1.

Lia Company has two products with the following and selling price:

PRODUCT X PRODUCT Y

Selling Price 2,000,000 3,000,000

Estimated Selling cost 600,000 700,000

Material and Conversion cost 1,500,000 800,000

At year-end the manufacture of inventory has completed but no selling cost has yet been incurred. Under
LCNRV by individual item, the inventory shall be measured at what amount?

a. 3,700,000
b. 3,200,000
3,800,000
d. 3,300,000

[Link] Company used the perpetual method to read inventory transactions for the current year.
sales 6,500,000

cost of goods sold 4,600,000

inventory 1,900,000

inventory losses 120,000

sales return 150,000

In the latter part of the year, the entity recorded a P150. credit sale of goods costing P100,000. These
goods were on FOB destination terms and were in transit at years and were included in the physical
count.
The inventory at year-end determined by physical count has a cost of P2.000.000 and a net realizable
value of P1 2000 Any inventory written down is not yet recorded.
What amount should be reported as the cost of goods sold?

a. 5,020,000
b. 4,500,000
c. 4,720,000
d. 4,920,000

3. Melon Company provided the following data at year-end:

●​ Historical cost 1,200,000

●​ Estimated selling price 1,300,000
●​ Estimated completion and selling cost 150,000
●​ Replacement cost 1,100,000
What amount should be reported as inventory at year-end?

a.​ 1,100,000
b.​ 1,150,000
c.​ 1,200,000
d.​ 1,300,000

4. Aloha Company determined the following data at year-end:

●​ historical cost 2,000,000

●​ current replacement cost 1,400,000
●​ NRV 1,800,000
●​ NRV less normal profit margin 1,700,000
●​ FV 1,900,000

What amount should be reported as inventory at year-end?

a. 1,400,000
b. 1,700,000
c. 1.800,000.
d. 1,900,000

5. Chewy Company determined the chocolate inventory on a FIFO basis at P5,200,000 with a
replacement cost of P4,000,000.
Chewy Company estimated that, after further processing costs of P2,400,000, the chocolate could be sold
as finished candy bars. for P8.000.000. The normal profit margin is 10% of sales. What amount should be
reported as chocolate inventory at year-end?

a.​ 5,600,000
b.​ 5,200,000
c.​ 4,800,000
d.​ . 4.000.000
e.​
6. YahooCompany provided the following information for the current year:

●​ Beginning inventory 650,000

●​ Net purchases 2,500,000
●​ Net sales 3,300,000

At year-end, a physical inventory revealed that the endine inventory was only P400.000. The gross profit
on sales has remained constant at 25%. The entity suspected that some inventory may have been
pilfered by one of the employees.
What amount should be reported as cost of missing inventory at year-end?

a.​ 275,000
b.​ 675,000
c.​ 825,000
d.​ 425.000
7. At year-end a storm surge damaged the warehouse and the entire inventory and many accounting
records and were completely destroyed.

JANUARY 1 DECEMBER 31

inventory 1,500,000

purchases 5,500,000

cash sales 900,000

collection of AR 8,400,000

AR 700,000 1,100,000

gross profit rate on sales 40%

What amount should be reported as loss on inventory from the storm surge?

a. 1,180,000
b. 1,720,000
c. 2,700,000
d. 2,260,000

8. On September 30. a fire at Brock Company's only warehouse caused severe damage to the entire
inventory. Based on recent history. The entity has a gross profit of 30% on the cost of goods sold. A
physical inventory disclosed usable damaged goods which he sold to a jobber for P100.000. The
following information is available from the records for the nine months ended September 30:

Inventory-January1 - 1,100,000
Purchases 6,000,000
Net sales 7,280,000

What amount should be reported as fire loss?

a.​ 1.500.000
b.​ 1,400,000
c.​ 2,004,000
d.​ 1,964,000

9. At year-end. Frenzy Company had a fire which completely destroyed the goods in process inventory. A
physical inventory was taken after the fire.
December 31 january 1
FG 4.5M 6M
FGoods In Process 0 4.3M
Rm 2M 1.7M
Factory Supplies 400K 500K
During the year, the entity reported sales P20,000,000, purchases P3,800,000, freight P200,000, direct
labor P5,000,000 and manufacturing overhead at 60% of direct labor. The Average gross profit is 30% on
sales.

1. What amount should be reported as cost of raw materials used?

a. 5,700,000
b. 3,700,000
c. 3,800.000
d. 3,600,000

2. What amount should be reported as total manufacturing cost?

a. 13,000,000
b. 11,800,000
c. 11,700,000
d. 11,600,000

3. What amount should be reported as cost of goods and

a. 12,000,000
b. 16,000,000
c. 13,000,000
d. 14,000,000

4. What amount should be reported as cost of goods in process inventory destroyed by fire?

a. 3,500,000
b. 3,800,000
C. 2,500,000
d. 1,500,000

10. Dean Company used the retail inventory method to estimate

cost retail

BEG INV 700k 1M

purchases 4.1M 6.3M

markup 700K

markdown 500K

sales 6.8M

normal shoplift losses 100k

Under the average cost approach, what amount should be reported as cost of end inv?
a.​ 408,000
b.​ 600,000
 c.​ 384,000
d.​ 360,000

11. Huff Company provided the following information for the current year:
COST RETAIL
beg inv 750k 1M

purchases 4.150M 5.8M

additional markup o 200k

Sales for the year totaled P5,500,000. Markdown amounted to P100,000. Under the approximate lower of
average cost or net realizable value approach in applying the retail method what amount should be
reported as cost of ending inventory?

a, 1,050,000
b. 1,400,000
c. 994.000
d. 980,000

12. Airborne Company used the average cost retail inventory method.

●​ Beginning inventory 1,650,000 2,000,000

●​ Net purchases 3,725,000 4,950,000
●​ Departmental transfer-credit 200,000 300,000
●​ Net markup 150,000
●​ Normal inventory shortage - sales price 100,000
●​ Employee discounts 200,000
●​ Sales, including sales of P400,000 of items which were marked down from P500,000

What amount should be reported as cost of ending inventory?

a. 1,950,000
b. 2,600,000
c. 1.924,000
d. 2,250,000

13. At the beginning of current year, Alexis Company purchased marketable equity securities to be held
as "trading" for P5,000,000. The entity also paid transaction cost amounting to P200,[Link] securities
had a market value of P5,500,000 at year-end and the transaction cost that would be incurred on sale is
estimated at P100,000. No securities were sold during the current year.

What amount of unrealized gain or loss on these securities should be reported in the income statement
for the current year?

a. 500,000 gain​
b. 500,000 loss​
c. 300,000 gain​
d. 400,000 gain
14. At the beginning of current year, Carmela Company acquired nontrading equity instrument for
P4,000,000. The transaction cost incurred amounted to P700,000. The equity instrument is irrevocably
designated as financial asset at fair value through other comprehensive [Link] fair value of the
instrument was P5,500,000 at year-end and the transaction cost that would be incurred on the sale of the
investment is estimated at P600,000.

What amount of gain should be recognized in other comprehensive income for the current year?

a. 200,000​
b. 900,000​
c. 800,000​
d. 0

15. At the beginning of current year, Marigold Company began operations. The following information
related to portfolio equity securities at year-end:

Trading Nontrading

Aggregate cost 4,000,000 6,000,000

Aggregate fair value 3,700,000 5,500,000

Aggregate lower of cost or 3,500,000 5,300,000

market value applied to each
security in the portfolio

The nontrading investments are measured at fair value through other comprehensive income by
irrevocable election.

What amount should be reported as unrealized loss as component of other comprehensive income in the
statement of comprehensive income for the current year?

a. 300,000​
b. 800,000​
c. 500,000​
d. 700,000

16. Baguio Company provided the following information at year-end regarding nontrading equity
investments:

Aggregate cost .................................... 1,700,000​

Unrealized gains ................................. 40,000​
Unrealized losses ............................... 260,000​
Net realized gains during the current year .... 300,000

The nontrading equity investments are measured at fair value through other comprehensive income by
irrevocable election.
At the beginning of current year, the entity reported an unrealized loss of P15,000 to reduce investments
to market on a portfolio basis.

In the year-end statement of changes in equity, what amount of unrealized loss should be reported as
component of other comprehensive income?

a. 260,000​
b. 220,000​
c. 205,000​
d. 0

17. Wray Company provided the following data for 2024:

On September 1, 2024, Wray Company received a P500,000 cash dividend from Seco Company. Wray
Company owned a 15% interest in Seco Company.

On October 1, 2024, Wray Company received a P50,000 liquidating dividend from King Company. Wray
Company owned a 5% interest in King Company.

Wray Company owned a 10% interest in Bow Company which declared and paid P2,000,000 cash
dividend on November 15, 2024.

What amount should be reported as dividend income for 2024?

a. 700,000​
b. 560,000​
c. 760,000​
d. 200,000

18. Wood Company owned 20,000 shares of Arlo Company 200,000 shares of P100 par, 6% cumulative
nonparticipating preference share capital and 10,000 shares representing 2% ownership of Arlo
Company's ordinary share capital.

During 2024, Arlo Company declared and paid preference dividends of P2,400,000. No dividends had
been declared or paid during 2023.

In addition, Wood Company received a 5% share dividend on ordinary share from Arlo Company when
the market price of Arlo Company's ordinary share was P110.

What amount should be reported as dividend income for 2024?

a. 120,000​
b. 125,000​
c. 240,000​
d. 245,000

19. Adam Company owned 50,000 ordinary shares held for sale. The 50,000 shares were purchased for
P120 per share. During the year, the investee distributed 50,000 share rights to the investor.

The investor was entitled to buy one new share for P90 cash and two of these rights.
Each share had a market value of P130 and each right had a market value of P20 on the date of issue.

What amount should be recorded as cost of the new shares acquired by exercising the rights?

a. 2,250,000​
b. 3,250,000​
c. 3,050,000​
d. 5,500,000

20. Haste Company invested in shares of another entity.

Year Number of Shares Cost

2022 20,000 2,000,000

2023 40,000 3,500,000

In 2024, the entity received 60,000 rights to purchase one share at P80.

Five rights are required to purchase each share. At issue date, rights had a market value of P5 each.

The entity used rights to purchase 10,000 additional shares and the investee allowed the rights not
exercised to lapse.

What amount was debited to investment account for the purchase of the additional new shares?

a. 1,100,000​
b. 1,050,000​
c. 800,000​
d. 900,000

21. On January 1, 2024, Eden Company purchased 100,000 ordinary shares at P80 per share classified
as nontrading equity investment through other comprehensive income.

On September 30, 2024, the entity received 100,000 share rights to purchase 20,000 shares at P90 per
share. The share rights had an expiration date of February 1, 2025.

On September 30, 2024, each share had a market value of P114 and the share right had a market value
of P5.

1. What amount should be reported on September 30, 2024 as investment in share rights?

a. 500,000​
b. 400,000​
c. 100,000​
d. 600,000
2. What amount should be reported as total cost of the new investment if all of the share rights
are exercised?

a. 1,800,000​
b. 1,600,000​
c. 2,200,000​
d. 2,400,000

22. At the beginning of current year, Sage Company bought 40% of Bee Company's outstanding ordinary
shares for P4,000,000. The carrying amount of Eve's net assets at the purchase date totaled P9,000,000.

Fair values and carrying amounts were the same except for plant and inventory, for which fair values
exceeded their carrying amounts by P900,000 and P100,000, respectively.

The plant has an 18-year life. All inventory was sold during the current year.

During the current year, the investee reported net income of P1,200,000 and paid a P200,000 cash
dividend.

What amount should be reported as investment in associate at the end of current year?

a. 4,400,000​
b. 4,420,000​
c. 4,340,000​
d. 4,220,000

23. At the beginning of current year, Kean Company purchased 30% interest in Pod Company for
P2,500,000.

On this date, Pod Company's shareholders' equity was P5,000,000. The carrying amounts of Pod
Company's identifiable net assets approximated their fair values, except for land which had a fair value
exceeded the carrying amount by P2,000,000.

The investee reported net income of P1,000,000 and paid no dividends during the current year.

What amount should be reported as investment in associate at the end of current year?

a. 2,100,000​
b. 2,200,000​
c. 2,800,000​
d. 2,760,000

24. On April 1, 2024, Owl Company purchased 30,000 shares of Eagle Company's 100,000 outstanding
ordinary shares at P200 per share.

On December 15, 2024, Eagle Company paid P1,000,000 in dividends. Eagle Company's net income for
2024 was P5,000,000 earned evenly throughout the year.
What amount of income from the investment should be reported for the current year?

a. 1,500,000​
b. 1,250,000​
c. 1,125,000​
d. 1,425,000

24. At the beginning of current year, Well Company purchased 10% of Rea Company's outstanding
ordinary shares for P4,000,000.

Well Company is the largest single shareholder of Rea Company and Well Company's officers are a
majority of Rea Company's board of directors.

Rea Company reported net income of P5,000,000 for the current year and paid dividends of P1,500,000.

What amount should be reported as investment in associate at the end of current year?

a. 4,350,000​
b. 4,500,000​
c. 4,000,000​
d. 3,850,000

25. Moss Company owned 20% of Dubro Company's preference share capital and 50% of the ordinary
share capital.

Dubro Company's share capital outstanding comprised 10% cumulative preference shares P2,000,000
and ordinary share capital P7,000,000.

Dubro Company reported net income of P5,000,000 for the current year.

What amount should be recorded as investment income for the current year?

a. 2,400,000​
b. 2,500,000​
c. 2,600,000​
d. 2,700,000

26. At the beginning of current year, Gold Company purchased 40% of the outstanding ordinary shares of
another entity for P9,500,000 when the net assets of the investee amounted to P15,000,000.

At acquisition date, the carrying amounts of the identifiable assets and liabilities of the investee were
equal to their fair values, except for equipment whose fair value was P3,000,000 greater than carrying
amount, land whose fair value was P500,000 greater than cost and inventory whose fair value was
P2,000,000 greater than cost.

The equipment had a remaining life of 4 years. The land was unsold and the inventory was sold during
the current year.

The investee reported net income of P10,000,000, paid P400,000 cash dividend and issued 10% share
dividend during the current year.
What amount should be reported as investment in associate at the end of current year?

a. 11,400,000​
b. 10,800,000​
c. 11,900,000​
d. 12,400,000

27. At the beginning of the year, Iceland Company purchased 40% of the outstanding ordinary shares of
an investee for P3,500,000 when the net assets of the investee amounted to P7,000,000.

At acquisition date, the carrying amounts of the identifiable assets and liabilities of the investee were
equal to their fair values, except for equipment whose fair value was P2,500,000 greater than the carrying
amount. The equipment had a remaining life of 5 years.

The investee reported net income of P4,000,000 and paid P1,000,000 cash dividend during the current
year.

What amount should be reported as investment income for the current year?

a. 1,350,000​
b. 1,250,000​
c. 1,600,000​
d. 1,700,000

28. Rainbow Company acquired 40% of another entity’s shares on January 1, 2024 for P15,000,000. The
investee’s assets and liabilities at that date were:

Carrying amount / Fair value

●​ Cash — 1,000,000 / 1,000,000

●​ Accounts receivable — 4,000,000 / 4,000,000
●​ Inventory – FIFO — 8,000,000 / 6,000,000
●​ Land — 5,500,000 / 8,000,000
●​ Plant and equipment – net — 14,000,000 / 12,000,000
●​ Liabilities — (7,000,000) / (7,000,000)

Total: 25,500,000 / 36,000,000

●​ The plant and equipment have a 10-year remaining useful life. The inventory was all sold in 2024.
●​ The entity sold the land in 2025 for P8,000,000 and reported a gain of P2,500,000.
●​ The investee reported net income of P3,000,000 for 2024 and P5,000,000 for 2025.
●​ The investee paid P1,000,000 cash dividend on December 31, 2024 and P2,000,000 on
December 31, 2025.
1.​ What amount should be reported as investment income for 2024?​
a. 400,000​
b. 480,000​
c. 880,000​
d. 800,000
 2.​ What amount should be reported as investment income for 2025?​
a. 1,080,000​
b. 2,280,000​
c. 1,680,000​
d. 2,680,000
3.​ What amount should be reported as investment in associate on December 31, 2025?​
a. 15,080,000​
b. 15,400,000​
c. 15,360,000​
d. 15,680,000

29. On January 1, 2024, Paradox Company purchased 9% bonds with a face amount of P4,000,000 for
P3,756,000 to yield 10%.

The bonds are dated January 1, 2024, mature on December 31, 2033, and pay interest annually on
December 31. The bonds are measured at amortized cost.

What amount should be reported as interest revenue for 2024?

a. 400,000​
b. 344,400​
c. 360,000​
d. 375,600

30. On July 1, 2024, Beast Company purchased P5,000,000 face amount, 8% bonds for P4,615,000 to
yield 10% per year to be held as financial asset at amortized cost. The bonds pay interest semiannually
on January 1 and July 1.

On December 31, 2024, what amount should be reported as interest receivable?

a. 184,600​
b. 250,000​
c. 230,750​
d. 200,000

31. On July 1, 2024, Cody Company paid P1,198,000 for bonds with a face amount of P1,000,000 to be
held as financial asset at amortized cost.

Interest is paid on June 30 and December 31. The bonds were purchased to yield 8%. The entity used
the effective interest method.

What is the carrying amount of the bond investment at December 31, 2024?

a. 1,207,900​
b. 1,198,000​
c. 1,196,920​
d. 1,193,050
32/ On July 1, 2024, York Company purchased P1,000,000 of 8% bonds for P946,000, including accrued
interest of P40,000. The bonds were purchased to yield 10% interest. The bonds mature on January 1,
2029, and pay interest annually on January 1. The bonds are measured at amortized cost.

On December 31, 2024, what is the carrying amount of the bond investment?

a. 911,300​
b. 916,600​
c. 953,300​
d. 960,600

33. On January 1, 2024, Purl Company purchased P5,000,000 face amount 8% bonds for P4,562,000 to
be held as financial asset at amortized cost. The bonds were purchased to yield 10% interest.

The bonds mature on January 1, 2030 and pay interest annually on December 31. The interest method of
amortization is used.

What is the carrying amount of the bond investment on December 31, 2025?

a. 4,680,020​
b. 4,662,000​
c. 4,618,200​
d. 4,962,000

34. On July 1, 2024, Pell Company purchased ten-year, 8% bonds with a face amount of P5,000,000 for
P4,200,000, to be held as financial asset at amortized cost. The bonds mature on June 30, 2032 and pay
interest semiannually on June 30 and December 31.

Using the effective interest method, the entity recorded bond discount amortization of P18,000 for the six
months ended December 31, 2024.

What amount should be reported as interest income for 2024?

a. 168,000​
b. 182,000​
c. 200,000​
d. 218,000

35. Union Company used the FIFO retail method of inventory valuation. The entity provided the following
information for the current year:

Cost / Retail

●​ Beginning inventory — 600,000 / 1,500,000

●​ Purchases — 3,000,000 / 5,500,000
●​ Net markups — — / 500,000
●​ Net markdowns — — / 1,000,000
●​ Sales revenue — — / 4,500,000
●​
What amount should be recognized as estimated cost of ending inventory?

a. 1,200,000​
b. 1,040,000​
c. 1,000,000​
d. 960,000

36. Groom Company used the retail method of inventory valuation. The entity provided the following
information for the current year:

Cost / Retail

●​ Beginning inventory — 1,200,000 / 1,500,000

●​ Net purchases — 4,200,000 / 5,900,000
●​ Net markups — — / 200,000
●​ Net markdowns — — / 100,000
●​ Net sales — — / 5,500,000
1.​ What amount should be recognized as cost of ending inventory under FIFO retail?

a. 1,400,000​
b. 1,550,000​
c. 1,440,000​
d. 1,460,000

2.​ What amount should be recognized as cost of ending inventory under LIFO retail?

a. 1,400,000​
b. 1,550,000​
c. 1,600,000​
d. 1,700,000