Problem 2

On May 4, 2020 the majority stockholder purchased a tract of land as a factory site for P12,000,000. An existing building on the property was demolished, and construction was begun on a new factory building in July 2012. Cost data is shown below:

New building construction costP20,000,000

Cost of demolition400,000

Proceeds from sale of salvage materials30,000

Title insurance and attorney's fees for purchase of land150,000

Instruction:Compute the capitalized cost of (a) land, (b) completed building

Problem 3

Renz Company acquired land, building and equipment from a bankrupt company at a lump sum price of P6,600,000. At the time of acquisition, Renz paid, P400,000 to have the assets appraised. The appraisal disclosed the following values:Land-P2,400,000; Building - P1,600,000; Equipment - P1,000,000.

Instruction:Compute the cost assigned to land, building and equipment.

Problem 4

Two different companies, Keanna and Rustom, each own an asset, and they have agreed to an exchange in which no cash involved. The following information for the two assets is available:

KeannaRustom

CostP2,000,000P1,300,000

Accumulated depreciation1,300,000900,000

Fair value800,000800,000

Instruction:Prepare journal entries for Keanna and Rustom to record the exchange.

Problem 5

During 2020 and 2021 Marvick Corporation build a building for its own use. The expenditures on the construction were as follows:

January 1, 2020P1,100,000

May 1, 2020480,000

July 1, 2020640,000

September 1, 2020360,000

February 1, 2021540,000

The construction was completed on March 31, 2021.Marvick obtained a construction loan from its bank for P3,200,000 on January 1, 2019.This loan had a 10% annual rate.Marvick's only other outstanding debt during the period January 1, 2020 to March 31,2021S, consisted of two long-term notes.This note has a principal amounts of P3,000,000 and P6,000,000 and annual interest rate of 11% and 12% respectively.

Instructions:Compute for the average accumulated expenditures, interest to be capitalized and total cost of the asset in 2020 and 2021.

Problem 6

On December 31, 2019, Joross Company borrowed P3,000,000 and issued a 12%, 3-year note to finance the construction of a new building. In 2020, the company made the following expenditures related to this building.

January 1P360,000

June 1600,000

July 11,500,000

December 11,500,000

Other debt outstanding and other information follow:

10-year,13% bonds, dated December 31, 2019,

interest payable annuallyP4,000,000

6-year, 10% note, dated December 31, 2019

interest payable annually1,600,000

Interestrevenue earned in 2020 from temporary

investments of the specific borrowing40,000

Instructions:

1. Determine the amount of interest to be capitalized in 2020.
2. If the specific borrowing amounted to P1,200,000 only (instead of P3,000,000), how much is the capitalized interest in 2020?

Problem 7

The company purchased an office building for P3,000,000 with estimated useful life of 10 years with no salvage value on January 1, 2020

Instructions:Compute the depreciation for year 1 and 2 under each of the following methods:

1. straight-line method
2. sum-of-the-years'-digit-method
3. double declining balance method

Problem 8

On January 1, 2016, Canberra Company acquired an equipment for P2,160,000. The equipment is expected to have a five year life. Straight-line depreciation is used.On January 1, 2018, the asset is appraised as having a sound value (depreciated replacement cost) of P1,944,000.On January 1, 2020, the asset is appraised at a sound value of P324,000.

Instruction:Prepare entries to record the above transactions.