COMPUTATION

AGRICULTURE
Problem 22-4 (IFRS)

Forester Company provided the following assets in a fores

plantation and farm:

Freestanding trees 5,000,000

Land under trees 600,000

Roads in forest 300,000

Animals related to recreational activities 1,000,000

Bearer plants 1,500,000

Bearer animals 2,000,000

Agricultural produce growing on bearer plants 800,000

Agricultural produce harvested 1,200,000

1. What total amount should be reported as biological assets?

a. 7,800,000

b. 5,800,000

c. 5,000,000

d. 7,000,000
2. What total amount should be included in property, plant and
equipment?

a. 4,600,000

b. 3,400,000

c. 1,800,000

d. 4,200,000

PROVISION, CONTIGENT LIAB. AND ASSET

( PAS 37 )

Problem 23-6 (IAA)

Eastern Company had several contingent liabilities December 31, 2024.

The auditor obtained the following brief description of each liability.

*In May 2024, Eastern Company became involved in litigation. In

December 2024, the court assessed judgment for P 1,600,000 against
Eastern Company.

*The entity is appealing the amount of the judgment. The entity's

attorneys believed it is probable that the assessment can be reduced on
appeal by 50%.

*In July 2024, Pasig City brought action against Eastern Company for
polluting the Pasig River with its waste products.
*It is probable that Pasig City will be successful but the amount of
damages Eastern Company might have to pay should not exceed P
1,500,000.

*A personal injury liability suit for P500,000 was brought against

Eastern Company in December 2024.

What total amount should be accrued as provision on December 31,

2024?

a. 2,000,000

b.2,500,000

c.3,100,000

d. 2,300,000

PROBLEM 23-7

Star Company, a publisher, is preparing the 2024 financial statements

and must determine the proper accounting treatment for each of the
following situations: *An author filed a suit for breach of contract
seeking damages of P2,000,000 against Star Company on July 1, 2024
The entity's legal counsel believed that an unfavorable outcome is
probable. The best estimate of the court's award to the plaintiff is
P1,500,000

*During December 2024, a competitor filed suit against Star Company

for industrial espionage, claiming P3,000,000 in damages. Management
and legal counsel believed it is probable that damages will be awarded
to the plaintiff and the best estimate of the damages is P 1,000,000.
Star Company signed as guarantor for P2,000,000 loan by PNB to Moon
Company, a principal supplier of Star Company.

By reason of financial difficulties, it is probable that Star Company shall

pay the ₱2,000,000 loan with only a 60% recovery anticipated from
Moon Company.

What total amount should be accrued as provision on December

31, 2024?

a. 3,700

b. 3,300,000

c. 2,500,000

d.7,000,000

PROBLEM 23-8

TOY Company provided the following facts regarding litigation at year-

end:

*The entity is defending against a first lawsuit and believed there is a

51% chance it will lose in court. The entity estimated that damages will
be P1,000,000.

*The entity is defending against a second lawsuit for which

management believed it is virtually certain to lose in court.

If it loses the lawsuit, management estimated that damages will fall

somewhere in the range of P3,000,000 to P5,000,000 with each amount
in that range equally likely to occur.
*The entity is defending against a third lawsuit but the relevant loss will
only occur far into the future.

The present values of the endpoints of the range are P1,500,000 and
P2,500,00

The management believed the effects of time value of money on these

amounts are material.

*The entity is defending against a fourth lawsuit and believes there is

only a 25% chance it will lose in court.

If the entity loses, management believed damages will fall somewhere

in the range of P3,000,000 to P4,000,000 with each amount in the
range equally likely to occur.

What total amount should be reported as accrued litigation liability

at year-end?

a.5,500,000

b.7,000,000

c.8,500,000

d.8,500,000

PROBLEM 23-9

On February 5, 2025, an employee filed a P2,000,000 lawsuits against

Steel Company for damages suffered when a plant exploded on
December 29, 2024.
The legal counsel believed the entity would probable lose the lawsuit
and estimated the loss to be P500,000.

The employee offered to settle the lawsuit out of court for P900,000
but the entity did not agree to the settlement.

On December 31, 2024, what amount should be reported as liability

from lawsuit?

a.2,000,000

b.1,000,000

c.900,000

d.500,000

PROBLEM 23-10

On November 5, 2024, a Dunn Company truck was in an accident with

an auto driven by Bell. Dunn received notice on January 15, 2025 of a
lawsuit for P700,000 damages for personal injuries suffered by Bell. The
entity's counsel believed it is probable that Bell will be awarded an
estimated amount in the range between P200,000 and P450,000, and
no amount is a better estimate of potential liability than any other
amount because each point in the range is as likely as any [Link]
2024 financial statements were issued on March 1, 2025.

What amount of loss should be accrued on December 31, 2024?

a. 450,000

b, 200,000
c. 325,000

d. 0

PROBLEM 23-11

In May 2024, company filed suit against Wayne comapany seeking

P1,900,000 damages for patent infringement.

A court verdict in November 2024 awarded Caso Company P1,500,000

damages but Wayne Company's appeal is not expected to be decided
before 2025.

Caso Company's counsel believed it is probable that Caso Company will

be successful against Wayne Company for an estimated amount in the
range between P800, 000 and PI, 100,000 with P1,000,000 considered
the most likely amount.

What amount should Caso Company record as income from the lawsuit
for the year ended December 31, 2024?

a.1,500,000

b.1,100,000

c.1,000,000

d.0

PROBLEM 23-12
During the latter part of the year, Haze Company won a litigation award
for P 1,500,000 which was tripled to P4,500,000 to include punitive
damages. The defendant, who is financially stable, appealed only the
P3,000,000 punitive damages.

Hazel Company was awarded P5,000,000 in an unrelated suit it filed

which is being appealed by the defendant. Counsel is unable to
estimate the outcome of these appeals.

What amount should be reported as pretax gain for the year?

a.1,500,000

b.4,500,000

c.5,000,000

d.9,500,000

FINANCIAL INSTRUMENT- PRESENTATION

( PAS 22 )
Problem 24-4 (IAA)

Marion Company issued P5,000,000 face amount 12% convertible

bonds payable at 110 at the beginning of current year. The bonds pay
interest semiannually on June 30 and December 31.

It is estimated that the bonds would sell only at 102 without the
conversion feature.
Each P1,000 bond is convertible into 10 ordinary shares with P100 par
value.

What is the increase in shareholders' equity arising from the original

issuance of the convertible bonds payable?

a. 400,000

b. 500,000

c. 100,000

d. 0

Problem 24-5 (IAA)

At the beginning of current year, Sunshine Company issued 4-year 12%

convertible bonds payable with face amount of P5,000,000 at 115
paying interest annually every December 31.

It is reliably determined that the bonds would sell at P4,700,000

without conversion feature.

Each bond is convertible into 8 equity shares of P100 par value. At the
end of the year, all of the bonds were converted into equity shares.

1. What is the initial carrying amount of the bonds payable?

a. 5,750,000

b. 4,700,000
c. 5,000,000

d. 5,500,000

2. What is the increase in shareholders' equity as a result of issuance of

convertible bonds payable?

a. 1,050,000

b. 1,000,000

c. 750,000

d. 300,000

INCOME TAX ( PAS 34 )

Problem 25-7 (IAA)

Hilton Company reported pretax accounting income of P6,200,000 for

current year. Included in accounting income was P200.000 tax-exempt
interest revenue on government bonds held by the entity.

The income statement included depreciation expense of P500,000 for a

machine with cost of P3,000,000.

The income tax return reported P600,000 as depreciation of the

machine. The enacted tax rate is 25% for current year and future years.

What amount should be reported as current tax expense?

a. 1,550,000
b. 1,500,000

c. 1,475,000

d. 1,525,000

Problem 25-8 (AICPA)

Mont Company showed accounting income of P8,000,000 before

provision for income tax expense. The following items should be
considered in computing taxable income:

Income from tax-exempt government bonds 600,000

Depreciation deducted for tax purposes in excess of depreciation for

accounting purposes 400,00

Proceeds received from life insurance

on death of officer 1,500,00

Income tax rate 25%

What amount should be reported as current tax expense?

a. 1,375,000

b. 2,000,000

c. 1,850,000

d. 1,750,000

Problem 28-4 (AICPA Adapted)

 Farr Company had the following transactions during the first quarter:

Loss from typhoon 700,000

Payment of fire insurance premium

for calendar year 100,00

What total amount of expenses should be included in the income

statement for the first quarter?

a. 800,00

b. 725,000

c. 200,000

d.0

Problem 28-5 (AICPA Adapted)

Harper Company incurred an inventory loss from market decline of

P840,000 on June 30.

What amount of the inventory loss should be recognized in the

quarterly income statement for the three months ended June 30?

a. 210,000

b. 280,000

c. 420,000

d. 840,000
Problem 28-6 (AICPA Adapted)

On June 30, Mill Company incurred a P1,000,000 loss from disposal of a

business asset. Also, on June 30, the entity paid P400,000 for property
taxes assessed for the current calendar year. What total amount
should be included in the determination of the net income or loss for
the six-month interim period ended June 30?

a. 1,400,000

b. 1,200,000

C. 900,000

d. 700,000

Problem 28-7 (AICPA Adapted)

Vim Company estimated the depreciation expense for the current year
at P500,000, and the year-end bonuses to employees at P1,200,000.

In the interim income statement for the six months ended June 30,
what total amount of these expenses should be reported?

a. 1,700,000

b. 1.100,000

C. 500,000

d. 850,000

Problem 28-8 (IFRS)

Mount Company operates in the travel industry and incurs costs
unevenly throughout the year. Advertising costs of P2,000,000 were
incurred on March 1, and staff bonuses are paid at year-end based on
sales.

Staff bonuses are expected to be around P20,000,000 for the year. Of

that sum, P3,000,000 would relate to the period ending March 31.

What total amount of expenses should be included in the quarterly

financial report ending March 31?

a 7,000,000

b. 5,500,000

c. 5,000,000

d. 3,500,000

Problem 28-9 (AICPA Adapted)

Bailar Company, a calendar-year entity, reported the Bailar income

before income tax and effective tax rate for the first three quarters of
the current year:

Income Tax before Effective Tax Rate

First quarter 6,000,000 30%

Second quarter 7,000,000 30%

Third quarter 8,000,000 25%

What amount should be reported as income tax expense for the

third quarter? 5,250,000
a. 5,250,00

b. 1,350,000

c. 2,400,000

d. 2,000,000

Problem 28-10 (IFRS)

The terms and conditions of employment with Pauline Company

included entitlement to share in the staff bonus system, under which
5% of the income for the year before charging the bonus is allocated to
the bonus pool, provided the annual net income exceeds P50,000,000.

The income before accrual of any bonus for the first half of the current
year amounted to P40,000,000 and the latest estimate of the income
before accrual of any bonus for the year as a whole is P60,000,000.

What amount should be recognized as bonus expense for the first

half of the current year?

a. 1,500,000

b. 3,000,000

c. 2,000,000

d.0

Problem 28-11 (IFRS)

Davao Company prepares quarterly interim financial reports. The entity
sells electrical goods and normally 5% of customers claim on their
warranty.

The warranty expense in the first quarter was calculated at 5% of sales

to date which amounted to P10,000,000.

However, in the second quarter, a design fault was found and warranty
claims were expected to be 10% for the whole year. Sales for the
second quarter amounted to P15,000,000.

What amount of warranty expense should be reported in the

interim income statement for the second quarter?

a. 2,000,000

b. 1,250,000

c. 1,500,000

d. 750,000

Problem 28-12 (IAA)

Everest Company has historically reported bad debt expense of 5%

of sales in each quarter. For the current year, the entity followed the
same procedure in the three quarters of the year

However, in the fourth quarter, the entity determined that bad debt
expense for the entire year should be P450,000.
Sales in each quarter of the year were first quarter P2,000,000, second
quarter P1,500,000, third quarter P2,500,000 and fourth quarter
P4,000,000.

What amount of bad debt expense should be recognized for the

fourth quarter?

a. 200,000

b. 150,000

c. 300,000

d. 400,000

Problem 28-12 (AICPA Adapted)

Kell Company reported P950,000 net income for the quarter ended
September 30, 2024 which included the following after tax items:

A P600,000 expropriation gain, realized on April 30, 2024, was allocated

equally to the second, third and fourth quarters of 2024.

A P150,000 cumulative-effect loss resulting from a change in inventory

valuation method was recognized on August 1, 2024.

In addition, the entity paid P480,000 on February 1, 2024 for 2024

calendar-year property taxes. Of this amount, P120,000 was allocated
to the third quarter of 2024.

For the quarter ended September 30, 2024, what amount should be
reported as net income?

a. 1,100,00
b. 1,020,000

c. 950,000

d. 900,000

NONCURRENT ASSET HELD FOR SALE ( PFRS 5 )

Problem 32-2 (IFRS)

Dana Company accounted for noncurrent assets using the cost

model. On October 1, 2024, the entity classified a noncurrent asset as
held for sale.

At that date, the carrying amount was P3,200,000, the fair value was
estimated at P2,200,000 and the cost of disposal at P200,000.

On December 15, 2024, the asset was sold for net proceeds of
P1,850,000.

What amount should be included as an impairment loss in the

statement of comprehensive income for the year ended December 31,
2024?

a. 1,000,000

b. 1,200,000

c. 1,350,000

d. 0
Problem 32-3 (IFRS)

Arlene Company accounted for noncurrent assets using the cost model.
On October 30, 2024, the entity classified a noncurrent asset as held for
sale.

At that date, the carrying amount was P1,500,000, the fair value was
estimated at P1,100,000 and the cost of disposal at P150,000.

On November 20, 2024, the asset was sold for net proceeds of
P800,000.

1. What amount should be reported as impairment loss?

a. 550,000

b. 400,000

c. 700,000

d. 0

2. What amount should be reported as loss on disposal?.

a. 550,000

b. 700,000

c. 150,000

d. 0
Problem 32-4 (IFRS)

On December 31, 2024. Andi Company 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, 2024, the fair value less cost of disposal of the
equipment was P2,700,000.

On same date, the relevant account balances are:

Equipment held for sale 3,600,000

Carrying amount of equipment on the basis

that the equipment had not been

classified as held for sale 3,000,000

Remaining life of equipment 3 years

1. What amount should be recognized as gain or loss in 2024 wha result

of the reclassification of the equipment property, plant and
equipment?

a. 900,000 gain
b. 900,000 loss

c. 300,000 gain

d. 300,000 loss

2. What amount should be recorded as depreciation of the equipment

for 2025?

a. 1,200,000

b. 1,000,000

C. 900,000

d. 600,000

3. What is the adjusted carrying amount of the equipment on

December 31, 2025?

a. 2,700,000

b. 1,800,000

c. 2,000,000

d. 3,000,000

Problem 32-5 (IFRS)

Clara Company purchased equipment for P5,000,000 on January 1.
2024 with a useful life of 10 years and no residual value.

On December 31, 2025, the entity classified the equipment as held for
sale., The fair value less cost of disposal of the equipment on December
31, 2025 was P3,200,000,

On December 31, 2026, the fair value leas cost of disposal of the
equipment was P4,200,000.

On December 31, 2026, 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 asset but to continue to
use it.

1. What amount of impairment loss should be recognized for 2025%

a. 300,000

b. 800,000

c. 700,000

d. 0

2. What is the measurement of the equipment that ceases as held for

sale on December 31, 2026?

a. 3,200,000
b. 4,000,000

c. 3,500,000

d. 3,600,000

3. What amount should be recognized as gain as a result of the

reclassification in 2026?

a. 800,000

b. 300,000

c. 400,000

d. 0

4. What amount should be recorded as depreciation for 2027?

a. 500,000

b. 350,000

c. 420,000

d. 600,000