QUIZ-PART-2-PPE-PART-2 PDF

Preview

Summary

ACC 205- INTERMEDIATE ACCOUNTING IPART II PPE Part 2NAME: Marvin M. Patulot Date: Professor: Sir Arnold Malaluan Section: BSMA 2203 Score:LONG QUIZ: Subsequent to initial recognition, an entity shall use this model to account for its items of property, plant and equipment. a. cost model c. revaluati...

Description

Page | 1

ACC 205- INTERMEDIATE ACCOUNTING I PART II PPE Part 2 NAME: Marvin M. P Patulot atulot Professor: Sir Arnold Malaluan

Section: BSMA 2203

Date: Score:

LONG QUIZ: 1. Subsequent to initial recognition, an entity shall use this model to account for its items of property, plant and equipment. a. cost model c. revaluation model b. fair value model d. a or c as an accounting policy choice 2. It is the systematic allocation of the depreciable amount of an asset over its estimated useful life. a. Depreciation c. Impairment b. Revaluation d. all of these 3. Which of the following is considered when depreciating an asset under the cost model? a. The cost of the asset. c. The change in the fair value of the asset. b. The useful life of the asset. d. Both a and b. 4. Which of the following depreciation methods will most likely result in the highest amount of reported profit in the early years of an asset’s useful life? a. Straight line c. 150% declining balance b. Double declining balance d. Sum-of-the-years’ digits 5. The most commonly used depreciation method is the a. straight-line method. c. replacement method. b. depreciation method based on revenue. d. inventory method. 6. Assume that a drill press is rebuilt during its sixth year of use so that its useful life is extended 5 years beyond the original estimate of 10 years. If the asset recognition criteria are met, the cost of rebuilding the drill press should be charged to the appropriate: a. expense account c. asset account b. accumulated depreciation account d. liability account 7. The carrying amount of an item of property, plant and equipment that is subsequently accounted for under the cost model is equal to a. the historical cost less any accumulated depreciation. b. the fair value less any accumulated depreciation. c. the historical cost less any accumulated depreciation and any accumulated impairment lo loss. ss. d. the fair value less any accumulated depreciation and any accumulated impairment loss. 8. On January 1, 20x1, SIMPLETON FOOL Co. acquired a piece of equipment with an estimated useful life of 4 years and a residual value of ₱80,000 for a total purchase cost of ₱400,000. At normal capacity, the equipment’s estimated service life is 40,000 hours or a total productive capacity of 160,000 units of a product. In 20x1 and 20x2, the actual manufacturing hours were 16,000 and 8,000, respectively, and the actual units produced were 60,000 and 30,000,

Page | 2 respectively. How much is the accumulated depreciation on December 31, 20x2 under each of the following depreciation methods? SLM SYD DDB UOPM (input) UOPM (output) a. 100,000 160,000 200,000 129,000 120,000 b. 160,000 224,000 300,000 192,000 180,000 c. 80,000 128,455 200,000 128,000 120,000 d. 160,000 224,000 300,000 180,000 192,000 *SLM = straight line method; SYD = sum-of-the-years’ digits; DDB = double declining balance; UOPM = units-of-production method

9. DEPLORABLE BAD Co. acquired a machine on October 5, 20x1 for a total cost of ₱160,000. The machine was estimated to have a useful life of 4 years and a salvage value of ₱10,000. DEPLORABLE BAD Co. uses the sum-of-the-years’ digits method and prorates full-year depreciation to the nearest month. DEPLORABLE BAD Co. sold the machine on December 27, 20x2 for ₱40,000. How much is the gain (loss) on the sale? a. (48,750) c. (32,250) b. 48,750 d. 32,250 10. On January 1, 20x1, DEVIOUS CROOKED Co. depreciate them as a single unit: Cost Residual value Machine tools 80,000 4,000 Meters 64,000 2,000 Returnable containers 120,000 What is the composite life? a. 5.40 b. 5

purchased the following assets and decided to Useful life 3 years 5 years 6 years

c. 4.70 d. 4.50

11. The small tools account of ATROCIOUS CRUEL Co. has a balance of ₱600,000 as of January 1, 20x1. The movements in this account during the year were as follows: Feb. April Sept. Nov. Cost of new tools acquired 40,000 120,000 88,000 Cost of old tools retired 24,000 48,000 72,000 Disposal proceeds of old tools 2,000 3,200 4,000 How much is the depreciation expense in 20x1 under the retirement method? a. 134,800 c. 144,000 b. 166,800 d. 118,800 12. On January 1, 20x1, COCKY ARROGANT Co. acquired a piece of equipment for ₱4,000,000. The equipment will be used to reproduce gaming software that is expected to be marketed for 3 years. The equipment is expected to be used in producing products over the next two years, after which the equipment will be disposed of at a negligible amount. The estimated revenues from the software are as follows: Estimated revenu revenues es Year 20x1 120,000,000 20x2 80,000,000 20x3 40,000,000

Page | 3 Total

240,000,000

The actual revenue earned in 20x1 is ₱180,000,000. The depreciation expense in 20x1 is most likely equal to a. 3,000,000 c. 2,977,667 b. 2,000,000 d. 333,333 13. On January 1, 20x1, DIMINUTIVE SMALL Co. signed a ten-year lease for office space. DIMINUTIVE has the option to renew the lease for an additional five-year period on or before January 1, 2x10. During the first half of January 20x2, DIMINUTIVE Co. incurred the following costs: ● ₱3,600,000 for general improvements, with an estimated useful life of ten years, on the leased premises. ● ₱400,000 for office furniture with an estimated useful life of ten years. ● ₱800,000 for movable assembly line equipment with a useful life of 5 years. At the time the leasehold improvements were finished, DIMINUTIVE Co. was uncertain as to the exercise of the lease renewal option. How much is the depreciation expense on the leasehold improvements in 20x2? a. 400,000 c. 533,333 b. 360,000 d. 488,889 14. On January 1, 20x1, KNAVE RASCAL Co. acquired a machine for a total cost of ₱80,000,000. The machine was depreciated using the sum-of-the-years’ digits method over a period of 10 years. On January 1, 20x4, KNAVE Co. changed its depreciation method to the double declining balance method. How much is the depreciation expense in 20x4? a. 40,727,272 c. 12,556,780 b. 11,635,782 d. 13,556,702 15. ENTREAT Co. acquired an aircraft from BEG, Inc. on January 1, 20x1 for a total cost of ₱24,000,000. The aircraft was estimated to have a useful life of 10 years. ENTREAT Co. uses the straight line method of depreciation. On January 1, 20x5, a major part of the aircraft was replaced for a total cost of ₱3,200,000. ENTREAT Co. cannot determine the cost of the replaced part. How much is the loss on replacement? a. 1,920,000 c. 1,200,000 b. 1,280,000 b. 0 16. On December 31, 20x1, SWIMMY UNSTEADY Co. determined the following information for the purpose of revaluing its building: Historical cost 80,000,000 Initial estimate of useful life 25 Actual life 10 Replacement cost 140,000,000 Effective life 8 Remaining economic life 17 Income tax rate 30% If SWIMMY UNSTEADY Co. uses the proportional method of recording, the entry to record the revaluation would include which of the following?

Page | 4 a. b. c. d.

a debit to accumulated depreciation of ₱32,000,000. a credit to accumulated depreciation of ₱12,800,000 12,800,000. a credit to building of ₱15,200,000. a debit to deferred tax of ₱14,160,000.

17. On December 31, 20x1, the building of LITHE FLEXIBLE Co. was revalued. Information determined on revaluation date is as follows: Historical cost 72,000,000 Accumulated depreciation 16,000,000 Initial estimate of residual value 8,000,000 Actual life on revaluation date 10 Replacement cost 144,000,000 Effective life 12 Remaining economic life 20 Income tax rate 30% The estimate of residual value remained unchanged. How much are the (1) revaluation surplus, net of tax, on December 31, 20x1 and (2) revised annual depreciation in periods subsequent to December 31, 20x1? a. 25,900,000; 4,650,000 b. 37,000,000; 895,000 c. 37,000,000; 4,650,000 d. 25,900,000; 4,250,000 18. On December 31, 20x1, the building of Borong Co. with a historical cost of ₱320,000,000, accumulated depreciation of ₱160,000,000, and an estimated useful life of 20 years was determined to have a fair value of ₱200,000,000. Borong Co. is subject to an income tax rate of 30%. Under the elimination method, the entry to record the revaluation includes a. a debit to accumulated depreciation for ₱160,000,000 160,000,000. b. a debit to accumulated depreciation for ₱40,000,000. c. a debit to building for ₱120,000,000. d. a credit to building for ₱160,000,000. 19. On December 31, 20x1, the land of CONJUNCTION UNION Co. with an original cost of ₱40,000,000 was revalued to a fair value of ₱28,000,000. This was the first revaluation made on the land since it was purchased 2 years ago. On December 20x4, the building was appraised at a fair value of ₱48,000,000. How much is the gain on impairment reversal in 20x4? a. 8,000,000 c. 12,000,000 b. 20,000,000 d. 0 20. FORTITUDE ENDURANCE Co. purchased a piece of equipment on August 14, 20x1 for a total cost of ₱400,000. The equipment has an estimated useful life of 10 years and a residual value of ₱80,000. It is the policy of FORTITUDE Co. to provide for full-year depreciation in the year of acquisition and none in the year of disposal. On May 12, 20x4, the equipment was sold for ₱120,000. Disposal costs of ₱8,000 were incurred. How much is the gain (loss) on the sale? a. (184,000) c. 192,000 b. 184,000 d. (192,000) “Pride goes before destruction, a haughty spirit before a fall.” (Proverbs 16:18)

Page | 5

- END -...