Income Taxes, PPE, EB PDF

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PROPERTY, P LA NTS A ND E QUIPMENTA. During the current year Beam Company paidP 100,000 cash and traded inventory which had acarrying amount of P 2,000,000 and a fair value ofP 2,100,000 , for other inventory in the same line ofbusiness with a fair value of P 2,200,000.What amount should be recorded...

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PROPE PROPERTY RTY RTY,, PLANTS AND EQUIPMENT A. During the current year Beam Company paid P 100,000 cash and traded inventory which had a carrying amount of P 2,000,000 and a fair value of P 2,100,000, for other inventory in the same line of business with a fair value of P 2,200,000.

What amount should be recorded as a cost of the inventory received in exchange? Solution: Fair value of inventory given Cash payment Total cost of inventory received

P 2,100,000 100,000 P 2,200,000

The “present value factor of 1” is used present value of the second note pa is payable lump sum after 2 years.

D. At the beginning of the current year reported the following balances: Land P 2,200,000 Building P 6,500,000 During the current year, the followin transactions occurred: A piece of land was acquired fo To be able to acquire the land, P a real estate agent, and P 50,0 clear the land.

B. Yola Company and Zaro Company are fuel oil distributors. To facilitate the delivery of oil to their customers, Yola and Zaro exchange ownership of 1,200 barrels of oil without physically moving the oil. Yola paid Zaro P 300,000, to compensate for a difference in the grade of oil. It is reliably determined that the exchange lacks commercial substance. On the date of the exchange, cost and fair value of the oil of Yola Company were P 1,000,000 and P 1,200,000, respectively.

During the course of clearing th gravel were recovered and sold

What amount should Yola Company record as cost of the oil inventory received in exchange?

Shortly after acquisition, the bui at a cost of P 100,000.

Solution:

A new building was constructed 5,000,000 plus excavation fee P P 80,000 and building permit P

Cost of oil inventory given Cash payment Cost of oil inventory received

P 1,000,000 300,000 P 1,300,000

The exchange transaction is measured at the carrying amount of the asset given up adjusted by the cash involved if the exchange lacks commercial substance.

C. Anxious Company acquired two items of machinery. On December 31 2019, Anxious Company purchased a machine in exchange for a non interest bearing note requiring 10 payments of P 500,000. The first payment was made on December 31 2020, and the others are due annually on December 31. The prevailing rate of interest for this type of note at date of issuance was 12%. The present value of an ordinary annuity of 1 at 12% is 5.33 for 9 periods and 5.65 for 10 periods. On December 31 2019, Anxious Company acquired used machinery by issuing the seller at two -year, noninterest-bearing note for P 3,000,000. In recent borrowing, the entity has paid a 12% interest for this type of note. The present value of 1 at 12% for 2 years is .80 and the present value of an ordinary annuity of 1 at 12% for 2 years is 1.69.

A second piece of land with a b P 4,500,000. The appraiser valued the land a building at P 1,000,000.

A third piece of land was acquir was held for undetermined use.

1. What total cost of land should statement of financial position plant and equipment? Solution: Balance of land account on Jan First piece of land acquired: Cost Payment to real estate a Cost of clearing land Timber and gravel recov Second piece of land acquired (4,500,000 x 2/3) Total cost of land under property and equipment Second piece of land with an ol Land Old Building

Total appraised valu Allocated cost: Land (4,500,000 x 2/3) Old Building (4,500,000

What is the total cost of the machinery? Solution:

Total purchase price The third piece of land acquired is clas property and not included in property p

E. Isabela Company incurred the following costs during the current year: Option fee for land acquired Option fee for land not acquired Taxes in arrears on land Payment for land 1,000,000 Architect fee Payment to city hall for approval of building construction Contract price for factory building Safety fence around construction site 35,000 Safety inspection on building Removal of safety fence after completion of building New fence surrounding the factory Driveway, parking bay and safety lightning Trees, shrubs and other landscaping 1.

What is the capitalized cost of the 230,000

Solution: 120,000 5,000,000

All costs incurred are capitalize

H. Taiwan Company fabricated equi 30,000

during the current year. The following d accounting records:

Materials 20,000 80,000 550,000 200,000

What amount should be recorded as cost of land?

Solution: Option fee for land acquired Taxes in arrears on land Payment for land Total cost of land

An additional water line had to be ru cost of P 40,000. Labor and testing P 60,000. Materials used up in tes

10,000 10,000 50,000

P

10,000 50,000 1,000,000 P 1,060,000

The option fee for land not acquired should be treated as outright expense.

Finished goods 1,000,000 Office equipment 600,000

The office equipment is to be charged w would have been apportioned to the 15 not produced.

What is the total cost of office eq apportionment of factory overhea Solution: Materials Direct labor Overhead (15,000/50,000 x 1,2 Total cost of office equipment

Solution: P

230,000 120,000 5,000,000 35,000 30,000

In the absence of any statement, the ov the basis of direct labor as follows: Materials Direct labor Overhead (500,000/2,000,000 x Total cost of office equipment

20,000 P 5,435,000 I.

3. What amount should be recorded as cost of land improvements? Solution: New fence surrounding the factory P 80,000 Driveway, parking bay and safety lightning 550,000 Trees, shrubs and other landscaping 200,000 Total cost of land improvements P 830,000 F. Grab Company purchased a ten-ton draw press at a cost of P 3,600,000 with terms of 5/15, n/45. Payment was made within the discount period. Shipping cost was P 90,000 which included P 4,000 for insurance in transit. Installation cost totaled P 240,000

50

Factory overhead amounted to P 1,20 production of finished goods is 50,000 fabrication of the office equipment, finis totaled 35,000 units only in the current

2. What amount should be recorded as cost of new building? Architect fee Payment to city hall for approval of building construction Contract price for factory building Safety fence around construction site Safety inspection on building Removal of safety fence after completion of building Total cost of new building

Direc 1,500

During the current year, Wilbur Co old machine for a newer model. Data relative to the old and new ma exchange follow:

Old Machine Original cost P Accumulated depreciation Average published retail value

New Machine List price Cash price without trade in Cash paid with trade in

P 1,00

9 7

What amount should be recogniz

which included P 80,000 for taking out a section of a wall and rebuilding it because the press was too large for the doorway.

new machine acquired in the exc Solution:

Since the old machine has no a

J. Caine Company exchanged a car from inventory for a computer to be used as a long-term asset. The following information relates to this exchange: Carrying amount List selling price of the car Fair value of the computer Cash difference paid by Caine

P 600,000 900,000 860,000 100,000

Solution: P 860,000 100,000 P 760,000 600,000 P 160,000

2. What is the cost of the computer acquired in exchange? Solution: Fair value of car - asset given Cash difference paid by Caine Cost of computer acquired in exchange

The cost of windows broken by vandals expense.

L. Precious Company had the follo

1. What amount of gain should be recognized on the exchange?

Fair value of the computer Less: Cash difference paid by Caine Fair value of car - asset given Less: Carrying amount Gain on exchange

Cost of construction changes Total cost of new building

P 760,000 100,000 P 860,000

K. Rolex Company incurred the following expenditures

acquisition during the current year: Acquired a tract of land in excha of Precious Company with P 10 market price of P 120 per shar acquisition. The last property ta assessed value of P 2,400,000 Received land from a major sha inducement to locate a plant in was required but the entity paid expenses for land transfer. The P 1,200,000.

What is the total increase in land acquisition? Solution: First land: Fair value of shares (50,000 Second land Total cost

related to land and building: Cash paid for land and dilapidated building P 1,000,000 Fee for title search 10,000 Survey before construction of new building 20,000 Assessment by city government for drainage project 5,000 Cost of grading, leveling and landfill 45,000 Removal of old building to make room for construction of new building 50,000 Payment to tenants for vacating old building 15,000 Architect fee for new building 200,000 Building permits for new construction 30,000 Excavation before new construction 100,000 New building constructed 6,000,000 Driveway and walk to new building from street as part of building plan 40,000 Temporary quarters for construction crew 80,000 Temporary building to house tools and materials 60,000 Cost of changes during construction to make new building more energy efficient 50,000 Cost of windows broken by vandals 25,000

1. What amount should be recorded as cost of land? Solution: Cash paid for land Fee for title search

P 1,000,000 10,000

If shares are issued for noncash consid should be measured by the fair value o received of the fair value of the shares of the fair value of the consideration giv

The assessed value of the land is only not an evident of fair value.

Donated asset received from sharehold at fair value and credited to donated ca

However, the legal expresses for the tr property should not be capitalized but d capital.

M. Lax Company: What is the total in equipment account as a result of the tra N. Newman Company Demolition of old building Architect fee Legal fee Construction cost What amount should be recorded as co What amount should be recorded as co...