Cpa Review School of The Philippines Manila Financial Accounting and Reporting Valix/Valix/Santos Batch 96 October 2024 Lecpa SME
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MaximusCpa Review School of The Philippines Manila Financial Accounting and Reporting Valix/Valix/Santos Batch 96 October 2024 Lecpa SME
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MaximusCPA REVIEW SCHOOL OF THE PHILIPPINES
Manila
FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/SANTOS
BATCH 96 OCTOBER 2024 LECPA
SME
1. On January 1, 2024, SME acquired 20% of the equity of A and B for P2,000,000 and P6,000,000
respectively. Transaction costs of P200,000 and P600,000, respectively were incurred by SME.
On January 15, 2024, entity A declared and paid dividend of P1,500,000. Entity A recognized net income
of P2,500,000 and entity B recognized a net loss of P4,000,000 for 2024.
On December 31, 2024, SME determined the fair value of the investments in A and B at P3,000,000 and
P4,000,000 respectively. Costs of disposal are estimated at 10% of the fair value of the investments.
Published price quotations do not exist for the shares of entities A and B.
I. An SME shall account for investments in associates using cost model, equity method or fair value
model and the model can be elected on an individual investment basis.
II. Under the cost model the impairment loss should be reported at P3,000,000 for 2024.
III. Under the equity method, the impairment loss should be reported at P2,200,000 for 2024.
IV. Under the equity method, the total carrying amount of the investments in associates should be
reported at P6,000,000 on December 31, 2024.
A. All statements are true
B. All statements are not true
C. Only three statements are true
D. Only two statements are true
2. On January 1, 2024, SME acquired 25% of the equity of A, B and C for P1,000,000, P1,500,000 and
P3,000,000 respectively. Transaction cost of 10% of the purchase price were incurred by SME.
On January 5, 2024, entity A paid dividend of P500,000. On December 31, 2024, entity B paid dividend
of P800,000. For 2024, entities A and B recognized net income, respectively of P600,000 and P1,800,000.
However, entity C recognized net loss of P2,000,000 for 2024.
Published price quotations exist for A, B and C. SME determined the fair value of investments in A, B
and C at P1,400,000, P2,800,000 and P2,000,000 respectively on December 31, 2024.
The costs of disposal are estimated at P50,000, P200,000 and P150,000 for investment in A, B and C,
respectively.
I. Under the fair value model, the investments in associates shall be measured at fair value less cost of
disposal.
II. Under the fair value model, the total carrying amount of the investments in associates should be
reported at P6,200,000.
III. Under the fair value model, the net gain from change in fair value of the investments should be
reported at P700,000.
A. All statements are true
B. All statements are not true
C. Only three statements are true
D. Only two statements are true
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3. On January 1, 2024, SME acquired trademark for P3,000,000. The SME expected to continue marketing
the line of products using the trademark indefinitely. Management is unable to estimate the useful life of
the trademark. In 2027, a competitor unexpectedly revealed a technological breakthrough that is expected
to result in a product, that when launched by the competitor, will extinguish demand for SME’s patented
product line. Demand for SME’s patented product line is expected to remain strong until December 2029,
when the competitor is expected to launch the new product.
On December 31, 2027, SME cannot be measured reliably, assessed the recoverable amount of the
trademark at P500,000. SME intended to continue manufacturing the patented products until December
31, 2029.
I. If the useful life of an intangible asset of an SME cannot be estimated reliably, the intangible asset
is amortized over the best estimate of management but not exceeding 10 years.
II. The amortization of trademark should be reported at P300,000 for 2024.
III. The amortization of trademark should be reported at P700,000 for 2027.
IV. The impairment loss on trademark should be reported at P900,000 for 2027.
A. All statements are true
B. All statements are not true
C. Only three statements are true
D. Only two statements are true
4. On January 1, 2024, an SME acquired a building to be held as investment property in a remote location
for P5,000,000. After initial recognition, the entity concluded that the fair value of the investment
property cannot be measured reliably without undue cost or effort on an ongoing basis.
On December 31, 2024, management assessed the building’s useful life at 25 years from date of
acquisition and presumed the residual value to be nil because the fair value cannot be determined reliably.
The entity declined an unsolicited offer to purchase the building for P6,500,000. This is a one-time offer
that is unlikely to be repeated in the foreseeable future.
I. An SME shall measure investment property using the fair value model if the fair value can be
measured reliably without undue cost and effort and the cost model for all other investment property
whose fair value cannot be determined reliably
II. The investment property should be reported at P4,800,000 on December 31, 2024.
A. Statements I and II are true
B. Statements I and II are not true
C. Only statement I is true
D. Only statement II is true
5. An SME incurred and paid the following expenditures in 2024:
January 1 20% of the price is attributable to land 50,000,000
January 1 Nonrefundable transfer taxes not included in the P50,000,000 purchase price 5,000,000
January 1 Legal cost directly attributable to the acquisition 5,000,000
January 1 Reimbursing the previous owner for paying the nonrefundable property tax
for the six-month period ending June 30, 2024 2,000,000
June 30 Nonrefundable annual property tax for the year ending June 30, 2025 4,000,000
During 2024, Day-to-day repairs and maintenance 1,000,000
On December 31, 2024, SME assessed that the useful life of the building is 20 years with residual value
of P3,000,000.
I. An SME shall measure property, plant and equipment using either the cost model or revaluation
model.
II. The cost of the land should be reported at P12,000,000 on December 31, 2024.
III. The carrying amount of the building should be reported at P42,750 on December 31, 2024.
A. Statements I, II and III are true
B. Statement I, II and III are not true
C. Only statements I and II are true
D. Only Statements II and III are true
End
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