Quizzer 211 with answer key PDF

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Quizzer 211 1. At the beginning of the current year, Rene Mining Company purchased a mineral mine for P36,000,000 with removable ore estimated by geological survey at 2,160,000 tons. The property has an estimated value of P3,600,000 after the ore has been extracted. The entity incurred P10,800,000 o...

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Quizzer 211 1. At the beginning of the current year, Rene Mining Company purchased a mineral mine for P36,000,000 with removable ore estimated by geological survey at 2,160,000 tons. The property has an estimated value of P3,600,000 after the ore has been extracted. The entity incurred P10,800,000 of development cost preparing the property for the extraction of ore. During the current year,270,000 tons were removed and 240,000 tons were sold. What amount of depletion should be included in cost of goods sold for the current year? a. 3,600,000 b. 4,050,000 c. 4,800,000 Solution: C Purchase price 36,000,000 Development cost 10,800,000 Total cost of ore property 46,800,000 Residual value (3,600,000) Depletable amount 43,200,000 Rate per ton (43,200,000/2,160,000) Total depletion for the year Depletion in cost of goods sold (240,000 X 20)

20 5,400,000 4,800,000

2. NJD Company provided the following balances at the end of the current year: Wasting asset, at cost 80,000,000 Accumulated depletion 20,000,000 Capital liquidated 15,000,000 Retained earnings 10,000,000 Depletion based on 100,000 units extracted at P50 per unit 5,000,000 Inventory at resource deposit (20,000 units) 2,000,000 What is the maximum dividend that can be declared at the end of current year? a. 14,000,000 Solution: A Retained earnings 10,000,000 Accumulated depletion 20,000,000 Total 30,000,000 Less: Capital liquidated 15,000,000 Unrealized depletion in ending inventory (20,000 X 50) 1,000,000 16,000,000 14,000,000 Maximum dividend Journal entry for declaration of maximum dividend Retained earnings Capital liquidated Dividend payable

10,000,000 4,000,000 14,000,000

At this point, the capital liquidated account has a balance of P15,000,000 plus P4,000,000 or P19,000,000. This account is presented as a deduction from total shareholders equity. 3. On June 30, 2019, Dinsay Company reported the following information: Equipment at cost 5,000,000 Accumulated depreciation 1,500,000 The equipment was measured using the cost model and depreciation on a straight line basis over a 10-year period. On December 31, 2019, the management decided to change the basis of measuring the equipment from the cost model to the revaluation model. The equipment had a fair value of P4,550,000 with remaining useful life of 5 years on December 31, 2019. Before income tax, what amount should be reported as revaluation surplus on December 31, 2019? _____________ a. 1,050,000

b. 1,300,000

Solution: B Cost – June 30, 2019 Accumulated depreciation Carrying amount – June 30, 2019 Depreciation from July 1 to Dec 31, 2019 (5,000,000/10 X 6/12) Carrying amount - December 31, 2019

(250,000) 3,250,000

Fair value – December 31, 2019 Carrying amount – December 31, 2019 Revaluation surplus – December 31, 2019

4,550,000 3,250,000 1,300,000

5,000,000 (1,500,000) 3,500,000

4. Using the same data in No.3 what is the depreciation of the equipment for 2020? a. 500,000 b. 910,000 c. 455,000 d. 650,000 Solution: B 910,000 Depreciation for 2020 (4,550,000 / 5 years) 5. Using the same data in No.3 What amount should be reported as revaluation surplus on December 31, 2020? a. 1,070,000 b. 1,040,000 c. 390,000 d. 845,000 Solution: B Revaluation surplus – December 31, 2019 1,300,000 Realization of revaluation surplus in 2020 (1,300,000 / 5years) (260,000) 1,040,000 Revaluation surplus – December 31, 2020 6. Willie Company has an equipment with a carrying amount of P1,600,000 on December 31, 2019 after recording depreciation for 2019. The following information is available on December 31, 2019 relative to the equipment: Fair value of similar equipment 1,400,000 Discounted future cash flows 1,300,000 Undiscounted future cash flows 1,350,000 At what amount should the equipment be reported on December 31, 2019? a. 1,600,000 b. 1,400,000 c. 1,300,000 d. 1,350,000 Solution: B Carrying amount 1,600,000 Recoverable amount equal to fair value 1,400,000 Which is higher than value in use Impairment loss 200,000 7. On January 1, 2019 Randy Company purchased a machine for P8,000,000 and established an annual depreciation charge of P1,000,000 over an eight-year life. During 2022, after issuing the 2021 financial statements the entity concluded that the machine suffered permanent impairment and P2,000,000 is a reasonable estimate of the amount expected to be recovered through use of the machine for the period January 1, 2022 through December 31, 2026? What is the impairment loss for 2021? a. 3,000,000 Solution: A Cost – January 1, 2019 8,000,000 Accumulated depreciation – December 31, 2021 (1,000,000 X 3) (3,000,000) Carrying amount – December 31, 2021 5,000,000 Recoverable amount – December 31,2021 2,000,000...