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Seatwork - Module 2

The entity made three property acquisitions during the year: 1) Received donated land valued at P1,000,000 for which it paid P50,000 in legal fees. 2) Acquired land valued at P2,000,000 through share issuance and acquired an unvalued building. 3) Purchased a building and land for P6,000,000 including P200,000 in appraisal fees, with the land valued at P2,000,000 and building at P3,000,000. The total cost of land was P5,000,000 and the total cost of buildings was P4,000,000.

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Alyanna Alcantara
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2K views

Seatwork - Module 2

The entity made three property acquisitions during the year: 1) Received donated land valued at P1,000,000 for which it paid P50,000 in legal fees. 2) Acquired land valued at P2,000,000 through share issuance and acquired an unvalued building. 3) Purchased a building and land for P6,000,000 including P200,000 in appraisal fees, with the land valued at P2,000,000 and building at P3,000,000. The total cost of land was P5,000,000 and the total cost of buildings was P4,000,000.

Uploaded by

Alyanna Alcantara
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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An entity had the following property acquisition during the current year:

 Received land as donation from major shareholder as an inducement to locate plant in the
city. No payment was required but the entity paid P50,000 for legal expenses for land
transfer. The land is fairly valued at P1,000,000.
 Acquired land and building in exchange for 30,000 ordinary shares with P100 par value
and quoted price of P150. The land had a fair value of P2,000,000 but the fair value of
the building cannot be reliably measured.
 Purchased warehouse building and the land on which it is located for P6,000,000
including appraiser fee of P200,000. The land had appraised value of P2,000,000 and the
building P3,000,000.

1. What is the total cost of land?


a. 5,400,000
b. 5,320,000
c. 5,480,000
d. 5,000,000
2. What is the total cost of building?
a. 5,980,000
b. 6,100,000
c. 5,500,00
d. 4,000,000

Tower Company made the following acquisitions during the year:


 Purchased for P5,400,000, including appraiser fee of P50,000, a warehouse building and
the land on which it is located. The land had an appraised value of P2,000,000 and
original cost of P1,400,000. The building had an appraised value of P3,000,000 and
original cost of P2,800,000.
 Purchased an office building and the land on which it is located for P7,500,000 cash and
assumed an existing P2,500,000 mortgage.
For realty tax purposes, the property is assessed at P9,600,000, 60% of which is allocated
to the building.
3. What is the total cost of the land?
a. 6,160,000
b. 5,840,000
c. 6,000,000
d. 5,000,000
4. What is the total costs of the building?
a. 8,760,000
b. 9,240,000
c. 9,000,000
d. 7,760,000
On December 31, 2016, Bart Company purchased a machine exchange for a non-interest bearing
note requiring eight payments of P200,000. The first payment was made on December 31,2016
and the others are due annually on December 31.
At date of insurance, the prevailing rate of interest for this type of note was 11%
PV of an ordinary annuity of 1 at 11% for 8 periods 5.146
PV of an annuity of 1 in advance at 11% for 8 periods 5.712

5. What amount should be recorded as initial costs of the machine?


a. 1,600,000
b. 1,029,200
c. 1,400,000
d. 1,142,400
6. What is the discount on note payable on December 31, 2016?
a. 657,600
b. 457,600
c. 570,800
d. 0
7. What is the interest expense for 2017?
a. 125,664
b. 103,664
c. 113,212
d. 176,000
8. What is the carrying amount of note payable on December 31, 2017?
a. 1,200,000
b. 846,064
c. 742,400
d. 742,412
9. If the plant asset is acquired by issuance of ordinary shares, the cost is properly measured
at
a. Par value of the shares
b. Stated value of the shares
c. Fair value of plant asset
d. Fair value of the shares
10. When a plant asset is acquired by deferred payment which condition generally does not
indicate the need for imputation of interest?
a. The stated interest rate is significantly different from market interest rate.
b. The cash price if the asset is significantly different from the deferred obligation
c. The note payable is noninterest bearing
d. The face amount of the deferred obligation is equal to the fait value of the asset
acquired.
11. Which of the following cost should be expensed immediately?
a. Cost of opening new facility
b. Cost of introducing new product, including advertising and promotion
c. Cost of conducting business in new location, including cost of staff training
d. All of these are expensed immediately
Yola Company and Zaro Company are fuel oil distributors. To facilitate the delivery oil to their
customers, Yola and Zaro exchanged ownership of 1,200 barrels of without physically moving
the oil. Yola paid Zaro 300,000 to compensate for a difference in the grade of oil. It is reliably
determined that the exchange lacks commercial substance.
On the data of the exchange, cost and market value of the oil were as follows:
Yola Company Zaro Company
Cost 1,000,000 1,400,000
Market Value 1,200,000 1,500,000

12. What amount should Yola Company record as cost of the oil inventory received in
exchange?
a. 1,000,000
b. 1,200,000
c. 1,300,000
d. 1,500,000
13. What amount should Zaro Company record as cost of the oil inventory received in
exchange?
a. 1,400,000
b. 1,500,000
c. 1,100,000
d. 1,200,000

At the beginning of the current year. Leonora Company purchased a parcel of land
factory site.
An old building on the land was demolished and construction started on a new building
that was completed at the end of current year.
Purchase price of land 3,200,000
Demolition of old building 200,000
Architect fee 300,000
Legal free-title investigation 50,000
Construction cost 8,500,000
Imputed interest on construction cost 140,000
Landfill for building site 190,000
Clearing of trees 100,000
Timber sold 30,000
Temporary building used for construction activities 290,000
Land survey 40,000
Excavation for basement 110,000

14. What is the cost of the land?


a. 3,550,000
b. 3,750,000
c. 3,360,000
d. 3,660,000
15. What is the cost of the new building?
a. 9,400,000
b. 9,200,000
c. 9,590,000
d. 9,290,000

Extra Corporation is installing a new plant at its production facility. It has incurred these costs:
Purchase price of plant 2,500,000
Initial delivery and handling costs 200,000
Cost of site preparation 600,000
Consultants used for advice on the acquisition of the plant 700,000
Estimated dismantling costs to be incurred after 7 years 300,000
Operating losses before commercial production 400,000
16. The total costs that can be capitalized in accordance with PAS 16 is
a. 4,900,000
b. 4,500,000
c. 4,300,000
d. 3,600,000

Cavite Company acquired land and building by issuing 60,000 P100 par value ordinary shares.
On the date of acquisition, the shares had a fair value of P150 per share and the land and building
had fair value of P2,000,000 and 6,000,000 respectively.
During the year, Cavite also received land from shareholder to facilitate the construction of a
plant in the city, Cavite paid P100,000 for the land transfer. The land’s fair value is P1,500,000.
17. As a result of these acquisitions, Cavite Company’s equity had a net increase of
a. 10,500,000
b. 9,500,000
c. 9,400,000
d. 7,400,000
18. Initial operating losses should be
a. Deferred and amortized over a reasonable period
b. Expensed and charged to the income statement
c. Capitalized as cost of the plant
d. Charged to retained earnings
19. Major spare parts and standby equipment which are expected to be used over a period of
more than one year shall be classified as
a. Property, Plant and Equipment
b. Inventory
c. NonCurrent Asset
d. Expense
20. In exchange with commercial substance
a. Gain or loss is recognized entirely
b. There is no gain or loss
c. Only gain should be recognized
d. Only loss should be recognized

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