PROBLEM #1

On January 1, 2019, MM Company reported the following property, plant and equipment: Land, P1,500,000; Building, P4,000,000; and Leasehold improvements, P500,000. The
following transactions occurred during the current year:
a.) Land site #621 was acquired for P3,000,000. Additionally, to acquire the land, the entity paid P60,000 commission to a real estate agent. Also, cost of P15,000 was incurred
to clear the land for the intended use but not to make room for the construction of a new building. During the course of clearing the land, timber and gravel were recovered
and sold for P5,000.
b.) Land site #622 with a building, was acquired for P4,000,000. The closing statement indicated that the land fair value was P2,500,000 and the building fair value was
P1,500,000. Shortly after acquisition, the building was demolished at a cost of P300,000 to make room for the construction of new building.
c.) A new building was constructed for P5,000,000 plus the following costs:
Excavation fee P 50,000
Architectural design fee 150,000
Building permit 40,000
Imputed interest on funds used during construction 500,000
d.) Land site #623 was acquired for P2,000,000 and was classified as held for sale.
e.) Extensive work was done to a building occupied by the entity under a lease agreement that expires on December 31, 2026. The total cost of work was P1,250,000 which
consisted of the following:
Painting of ceiling P 100,000
Electrical work with useful life of 10 years 350,000
Construction of extension to current working are with useful life of 15 years 800,000
The lessor paid one half of the cost incurred in connection with the extension to the current working area.
f.) During December 2019, cost of P650,000 was incurred to improve leased office space. The related lease will terminate on December 31, 2021 and is not expected to be
renewed.
REQUIRED: Compute for the cost of the following: a) Land b) Building c) Leasehold improvements

PROBLEM #2
DD Company provided the following charges to the repair and maintenance account:
Continuing and frequent repairs 600,000
Initial design fee for proposed extension of the office building 225,000
Installation of automatic door-opening system 300,000
Major improvements to the electrical wiring system 45,000
Overhead crane for assembly department to speed up production 525,000
Purchase and installation of windows and screens of better quality 750,000
Purchase of a more powerful machine to replace the old machine 90,000
Repainting of office building 150,000
Replacement of broken gear on a machine 90,000
Replacement of door to production area 75,000
Replacement of wooden floor by concrete flooring 180,000
Sealing of roof leaks in production area 120,000
Service contract on office equipment 150,000
REQUIRED: Compute for the: a) Amount of expenditures that should be capitalized b) Amount of expenditures that should be charged to repair and maintenance expense.

PROBLEM #3
EE Company used many kinds of machines in operations. The following information related to a machine that was acquired at the beginning of current year:
Cash paid for machine, excluding VAT 806,400
VAT on machine purchased 90,000
Cost of transporting machine 27,000
Labor cost of installation by expert fitter 45,000
Labor cost of testing machine before it was put into regular operation 36,000
Insurance cost for the current year 13,500
Cost of training for personnel who will use the machine 22,500
Cost of safety rails and platform surrounding machine 54,000
Cost of water device to keep machine cool 72,000
Cost of adjustment to machine to make it operate more efficiently 67,500
Estimated dismantling cost to be incurred 58,500
Wages of the regular machinery operator incurred during the testing of machine 7,200
REQUIRED: Compute for the cost of the new machine.

PROBLEM #4
GG Company replaced a portion of a building for P3,250,000. Before the replacement, the building had the following available information: Cost, P12,000,000; Carrying amount:
P8,400,000; 30% depreciated; original life, 30 years.
REQUIRED: Prepare the journal entry to record the replacement and subsequent annual depreciation under each of the following independent assumptions:
a) The portion of the building being replaced had an original cost of P3,000,000.
b) Separate identification of the replaced part is not practicable. The appropriate discount rate is 7%. (Round of the present value factor to 4 decimal places.)

PROBLEM #5
AA Company summarized construction activities for 2015 as follows:
Office Building Warehouse
Direct materials 4,500,000 750,000
Direct labor 6,000,000 1,500,000

Compute for the cost of office building AND warehouse under each of the following independent situations.
Case 1: Overhead is 70% of direct labor cost.
Case 2: Assuming that the overhead related to such activities amounted to P4,000,000 and is allocated using the following independent methods:
a. 60% is to be assigned to the warehouse.
b. Labor hours: 4,000 hours, office building; 6,000 hours, warehouse
c. Apportioned in the ratio of direct labor cost
d. Normal production of 24,000 units: 20,000 units, office building; balance, warehouse

PROBLEM #6
CC Company purchased a new machine on January 31. A P60,000 down payment was made and three monthly installments of P180,000 each are to be made beginning on March 1.
The cash price equivalent of the machine was P580,000. The entity incurred and paid installation costs amounting to P35,000. What amount should be capitalized as cost of the
machine?

PROBLEM #7
DD Company purchased equipment by making a down payment of P320,000 and issuing a note payable for P1,500,000. A payment of P500,000 is to be made at the end of each year
for three years. The applicable rate of interest is 8%. Irrecoverable taxes amount to P12,000, shipping charge of P160,000 and installation cost of P280,000 were incurred.
a) What is the present value of all payments?
b) How much is the discount on note payable?
c) What is the capitalized cost of the equipment?
d) How much will be the interest expense for the current year, assuming that the equipment was purchased January 1.

PROBLEM #8
EE Company plans to dispose of an equipment in one of several ways. The equipment has a cost of P2,400,000 and the accumulated depreciation amounted to P840,000. The current
fair value of such equipment is P1,800,000. Compute for the gain/loss on the following independent exchange transactions: (Specify whether your answer is a gain or loss.)
a) The equipment is exchanged for a used equipment also valued at P1,800,000. The cash flows of the asset given and the cash flows of the asset received do not differ.
b) The equipment is exchanged for a used equipment valued at P2,400,000. EE Company pays P600,000 in the exchange.
c) Assuming that the fair value of the equipment disposed of cannot be determined. The company exchanged it for a used equipment having a cost of P2,900,000 and fair
value of P1,000,000.
d) The equipment is exchanged for a vacant lot whose fair value is P2,040,000.