1. Wilson Corp. experienced a P50,000 decline in the value of its inventory in the first quarter of its fiscal year. Wilson expected this decline to reverse in the third quarter, and the third quarter recovery exceeded the previous decline by P10,000. Wilson's inventory did not experience any other declines in value during the fiscal year. What amounts of loss and/or gain should Wilson report in its interim financial statements for the first and third quarters?

| First quarter | Third quarter |
|---------------|----------------|
| a. 0 | 0 |
| b. 0 | 10,000 gain |
| c. 50,000 loss| 50,000 gain |
| d. 50,000 loss| 60,000 gain |

2. Farr Corp. had the following transactions during the quarter ended March 31, 20X7:

- Loss from rare earthquake: P70,000
- Payment of fire insurance premium for the calendar year 20X7: 100,000

What amount should be included in Farr's income statement for the quarter ended March 31, 20X7?

| Insurance expense |
|-------------------|
| a. 70,000 | 100,000 |
| b. 70,000 | 25,000 |
| c. 17,500 | 25,000 |
| d. 0 | 100,000 |

3. Vilo Corp. has estimated that total depreciation expense for the year ending December 31, 20X6 will amount to P60,000, and that 20X6 year-end bonuses to employees will total P120,000. In Vilo's interim income statement for the six months ended June 30, 20X6, what is the total amount of expense relating to these two items that should be reported?

a. 0
b. 30,000
c. 90,000
d. 180,000

Wilson Corp. had a decline in its inventory value by P50,000 during the first quarter, which it expected to reverse by the third quarter. In the third quarter, the inventory value recovery exceeded the decline by P10,000, making a total recovery of P60,000 (P50,000 + P10,000). Therefore, Wilson should report a P50,000 loss in the first quarter and a P60,000 gain in the third quarter. Thus, the correct answer is: d. 50,000 loss | 60,000 gain.
For the insurance expense in Farr Corp.: The total fire insurance premium for the whole year 20X7 is P100,000. To calculate the insurance expense for the quarter ended March 31, 20X7, you need to allocate 25% of the total yearly insurance (3 months out of 12 months). Therefore, the insurance expense for the first quarter is:
[tex]\frac{P100,000}{4} = P25,000[/tex]

For the earthquake loss amounting to P70,000, it should be fully reflected in the quarter it occurred, as expenses should be recognized when they are incurred. Therefore, the correct amounts for the quarter are a P70,000 loss and a P25,000 insurance expense, making the answer: b. 70,000 | 25,000.

For Vilo Corp.'s interim financial statements: Depreciation expense for the half-year (six months) is estimated by assuming it is evenly spread throughout the year. The total for the year is P60,000, so:
[tex]\frac{P60,000}{2} = P30,000[/tex]

Employee bonuses, also expected to be evenly allocated through the year, total P120,000 for the whole year. Again, for six months:

\[ \frac{P120,000}{2} = P60,000 \]

Adding both expenses together gives:

\[ P30,000 + P60,000 = P90,000 \]

Thus, the total amount of expense reported for these two items for the six months ended June 30, 20X6 should be: c. 90,000.