1. Hyatt Company reported a pretax accounting income of P7,900,000 for the year ended December 31, 2020. Temporary differences have been identied as folows:

Tax deprecatlon in excess of accounting depreciation= P1,000,000

Litigation loss accrued for financial accounting purposes but will be deducted for

tax purposes in the distant future=P400,000

Warranty cost expensed for nancial accounting purposes exceeded the amount currently deductible for tax purposes by P300,000

The warranty liability is classified as a current liability in the entity's statement of nancial position. The income tax rate is 30% There are no temporary differences at the beginning of the current year.

a. How much is the taxable income for 2020?

b. How much is the income tax expense for the year?

2. On January 1, 2020. Adrian Company offered the top management share appreciation rights with the following terms:

Predetermined prioe = P50 per share

Number of shares= 20,000 shares

Service period= 3 years

Expiration date =December 31, 2022

The share appreciation rights were exercised on December 31, 2022 The share prices are as follows:

January 1, 2020 =50

December 31, 2020 =56

December 31, 2021 =68

December 31, 2022 =71

How much is salaries expense for the year 2021?

3. On January 1. 2020. USJ Company had the following balances in the memorandum records with respect to a dened benet plan: Fair value of plan assets 5,500,000 Projected benet obligation 6,000,000 During 2020, the accountant had determined that current service cost is P1,550,000. The discount rate is recognized at 10% and the expected return on plan assets is 12%. The actual return on plan assets for the year is P650000. The entity contributed P1200000 to the plan on December 31, 2020.

a. How much is the net remeasurement on plan assets?

b. . How much is the employee benet expense for the current year

4. On January 1, 2020, Kim Company purchased a tractor at a cost of P1,600,000 for the purpose at leasing it. The tractor is estimated to have a useful life of five years with residual value of P100,000. Depreciation is on a straight-line. On April 1, 2020, Kim Company entered into a lease contract for the lease of the tractor tor a term of two years up to March 31, 2022. The lease fee is P50,000 a month and the lessee paid P600,000, the lease fee for one year. Kim Company paid P120,000 commission associated with negotiating the lease, P15,000 for minor repairs and P10,000 transportation of the tractor during 2020. How much is the rent income to be reported in the 2020 income statement?

5. On January 1. 2020. to supplement salaries of executives, Wetherick Company issued share options to executives to purchase 40,000 ordinary shares of P100 par value at P125 per share. On such date, the market value of ordinary shares is P150 per share. The fair value of each share option is P30. The share options are exercisable starting January 1, 2022 and expire one year aer. Options covering 35,000 shares are exercised on January 15, 2022. Options covering the remaining shares expired. Compute for the compensation expense for 2020.

6. On January 1, 2020. Silver Company entered into a ve-year lease of a floor of a building with the following terms:

Annual rental for the rst two years payable at the end of each year......200,000

Annual rental for the next three years payable at the end of each year...300,000

Initial direct cost paid by lessee ....100,000

Leasehold 250,000 Present value of restoration cost required by 50,000

Useful life of building 20 yrs

Implicit interest rate 8%

Discount rate for the restoration 5%

PV of an ordinary annuity of 1 at 8% for two periods 1.783

PV of an ordinary annuity of 1 at 8% for three periods 2.577

PV of 1 at 8% for two periods 0.857

Compute me lease liability on January 1, 2020.

Multiple choice

7. Jason Company has taken out a foreign loan of $100,000 that is recorded as P4,400,000. At the reporting date, the carrying value of the loan is P4,000,000. The unrealized exchange gain of P400,000 is included in profit or loss, but will be taxable when the gain is realized on the repayment of the loan. If the current and future tax rates are 34% and 35%, respectively, what amount of deferred tax liability should the company recognize?*

A. None

B. 136,000

C. 140,000

D. 276,000

8. On January 1, 2020, an entity sold a machine to another entity at a price of P1,500,000. The fair value of the machine is P1,000,000 on such date and the carrying amount is P800,000. Immediately, the entity leased the machine back. The terms of the lease called for the entity to make annual payments of P200,000 at the end of each year for ten years. The machinery has an estimated useful life of 15 years and no residual value. The implicit rate in the lease is 8% and the PV of an ordinary annuity at 8% for 10 periods is 6.71. What is the initial cost of the right of use asset?*

A. 673,600

B. 642,000

C. 1,342,000

D. 715,733

9. Goya Company has an employee benefit plan for compensated absences that gives employees 10 paid vacation days and 10 paid sick days. Both vacation and sick days can be carried over indefinitely. Employees can elect to receive payment in lieu of vacation days. However, no payment is given for sick days not taken. At year-end, the unadjusted balance of liability for compensated absences was P210,000. The entity estimated that there were 150 vacation days and 75 sick days available at year-end. The employees earn an average of P1,000 per day.At year-end, what amount of liability for compensated absences is required to be reported?*

A. 150,000

B. 210,000

C. 225,000

D. 360,000

10. On July 1, 2020, Hecky Company leased a delivery truck to Betty Company under a three-year operating lease. Total rent for the term of the lease will be P3,600,000 payable as follows: 12 months at P50,000 per month; second 12 months at P75,000 per month; and last 12 months at P175,000 per month. All payments were made when due. What amount should be reported as rent revenue for the year ended June 30, 2021?*

A. 1,200,000

B. 2,400,000

C. 750,000

D. 500,000