Acquisition by various Modes of Acquisition

On January 1, 2020, Oraller-Cabidog Company acquired a parcel of land. Apart from the

acquisition costs the company also incurred title transfer fees of P50,000 paid in cash on the same

date.

Required:

Under each of the cases provide the following.

1.Cost of land.

2.All journal entries in 2020, related to the acquisition of the land and payment.

Case 1:

The land is acquired by paying for cash of P5,500,000.

Case 2:

The land is acquired on account for P5,500,000. The credit terms were 2/10, n30. The

payment was made on January 5, 2020. Oraller-Cabidog uses the gross method.

Case 3:

The land is acquired on account for P5,500,000. The credit terms were 2/10, n30. The

payment was made on January 25, 2020. Oraller-Cabidog uses the net method.

Case 4:

The land is acquired by paying P500,000 down payment and issuing a promissory note of P6,000,000, payable in three equal installments of P2,000,000 every December 31 starting in 2020. The land has a cash price equivalent of P5,000,000.

Case 5:

The land is acquired by paying P500,000 down payment and issuing a promissory note of P6,000,000, payable in three equal installments of P2,000,000 every December 31 starting in 2020. The land has no cash price equivalent. However, the implied interest for the same promissory notes in the market is at 12%. The present value factors is 2.40.

Case 6:

The land is acquired by issuance of 50,000 ordinary share capital with a P100 par value and currently selling at P110 in the stock market. The land has a fair value of P5,750,000.

Case 7:

The land is acquired by issuance of 50,000 ordinary share capital with a P100 par value and currently selling at P110 in the stock market. The fair value of the land could not be determined.

Case 8:

The land is acquired by issuance of 50,000 unlisted ordinary share capital with a P100 par value. The fair value of the land and the share capital could not be determined.

Case 9:

The land was acquired by issuance of 1,000 bonds of P5,000 face value for each bond. The bonds have a fair value of P5,350 each while the land

has an appraised fair value of P5,500,000.

Case 10:

The land was acquired by issuance of 1,000 bonds of P5,000 face value for each bond. The bonds have a fair value of P5,350 each while the The fair value of the land could not be determined.

Acquisition by Exchange transaction

On January 1, 2020, Ogiso Company exchanged its old delivery truck with Martin Dealers Inc. for a brand new equipment. The following information pertains to the delivery truck.

Ogiso

Original cost 500,000

Accumulated depreciation 300,000

Carrying/book value 200,000

Cash paid by Ogiso to Martin Inc. 100,000

Ogiso incurred P10,000 in transportation and installation of the brand new equipment.

Required:

For each of the following independent cases.

1.The gain or loss as a result of the exchange.

2.Prepare the journal entries in 2020 to record the exchange transaction

Case 1

The old delivery truck has a fair value of P225,000. The brand new equipment has a fair market value of P300,000.

Case 2

The fair value of the old delivery truck could not be determined. The brand new equipment has a fair market value of P300,000.

Case 3

The fair value could not be determined for either the old delivery truck or the brand new equipment.

Borrowing Cost

High Standard Company erected a building during the year 2020. All funds used in construction were loaned for a generic purpose. The construction started on January 1 and was completed on December 31. The following pertains to the construction:

General purpose loan, 10% P3,000,000

General purpose loan, 12% 2,000,000

Average expenditures 3,125,000

Required: Compute the borrowing cost capitalized. Round off all computed % to nearest one percent.