St. Paul University Philippines

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St. Paul University Philippines

Tuguegarao City, Cagayan 3500
Quiz no. 9
Prepared by: Harley Bernieson D. Cortes
Date: February 15, 2019
Time : 8:30PM-10:00PM
Name:_____________________
[FAR]
On January 1, 2017, Panorama Company leased a building from a lessor with the following pertinent information:
Annual rental payable at the end of each year 1,000,000

Initial direct cost paid 400,000
Lease incentive received 100,000
Leasehold improvement 200,000
Purchase option that is reasonably certain to be exercised 500,000
Lease term 5 years
Useful life of building 8 years
Implicit interest rate 10%
PV of an ordinary annuity of 1 for 5 periods at 10% 3.79
Present value of 1 for 5 periods at 10% 0.62
1. What is the cost of the right of use asset?
a. 4,500,000 c. 4,700,000
b. 4,400,000 d. 4,600,000
2. What is the depreciation for 2017?
a. 880,000 c. 550,000
b. 900,000 d. 575,000
3. What is the interest expense for 2017?
a. 410,000 c. 450,000
b. 379,000 d. 429,000
4. What is the lease liability on December 31, 2017?
a. 3,510,000 c. 3,950,000
b. 3,169,000 d. 3,719,000
On December 31, 2017, Ames Company leased equipment for 10 years. The entity contracted to pay P400,000 annual
rent on December 31, 2017, and on December 31 of each of the next nine years.
The lease liability was recorded at P2,700,000 on December 31, 2017, before the first payment.
The equipment’s useful life is 12 years, and the interest rate implicit in the lease is 10%. The entity used the straight line
method to depreciate all equipment.
5. In recording the December 31, 2018 payment, by what amount should be the lease liability be reduced?
a. 270,000 c. 225,000
b. 230,000 d. 170,000
6. What is the interest expense for 2018?
a. 270,000 c. 200,000
b. 230,000 d. 0
GE Company, lessor, leased an equipment under an operating lease. The lease term is 5 years and the lease payments
are made in advance on January 1 of each year as shown in the following schedule:
January 1, 2017 1,000,000

January 1, 2018 1,000,000
January 1, 2019 1,400,000
January 1, 2020 1,700,000
January 1, 2021 1,900,000
Total rentals 7,000,000
7. What is the rent income for 2017?
a. 1,000,000 c. 2,000,000
b. 1,400,000 d. 1,500,000
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8. On December 31, 2108, what amount should be recognized as accrued rent receivable?
a. 700,000 c. 400,000
b. 800,000 d. 0
Guiller Company leased equipment to Faye Company on Januaru 1, 2017. The lease is for an eight-year period expiring
December 31, 2024. The first of eight equal annual payments of P900,000 was made on January 1, 2017.
The entity had purchased the equipment for P4,800,000. The lease is appropriately accounted for as a sales type lease.
The present value on January 1, 2017 of all rent payments over the lease term discounted at a 10% interest rate was
P5,280,000.
9. What is the gross profit on sale for 2017?

a. 1,920,000 c. 480,000
b. 2,400,000 d. 240,000
10. What amount of interest revenue should be recorded in 2017?
a. 528,000 c. 490,800
b. 438,000 d. 340,980
11. What amount of interest revenue should be recorded in 2018?
a. 490,000 c. 438,000
b. 480,000 d. 391,800
Camia Company is in the business of leasing new sophisticated equipment. As lessor, the entity expects a 12% return. At
the end of the lease term, the equipment will revert to Camia Company.
On January 1, 2017, an equipment is leased to another entity under a direct financing lease.
Cost of equipment to Camia 5,500,000

Residual value- unguaranteed 400,000
Annual rental payable in advance 959,500
Useful life and lease term 8 years
First lease payment January 1, 2017
12. What is the gross investment in the lease?
a. 7,676,000 c. 5,500,000
b. 8,076,000 d. 5,900,000
13. What is the unearned interest income on January 1, 2017?
a. 2,576,000 c. 1,776,000
b. 2,176,000 d. 1,616,500
14. What is the interest income for 2017?
a. 322,000 c. 660,000
b. 544,860 d. 496,860
On January 1, 2017, Shaira Company sold a building and immediately leased it back. The following data pertain to the
sale and leaseback transaction:
Sale price 9,000,000

Fair value of building 8,000,000
Carrying amount of building 7,200,000
Annual rental payable at the end of each year 600,000
Remaining life of building 20 years
Lease term 4 years
PV on an ordinary annuity of 1 at 12% for four periods 3.037
15. What is the initial lease liability?
a. 1,822,200 c. 1,200,000
b. 2,400,000 d. 1,000,000
16. What is the cost of right of use asset?
a. 639,980 c. 822,200
b. 739,980 d. 411,100
17. What is the gain on right transferred to buyer-lessor?
a. 800,000 b. 720,000
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c. 717,780 d. 400,000
18. What is the annual rental income of the buyer-lessor?
a. 600,000 c. 270,728
b. 329,272 d. 300,000
[TAXATION]
19. Regardless of the relationship to the done, donations made by the donor are subject to the scheduler rates of
2% to 15%, if such donation was made prior to the effectivity of the TRAIN Law. A relative by consanguinity in
the collateral line within the fourth degree of relationship is not a stranger.
a. Only the first statement is correct c. Both statements are correct
b. Only the second statement is correct d. Both statements are correct
20. For donations made prior to 2018, where the done or beneficiary is a stranger, the tax payable by the donor
shall be
a. 30% of the gross gifts
b. 30% of the net gifts
c. Based on the graduated rates with the first P100,000 net gif exempt or 30%
d. Based on the graduated rates with the first P100,000 net gift exempt or 30% of the net gifts whichever is
higher.
Gunwoo, single, donated the following properties on September 21, 2017:
Value Property Donee

100,000 Cash Juan, brother, on account of marriage
400,000 Jewelries Crissha, girlfriend residing in Korea
1,500,000 House and lot Parents, silver wedding anniversary gift
75,000 Land Bgy. Ugac North, for use of barangay hall
300,000 Car Fe, sister, donation is revocable
50,000 Cash IRRI
100,000 Cash Guillermo, father of the father of his mother
70,000 Motorcycle Kay, niece, donation is embodied in the will
21. The donor’s tax payable on the donation to strangers is

a. 9,000 c. 60,000
b. 24,000 d. 120,000
22. The donor’s tax payable on the donation to strangers assuming 2018 taxable year is
a. 9,000 c. 60,000
b. 24,000 d. 120,000
23. The total donor’s tax payable in 2017 is
a. 66,000 c. 160,000
b. 100,000 d. 220,000
24. The total donor’s tax payable assuming 2018 is the taxable year
a. 111,000 c. 160,000
b. 126,000 d. 220,000
[MAS]
The Ladies Belt Division of Leather Goods Corp. is classified as an investment center. For the month of November, it had
the following operating statistics:
Sales 675,000
Cost of goods sold 400,000
Operating expenses 237,500
Total assets 750,000
Weighted-average cost of capital 4%
25. What is the Ladies’ Belt division’s return on investment?
a. 4% c. 7.5%
b. 5% d. 3%
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26. The Ladies’ Belt Division’s residual income amounts to

a. 30,000
b. 7,500
c. 25,000
d. (7,500)
[AFAR]
27. Which of the following items will not affect the acquisition year’s consolidated net income in a business
combination?
a. Stock issuance cost
b. Direct cost of business combination
c. Gain on bargain purchase
d. Amortization of difference between fair value and carrying amount of net assets of acquire
28. Under IAS 27, how should the parent entity account for an investment in subsidiary in the separate financial
statements?
a. Equity method
b. Fair value method
c. Cost method
d. Equity method, fair value, or cost method
[AUDITING]
29. The most important output control is
a. Distribution control, which assures that only authorized personnel receive the reports generated by the
system
b. Review of the data for reasonableness by someone who knows what the output should look like
c. Control totals, which are used to verify that the computer’s results are correct.
d. Logic tests, which verify that no mistakes were made in processing
30. Which of the following is not an application control?
a. Processing controls
b. Hardware controls
c. Output controls
d. Input controls
END

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St. Paul University Philippines

Annual rental payable at the end of each year 1,000,000

January 1, 2017 1,000,000

9. What is the gross profit on sale for 2017?

Cost of equipment to Camia 5,500,000

Sale price 9,000,000

Gunwoo, single, donated the following properties on September 21, 2017:

Value Property Donee

21. The donor’s tax payable on the donation to strangers is

26. The Ladies’ Belt Division’s residual income amounts to

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