11-12__________11.

At the beginning of current year, White Company received a grant of ₱15,000,000

from the American govemment in order to defray safety and environmental costs within the area where
the entity is located.
The safety and environmental costs are expected to be incurred over four years, respectively, ₱4,000,000,
₱6,000,000, ₱6,000,000 and ₱8,000,000
What amount should be recognized as grant income for the current year?
A. 3,150,000
B. 1,000,000
C. 1,500,000
D. 2,500,000
Solution: 15,000,000 x (4/24)= 2,500,000
Solution: The grant should be recognized as income over the useful life of the equipment. Therefore,
PHP 1,000,000 / 5 years = PHP 200,000 per year.
13-14__________12. A company received a grant of ₱500,000 for research and development. The
company incurred ₱300,000 in eligible expenses in the first year. How much grant income should the
company recognize in the first year?
A. 300,000
B. 500,000
C. 200,000
D. 0
Correct Answer: A) PHP 300,000
Solution: The company can only recognize grant income to the extent of the eligible expenses incurred.
Thus, it recognizes PHP 300,000 in the first year.
Use for Nos. 13-15
On January 1, 20x1, Entity A received land with fair of ₱200,000 from the government conditioned on the
construction of a building on the lot. Entity A started immediately the construction and it was completed
on December 31, 20x1 for a total cost of ₱1,000,000. The building has an estimated useful life of 10 years
and zero residual value.
15-16__________13. How much is the income from government grant in 20x1 and 20x2, respectively?
20x1 20x2
a. 0 200,000
b. 200,000 0
c. 0 20,000
d. 20,000 20,000

17-18__________14. How much is the carrying amount of the building on December 31, 20x2 under the
following presentations?
Gross presentation Net presentation
a. 1,000,000 800,000
b. 900,000 720,000
c. 800,000 640,000
d. 800,000 533,333

19-20__________15. How much is the depreciation expense recognized in 20x3 under the following
presentations?
Gross presentation Net presentation
a. 100,000 80,000
b. 100,000 100,000
c. 80,000 100,000

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 d. 80,000 80,000

Solution for problem 13- 15

13. C 20x1 = 0, no depreciation yet is recognized from the building; therefore, no income yet is
recognized from the government grant (i.e., ‘matching’). The building starts to be depreciated in
20x2.
20x2 = 20,000 (200,000 ÷ 10 years)
14.B Gross presentation: (1M x 9/10) = 900,000;
Net presentation: (1M – 200K) x 9/10 = 720,000
15.B Gross presentation: (1M ÷ 10) = 100,000;
Net presentation: (1M – 200K) ÷ 10 = 80,000
31-32__________25. A company has a loan of ₱1,500,000 at an interest rate of 6%. During the year, it
incurs ₱1,000,000 in qualifying expenditures for a new project. How much of the interest cost can be
capitalized if the loan is specifically for the project?
A. 90,000
B. 60,000
C. 100,000
D. 120,000
Correct Answer: A) PHP 90,000
Solution: Interest to be capitalized = PHP 1,500,000 * 6% = PHP 90,000.
33-34__________27. A company has two loans: Loan A of ₱1,000,000 at 5% and Loan B of ₱500,000 at
7%. If the company incurs average PHP 800,000 in qualifying expenditures, how much interest can be
capitalized?
A. 45,360
B. 60,000
C. 65,810
D. 52,040

Solution: Capitalization Rate = [(1,000,000 * 5%) + (500,000 * 7%)] / (1,000,000 + 500,000) = 5.67%.
Interest to be capitalized = PHP 800,000 * 5.67% = PHP 45,360.

35-36__________28. A company has a loan of ₱2,500,000 at an interest rate of 9%. It incurs ₱1,500,000
in qualifying expenditures for a project. How much interest can be capitalized if the loan is used
specifically for the project?
A. ₱135,000
B. ₱225,000
C. ₱200,000
D. ₱180,000

Correct Answer: A) PHP 135,000

Solution: Interest to be capitalized = PHP 2,500,000 * 9% = PHP 225,000. However, since the qualifying
expenditures are less than the loan amount, the capitalized interest is based on the qualifying
expenditures:
Interest = PHP 1,500,000 * 9% = PHP 135,000.

Use the following information for the next two questions:

In 2023, Trixie Company built an asset with a total cost of ₱5,000,000. The weighted average
expenditures amounted to ₱3,000,000. To finance the construction, the company borrowed ₱2,200,000 at
an interest rate of 10% on January 1, 2023. Any funds not required for construction were temporarily
invested in short-term securities, generating ₱45,000 in interest revenue. Aside from the borrowed funds
for construction, the only other outstanding debt during the year was a ₱2,500,000 note payable, which
has a 10-year term at 9%, dated January 1, 2022.

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37-38__________29. What amount of interest should be capitalized during 2023?
A. 300,000
B. 150,000
C. 247,000
D. 472,000

39-40__________30. What amount should be reported as interest expense for 2023?

A. 225,000
B. 178,000
C. 153,000
D. 0

During 2022, Grant industries, Inc. constructed a new manufacturing facility at a cost of ₱12,000,000.
The weighted average accumulated expenditures for 2022 were calculated to be ₱5,400,000. The
company had the following debt outstanding at December 31, 2022:
a. 10 percent, five year note to finance construction of the manufacturing facility, dated January 1,
2022, ₱3,600,000
b. 12 percent, 20-year bonds issued at par on April 30, 2021, ₱8,400,000
c. 8 percent, six year note payable, dated March 1, 2021, ₱1,800,000
43-44__________32. What is the amount of interest expense to be capitalized by Grant Industries for
2022.
A. 360,000
B. 563,220
C. 108,000
D. 453,550

1. ABC

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ABC Company began construction of its administration building at an estimated cost of P2,000,000 on
January 1,2021. The building
was completed on December 31,2021. The entity had the following loans during the year
Rate Types Principal
10% General loan 500,000
12% Loans payable 1,500,000
The following expenditure were made during 2021
Date Amount
January 1,2021 300,000
July 1,2021 700,000
November 1,2021 600,000
Required: Compute for the capitalizable borrowing cost and the total cost of the building upon completion
ABC Company began construction of its administration building at an estimated cost of P2,000,000 on
January 1,2021. The building
was completed on December 31,2021. The entity had the following loans during the year
Rate Types Principal
10% General loan 500,000
12% Loans payable 1,500,000
The following expenditure were made during 2021
Date Amount
January 1,2021 300,000
July 1,2021 700,000
November 1,2021 600,000
Required: Compute for the capitalizable borrowing cost and the total cost of the building upon completion
Sam Company started construction on a building at the beginning of the current year and completed
construction at year-end. The entity had only two interest notes outstanding during the year end and both
of these notes were outstanding for all 12 months of the year.
Average accumulated expenditure 2,500,000.00
Ending balance in construction in progress before
capitalization of interest 3,600,000.00
6% note incurred specifically for the project 1,500,000.00
9% long term note 5,000,000.00

45-46__________33. What amount should be recoded as cost of the building?

A. 3,780,000
B. 2,680,000
C. 3,750,000
D. 3,825,000

Use for 44-45

Forester Company provided the following assets in a forest plantation and farm:

Freestanding trees 5,000,000.00

Land under trees 600,000.00
Roads in forest 300,000.00
Animals related to recreational activities 1,000,000.00
Bearer plants 1,500,000.00

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 Bearer animals 2,000,000.00
Agricultural produce growing on bearer plants 600,000.00
Agriculture produce harvested 1,200,000.00
Plants with dual use 1,200,000.00

57-58__________44. What amount should be reported as biological assets?

A. 8,800,000
B. 7,200,000
C. 8,400,000
D. 9,200,000

59-60__________45. What amount should be reported as property, plant and equipment?

A. 4,600,000
B. 3,400,000
C. 1,800,000
D. 4,200,000

Freestanding 5,000,0 5,000,0

trees 00.00 00.00

600,000 600,000
Land under trees .00 .00

300,000 300,000
roads in forest .00 .00
Animals related
to recreational 1,000,0 1,000,0
activities 00.00 00.00

1,500,0 1,500,0
Bearer plants 00.00 00.00

2,000,0 2,000,0
Bearer animals 00.00 00.00
Agricultural
produce growing 600,000 600,000
on bearer plants .00 .00
Agriculture
produce 1,200,0 inven
harvested 00.00 tory

Plants with dual 1,200,0 1,200,0

use 00.00 00.00

8,800,0 3,400,0
00.00 00.00

Use for 46-48

ABC Co, has three, 1-year old, animas with total carrying amount of ₱3,600 on January 1, 2021. On
March 31, ABC Co. acquired two animals, ages 2.25 years old each, for ₱2,000 each, the fair value less
costs of the animals on this date. Six animals were born on October 1, 2021. The fair value less cost to
sell of a newborn animal on this date is ₱500.00

ABC Co. determined the following fair values less costs to sell on December 31, 2021:

New born 600.00

.25 year old 800.00
1 year old 1,500.00
2 years old 2,400.00
2.25 years old 3,000.00

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 3 years old 3,500.00
61-62__________46. How much is the total gain(loss) from the change in FVLCS during the period?
A. 9,000
B. 11,400
C. 12,000
D. 18,000

Solution: Total: 19,000 less 3,600 carrying amount less 4,000 carrying amount = 11,400

63-64__________47. How much is the change in FVLCS due to price change?

A. 1,800
B. 7,00
C. 3,500
D. 3,200

Solution:
I. 1,500-1200x 3 = 900
II. 2,000
III. 600
Total = 3500

65-66__________48. How much is the change in FVLCS due to physical change?

A. 8,800
B. 7,900
C. 9,200
D. 10,200

Solution:
2400 – 1500 x 3 = 2,700
3500 – 3000 x2 = 1000
800 – 600 x 6 = 1,200
FVLCS new born = 3000
Total = 7,900
Joan Company provided the following data:

Value of biological asset at acquision cost on

5,500,000.00
December 31, 2023
Fair valuation surplus on initial recognition at fair
500,000.00
value on December 31, 2023
Increase in fair value to December 31, 2023 due
900,000.00
to growth and fluctuation
Decrease in fairvalue due to harvest in 2024 100,000.00

67-68__________49. What is the carrying amount of the biological asset on December 31, 2024?
A. 7,400,000
B. 7,300,000
C. 6,800,000
D. 6,500,000

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