On July 1, XYZ traded in an old machine with a book value of P10 000 for a similar new machine having a cash price of P32 000, and paid a cash difference of P19 000. XYZ recorded the new machine at the cash payment made.

1. How much should the property be initially recognized?

On June 1, XYZ Co. acquired a real property by issuing 35 360 shares of its P100 par value ordinary shares. The shares were selling on the same date at P125. A mortgage of P4 000 000 was assumed by XYZ Co. on the purchase. Moreover, the company paid 180 000 of real property taxes in the prior years. Twenty percent of the purchase price should be allocated to the land and the balance to the building.

In order to make the building suitable for the use of XYZ Co., remodeling costs had to be incurred in the amount of P900 000. This however necessitated the demolition of a portion of the building, which resulted in recovery of salvage material sold for P30 000.

Parking lot cost the company a total of P320 000 while repairs in the main hall were incurred at P45 000 prior to its use.

2.

The correct cost of the land should be:

The correct cost of the building should be: