Problem 1 Knight Company purchased an equipment for P369,600 to be used in the construction of MRT-3. The company had to pay the following in relation to the equipment: Import duties Non-refundable taxes Shipping costs Cost of testing Installation costs P10,000 15,000 2,000 1,200 1,800 Other information: The company is required to dismantle the equipment at the end of its useful life. The company estimates the dismantling costs to be P50,000. The relevant discount rate is 10%. The equipment has a useful life of 5 years. How much is the initial cost of the equipment? The purchase price includes input vat of P39,600 How much is the initial cost of the asset? Problem 2 On July 1, 2021, PAOLO exchanged its non-monetary asset (equipment) with YEN's nonmonetary asset (machinery). The following data were made available: PAOLO: Equipment Accumulated depreciation Fair value of the Equipment P4,400,000 2,000,000 3,000,000 YEN: Machinery Accumulated depreciation Fair value of the machinery P3,700,000 1,800,000 2,100,000 The exchange has significantly changed the cash flows of each entity. How much is the gain or loss on exchange for YEN? Problem 3 On December 31, 2021 MAGANDANGEHEMPLO, Inc. obtained a land with an old building, the old building is dilapidated and will not be used, that will be accounted for under property, plant and equipment. The Company intends to demolish the old building, to build a new building. The following information relates to the land and building: P3,500,000 3,000,000 2,000,000 Purchase price of the land and building Fair value: Land Old building Historical cost Land Old building Demolition costs 2,000,000 6,000,000 700,000 How much should be the amount taken to profit or loss for the year