problem 6 issuance of share capital

Starla Company acquired the assets of Boboy Company, which had discontinued operations. The fair values of the assets are:

Land1,000,000

Building5,000,000

Machinery2,000,000

Starla Company issued 60,000 shares with P100 par value in exchange. The share had a quoted price of P150 on the date of purchase of the property.

problem 7 issuance of bonds payable

Figaro Company acquired land and paid in full by issuing P600,000 of its 10 percent bonds payable and 40,000 ordinary shares with par value of P10. The share was selling at P19 and the bonds were trading at 102.

Prepare the relevant journal entry.

problem 8 exchange of assets

NO CASH INVOLVED

Invested in 5,000 shares of another company at P100 per share. Subsequently, Luna Company exchanged the 5,000 shares for delivery equipment. At the time of exchange, the shares are quoted at 120 per share and the equipment has a list price of P680,000. Motor vehicle registration was paid in the amount of P3,000.

Prepare the relevant journal entries if transaction is

a)with commercial substance; and

b)without commercial substance.

problem 9 exchange of assets

WITH CASH INVOLVED

Elias Company and Emma Company are fuel oil distributors. To facilitate the delivery of oil to customers, Elias and Emma exchanged ownership of 1,000 barrels of oil without physically moving the oil. Elias paid Emma P1,500,000 to compensate for a difference in the grade of oil. On the date of the exchange, cost and fair value of oil were:

Elias CompanyEmma Company

Cost5,000,0006,000,000

Fair value7,000,0008,500,000

Prepare the relevant journal entries if transaction is

a)with commercial substance; and

b)without commercial substance.

problem 10 trade-in

Lydia Company acquired a new equipment by trading used equipment with a dealer.

Old Equipment:

Original cost1,200,000

Accumulated depreciation1,050,000

Fair value100,000

Trade-in value300,000

New Equipment:

List price1,600,000

Prepare the entry to record the trade in following generally accepted accounting principles.

problem 11 trade-in

Cardo Company traded used equipment for newer model with a dealer. The pertinent data are:

Old Equipment:

Original cost1,000,000

Accumulated depreciation600,000

Fair valueunknown

New Equipment:

List price1,600,000

Cash price without trade-in1,400,000

Cash payment with trade-in980,000

Prepare the journal entry to record the trade in following generally accepted accounting principles.

problem 12 donation

UM Company had the following property acquisitions during the current year:

Acquired a tract of land with an existing building in exchange for 50,000 ordinary shares of P100 par value with a market price of P120 per share on the date of acquisition. The last property tax bill indicated assessed value of P2,800,000 for the land and P1,200,000 for the building. However, the land has a fair value of P5,500,000 and the building has no determinable fair value. Shortly after acquisition, the building was razed at a cost of P100,000 in anticipation of a new building construction.

Received land from a major shareholder as an inducement to locate a plant in the city. No payment was required but Jomalyn paid P50,000 for legal land transfer. The land is fairly valued at P2,000,000.

What is the total increase in land as a result of the acquisition?

problem 13 property held for sale

On January 2, 2015, Ben Company intends to sell its building with a carrying value of P3.8M but with a fair value of P4.2M.It will continue to use the asset until the construction of a new building is completed.The current building has a remaining useful life of 10 years.

On January 2, 2015, Ben Company should classify the building as __________ at P__________.

problem 14 property held for sale

On January 2, 2015, Lima Company committed a plan to sell its other building and classified this asset as held for sale.The carrying value of the building as of January 2, 2015 is P5M. Lima Company priced the building at P5.5M, which is equal to its fair market value.

During 2015, the market conditions that existed at the date the building was classified initially as held for sale deteriorate and as a result, the asset is not sold at the end of 2015.During 2015, the company actively solicited but did not receive any reasonable offers to purchase the building and, in response, reduced the price to P4.8M.

The building continues to be actively marketed at a price that is reasonable given the change in market conditions.In Lima's balance sheet at December 31, 2015, how is the building classified and at what amount should it be measured?