PACIFIC SOUTHBAY COLLEGE, INC.
Purok Carmenville, Calumpang, General Santos City
Acctg 24
Name: Louie Jay J. Bialan_BSA 2
MODULE 1 & 2: LAND AND BUILDING; MACHINERY
Problem 28-1 (AICPA Adapted)
Bastard Company
Answer:
1. A
Architect fee
New building construction cost
Cost of razing old building
Cost of factory building
P 950,000
8,000,000
300,000
P9,250,000
2. A
Purchase price
Title insurance and legal fees to purchased land
Cost of land
P4,500,000
200,000
P 4,700,000
Problem 28-2 (AICPA Adapted)
Chameleon Company
Answer: A
Purchase price
Legal fees
Title insurance
Total cost of land
Problem 28-3 (AICPA Adapted)
Dauntless Company
Answer:
1. B
2. B
P 4,000,000
150,000
50,000
P 4,200,000
Purchase price of land
Legal fees for contract
Architect fee
Demolition of old building
Sale of scrap
Construction cost
Total cost
Land
P 600,000
20,000
Building
P
P 620,000
80,000
50,000
(
30,000)
3,500,000
P3,600,000
Problem 28-4 (IAA)
Newman Company
Answer:
1. A
Purchase price of land
Demolition
Architect fee
Legal fee
Construction cost
Salvaged materials
Total cost
Land
P 1,000,000
Building
P 100,000
175,000
25,000
P 1,025,000
5,450,000
(
50,000)
P5,675,000
Problem 29-1 (IFRS)
Wisdom Company
Answer: A
Cost of equipment
Initial delivery and handling cost
Cost of site preparation
Consultants used for advice
Estimated dismantling cost
Total cost
P 2,500,000
200,000
600,000
700,000
300,000
P 4,300,000
The interest change is not capitalized because the equipment is ready for the
intended use when acquired.
The estimated dismantling cost is capitalized because it is required by contract.
Problem 29-2 (IFRS)
Repertoire Company
Answer: C
Cash paid (896,000-96,000)
Cost of transporting machine
Installation cost
Testing cost
Safety rails and platform
Water device
Cost of adjustment
Estimated dismantling cost
Total cost of machine
P 800,000
30,000
50,000
40,000
60,000
80,000
75,000
65,000
P1,200,000
The recoverable VAT or value added tax is not capitalizable.
The cost of training personnel who will operate the machine should be treated as
expense.
Note that the estimated dismantling cost is capitalized because the entity has a
present obligation as required by contract.
In the absence of a present obligation, the estimated dismantling cost is not
capitalized
Problem 29-3 (IAA)
Sacrosanct Company
Answer: A
Second hand market value
Overall and repairs
Installation
Testing
Handling
Safety device
Total cost of the second hand machine
P 2,400,000
150,000
80,000
110,000
10,000
250,000
P 3,000,000