a single investment property which had originally cost P580,000 on January 1, 2018. On December 31, 2020, its fair value was P600,000 and on December 31, 2021, it had a fair value of P590,000. On acquisition, the property had a useful life of 40 years. What should be the expense recognized in Bergs Company's profit or loss for the year ending December 31,2021 under the fair value model and cost model?
a. Fair Value model P10,000 ; Cost model P14,750
b. Fair Value model P24,500 ; Cost model P10,000
c. Fair Value model P14,750 ; Cost model P14,500
d. Fair Value model P10,000 ; Cost model P14,500
Q2. Bergs Co. purchased the following equity securities on January 1, 2021 for a total amount of P360,000.
Nowl Co. preference shares P200,000
Knowie Co. ordinary shares 160,000
The shares did not qualify for recognition as held for trading, thus they were classified as investment in equity securities measured at fair value through other comprehensive income.
On December 31, 2021, the portfolio of Bergs Co. comprised the following: Nowl Co. preference shares- P240,000; Knowie Co. ordinary shares- P60,000
On December 31, 2022, the portfolio of Bergs Co. comprised the following: Nowl Co. preference shares- P220,000;Knowie Co. ordinary shares- P180,000
On February 2, 2023, all of the Nowl Co. preference shares were sold for P160,000 net of transaction costs.
How much is the unrealized gain (loss) recognized in other comprehensive income on December 31, 2021?
a. P0
b. P(60,000)
c. P100,000
d. P60,000
Q3. Bergs Company purchased an equipment for P5,000,000 on January 1, 2021. The equipment had useful life of 5 years with no residual value.
On December 31, 2021, the entity classified the equipment as held for sale. On such date, the fair value less cost of disposal of the equipment was P3,500,000.
On December 31, 2022, the entity believed that the criteria for classification as held for sale can no longer be met. Accordingly, the entity decided not to sell the equipment but to continue to use it. On December 31, 2022, the fair value less cost of disposal of the equipment was P2,700,000. What amount should be included in profit or loss in 2022 as a result of the reclassification of the equipment to property, plant and equipment?
a. P800,000 loss
b. P800,000 gain
c. P300,000 gain
d. P300,000 loss
Q4. On January 1, 2021, the Bergs Company acquired a building to be held as investment property for P5,000,000. After initial recognition, the entity measured the investment property using the cost model because the fair value cannot be measured reliably. On December 31, 2021, management assessed the useful life of the building at 20 years from the date of acquisition and presumed the residual value to be nil because the fair value cannot be determined reliably. At year-end, there was an offer to buy the building amounting to P 6,500,000 but management declined this offer. What is the carrying amount of the building on December 31, 2021?
a. P4,750,000
b. P6,500,000
c. P5,000,000
d. P6,175,000
Q5. Bergs Company accounted for noncurrent assets using the revaluation model. On October 1, 2021, the entity classified a land as held for sale. At that date, the carrying amount of the land was P5,000,000 and the balance in the revaluation surplus was P1,500,000.
At same date, the fair value of the land was estimated at P5,500,000 and the cost of disposal at P100,000. On December 31, 2021, the fair value less cost of disposal of the land did not change. The land was sold on January 31, 2022 for P6,000,000.
What amount of OCI is reclassified to retained earnings in 2022?
a. P1,500,000
b. P0
c. P500,000
d. P2,000,000
Q6. Bergs Company's accounting policy with respect to investment property is fair value model at the end of each reporting period. One investment property had a fair value of P8,000,000 on December 31, 2021. The property was acquired on January 1, 2021 for a total of P7,600,000, made up of P6,900,000 paid to the vendor, P300,000 to the local authority as property transfer tax and P400,000 paid to professional advisers. The useful life of the property is 40 years. What amount should be recognized as gain for 2021 in respect of the investment property?
a. P700,000
b. P590,000
c. P800,000
d. P400,000
Q7. Bergs Co. purchased the following equity securities on January 1, 2021 for a total amount of P360,000.
Nowl Co. preference shares P200,000
Knowie Co. ordinary shares 160,000
The shares did not qualify for recognition as held for trading, thus they were classified as investment in equity securities measured at fair value through other comprehensive income.
On December 31, 2021, the portfolio of Bergs Co. comprised the following: Nowl Co. preference shares- P240,000; Knowie Co. ordinary shares- P60,000.
On December 31, 2022, the portfolio of Bergs Co. comprised the following: Nowl Co. preference shares- P220,000;Knowie Co. ordinary shares- P180,000.
On February 2, 2023, all of the Nowl Co. preference shares were sold for P160,000 net of transaction costs.
How much is the unrealized gain (loss) recognized in other comprehensive income on December 31, 2021?
a. P(40,000)
b. P40,000
c. P0
d. P100,000