KEY TO CORRECTION:

Question No. 1

Cost of land P3,000,000

Apartment building mortgage assumed, includin g
related interest due at the time of purchase 80,000
Deliquent property taxes assumed by the Aliaga 30,000
Payments to tenants to vacate the apartment building 20,000
Cost of razing the apartment building 40,000
Proceeds from sale of salvaged materials (10,000)
Fee for title search 25,000
Survey before construction of new building 20,000
Assessment by city for drainage project 15,000
Cost of grading and leveling 50,000
Total cost of Land P3,270,000

Question No. 2

Architects fee for new building P60,000

Building permit for new construction 40,000
Excavation before construction of new building 100,000
Payment to building contractor 10,000,000
Temporary quarters for construction crew 80,000
Temporary building to house tools and materials 50,000
Cost of changes during construction to make new
building more energy efficient 90,000
Interest cost on specific borrowing incurred
during construction 360,000
Premium for insurance on building during construction 30,000
Total cost of Building P10,810,0
00
Question No. 3

Cost of paving driveway and parking lot P60,000

Cost of installing lights in parking lot 12,000
Total cost of Land Improvements P72,000
 Question No. 4

Payment of medical bills of employees P18,000

Cost of open house party 50,000
Cost of windows broken by vandals 12,000
Total cost amount that should be expensed P80,000

Question No. 5

Building (see no. 2) P10,810,0

00
Land improvements (see no. 3) 72,0
00
Total depreciable PPE P10,882,0
00

Question No. 6

Invoice price of machinery P2,000,000

Cash discount not taken (40,000)
Freight on new machine 10,000
Installation cost of new machine 60,000
Testing costs 15,000
Salary of engineer for the duration of the trial run 40,000
Cash allowance (100,000)
Cost of the new machine P1,985,000

Questions No. 7 and 8

Land Building
Allocation of acquisition price:
Land (P960,000 x 1/3) P320,000
Building (960,000 x 2/3) P 640,000
Option paid on property acquired:
Land (6,000 x 1/3) 2,000
Building (6,000 x 2/3) 4,000
Cost of building remodelling 400,000
 Adjusted balances P322,000 P1,044,000

Question No. 9

Net purchase price of machinery (P318,400 x .98) P312,032

Freight on machinery purchased 5,000
Adjusted balance P317,032

10. A 20. B
11. C 21. C
12. A 22. B
13. B 23. D
14. D 24. A
15. D 25. D
16. C 26. A
17. B 27. C
18. C 28. C
19. D 29. A

Question No. 30

Depreciation on Building P32,000

Laboratory aimed at discovery 48,000
R&D Expense P80,000

Question No. 31
No deductions

Question No. 32

Initial Cost P400,000

Cost of employee benefits 40,000
Professional fees 20,000
Cost of Intangible Asset P460,000

Question No. 33

Cost of employee benefits 40,000

 Professional fees 20,000
Total Additional Cost P 60,000
Question No. 34

Cost of Materials P200,000

Cost of Employee benefits 40,000
Fees to register 20,000
Amortization of patents 8,000
Cost of Intangible Asset P268,000

Question No. 35

Selling, Administrative & Other OH P120,000

36. E
37. E
38. A
39. C
40. D
41. C
42. C
43. C
44. A
45. C
46. C
47. D
48. D
49. D
50. D

Question No. 51
2,250,000
Question No. 35
400,000