NON-FINANCIAL ASSETS: PPE - ACQUISITION & SUBSEQUENT EXPENDITURES

(with solutions and explanation)

Problem #1

Selected accounts included in the property, plant, and equipment section of Lucado Corporation's balance sheet at December 31, year 3, had the following balances:

Land P400,000

Land improvements 130,000

Buildings 2,000,000

Machinery and equipment 800,000

During year 4, the following transactions occurred:

1. A tract of land was acquired for P200,000 as a potential future building site from Maria Corp.
2. A plant facility consisting of land and building was acquired from Kaufman Company in exchange for 20,000 shares of Lucado's common stock. On the acquisition date, Lucado's stock had a closing market price of P42 per share on a national stock exchange. The plant facility was carried on Kaufman's books at P178,000 for land and P520,000 for the building at the exchange date. Current appraised values for the land and the building, respectively, are P200,000 and P800,000. The building has an expected life of forty years with a P20,000 salvage value.
3. Items of machinery and equipment were purchased from Apex Equipment at a total cost of P400,000. Additional costs were incurred as follows: freight and unloading, P13,000; installation, P26,000. The equipment has a useful life of ten years with no salvage value.
4. Expenditures totaling P120,000 were made for new parking lots, street, and sidewalks at the corporation's various plant locations. These expenditures had an estimated useful life of fifteen years.
5. Research and development costs were P110,000 for the year. Indicate the capitalized cost of each asset acquired during year 4, and the depreciation expense recorded for each of the acquired items in year 4.

CALCULATE THE FOLLOWING CAPITALIZED COST AND DEPRECIATION EXPENSE FOR YEAR4 FROM ABOVE TRANSACTIONS:

Capitalized Cost Depreciation expense for Year 4

1.) Land acquired from Maria Corp. 1. ??? 2. ???

2.) Land acquired from Kaufman 3. ??? 4. ???

• Building acquired from Kaufman 5. ??? 6. ???

3.) Machinery and equipment

acquired from Apex Equipment 7. ??? 8. ???

4.) Land improvements 9. ??? 10. ???

5.) Research and development 11. ??? 12. ???