Problem 7 The following information is related to Rommel Group. a. On July 6, Rommel acquired the plant assets of Alena Inc., which had discontinued operations. The appraised value of the property is: P 400,000 1 ,200,000 800,000 P 2,400,000 Rommel gave 12,500 share of its P100 par value ordinary shares in exchange. The shares had a market price of P180 per share on the date of the purchase of the property. Rommel expended the following amounts in cash between July 6 to December 15, before it moved in to the building. Repairs to building P 105,000 Construction of bases for machinery to be installed later 135,000 Drivewa s and - arkin lots 122,000 Remodeling of ofce space in building, including new partitions and walls 161,000 Special assessment by city on land 18,000 On December 20, the company paid cash for machinery, P 280,000, subject to a 2% cash discount, and freight on machinery of P 10,500. Requirement: Prepare the entries on the books of Rome] for these transactions. Problem 8 Sterling Inc. has decided to purchase equipment from Pound Ltd on January 2, 2019 , to expand its production capacity to meet customers' demand for its product. Sterling issues a P 1 170,000, 5-year, zero-interest-bearing note to Pound for the new equipment when the prevailing market rate of interest for obligation of this nature is 12%. The company will pay off the note in ve P 234,000 installments due at the end of each year over the life of the note. Requirements: 1. Prepare the journal entries at the date of the purchase. (Round to the nearest dollar in all computations.) 2. Prepare the journal entries at the end of the rst year to record the payment and interest. 3. Prepare the journal entries at the end of the second year to record the payment and interest. 4. Assuming that the equipment had a 10-year life and no residual value, prepare the journal entry necessary to record depreciation in the rst year. (Straight-line depreciation is employed.)