Name Student Number

Professor Name Date of Examination

Section Schedule (Time/Day)

I. Instruction:
a. For those questions without choices kindly type your answer in the given box. If the answer
requires numbers, follow the necessary format, for example the correct answer is P1,000,000,
your answer should be 1,000,000

II. True or False

1. Property, plant, and equipment and intangible assets are long-term, revenue-producing assets. T
2. Sales tax paid on equipment acquired for use in the business is not capitalized.. F
3. Demolition costs to remove an old building from land purchased as a site for a new building are considered
part of the cost of the new building. F
4. The initial cost of property, plant, and equipment includes all the identifiable expenditures necessary to
bring the asset to its desired condition and location for use. T
5. The initial valuation of natural resources can include (a) acquisition costs, (b) exploration costs, (c)
development costs, and (d) restoration costs. T

III. Multiple Choice: Shade the circle of the letter of your corresponding answer

6. The acquisition costs of property, plant, and equipment do not include:

a. The ordinary and necessary costs to bring the asset to its desired condition and location for use.
b. The net invoice price.
c. Legal fees, delivery charges, installation, and any applicable sales tax.
d. Maintenance costs during the first 30 days of use

7. On July 1, 2021, Markwell Company acquired equipment. Markwell paid $160,000 in cash on July 1, 2021,
and signed a $640,000 noninterest-bearing note for the remaining balance which is due on July 1, 2022. An
interest rate of 5% reflects the time value of money for this type of loan agreement. (PV of $1, PVA of $1)
(Use appropriate factor(s) from the tables provided.) 

For what amount will Markwell record the purchase of equipment?

a. 761,905
b. 769,523
c. 609,523
d. 800,000
8. An asset is acquired using a noninterest-bearing note payable for $225,000 due in three years. Which of the
following statements most likely is correct?
a. The fair value of the asset is less than $225,000.
b. No interest expense will be reported over the three-year note.
c. The total amount paid for the asset will be less than $225,000.
d. All of the other answer choices are correct
9. An asset is acquired using a noninterest-bearing note payable for $100,000 due in two years. Management
records the purchase with a debit to the asset for $100,000 and a credit to notes payable for $100,000.
Which of the following statements is correct?
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 a. Management has properly recorded the transaction.
b. Management has not considered the present value of the note in recording the asset.
c. Management should not record the asset until the note has been paid.
d. Management should record the note for more than $100,000 to account for the underlying interest
10. An asset acquired using a long-term note payable always will be recorded at the face amount of the note
under which scenario?
a. The note payable explicitly requires the payment of interest at a realistic interest rate.
b. The note is a noninterest-bearing note.
c. The company expects to use the asset for its entire physical life.
d. Interest on the note is not payable until the note is due
11. Alamos Co. exchanged equipment and $18,000 cash for similar equipment. The book value and the fair
value of the old equipment were $82,000 and $90,000, respectively. Assuming that the exchange has
commercial substance, Alamos would record a gain/(loss) of:
a. $26,000.
b. $8,000.
c. ($8,000).
d. $0.
12. Below is information relative to an exchange of similar assets by Grand Forks Corp. Assume the exchange has
commercial substance

Old Equipment Cash

Book Value Fair Value Paid
Case A $ 50,000 $ 60,000 $ 15,000
Case B $ 40,000 $ 35,000 $ 8,000

In Case A, Grand Forks would record the new equipment at:

a. 65,000.
b. 75,000.
c. 50,000.
d. 60,000.

13. The property, plant and equipment section of Naruto Corporation’s balance sheet at December 31, 2021

included the following items:

Land P 2,500,000

Land improvements 560,000

Building 3,600,000

Machinery and equipment 6,600,000

During 2022 the following data were available to you upon your analysis of the accounts:

Cash paid on purchase of land P10,000,0

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 00

Mortgage assumed on the land bought, including interest at 16% 16,000,00

Realtor’s commission 1,200,000

Legal fees, realty taxes and documentation expenses 200,000

Amount paid to relocate persons squatting on the property 400,000

Cost of tearing down an old building on the land 300,000

Amount recovered from the salvage of the building demolished 600,000

Cost of fencing the property 440,000

Amount paid to a contractor for the building erected 8,000,000

Building permit fees 50,000

Excavation expenses 250,000

Architect’s fee 100,000

Interest that would have been earned had the money used during the period of construction

been invested in the money market 600,000

Invoice cost of machinery acquired 8,000,000

Freight, unloading, and delivery charges 240,000

Customs duties and other charges 560,000

Allowances, hotel accommodations, etc., paid to foreign technicians during instillation and test

run of machines 1,600,000

Royalty payment on machines purchased (based on units produced and sold)

480,000

Compute for the amount of Land as of December 31, 2022? 30,400,000

14. Compute for the amount of Land Improvement as of December 31, 2022? 1,000,000

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 15. Compute for the amount of Building as of December 31, 2022? 12,000,000

16. Compute for the amount of Machinery and Equipment as of December 31, 2022?

17,000,000

17. Compute the total amount of depreciable assets as of December 31, 2022? 29,000,000

18. Sasuke Company incurred the following expenditures in 2022

Purchase of land P 7,892,000

Land Survey 104,000

Fees for search of title for land 12,000

Building permit 70,000

Temporary quarters for construction crew 215,000

Cost of demolish old building 940,000

Excavation of basement 200,000

Special Assessment for street project 40,000

Dividends 100,000

Damages awarded for injuries sustained in construction

(no insurance carried) 168,000

Cost of construction 58,000,000

Cost of paving parking lot adjoining building 800,000

Cost of shrubs, trees and other landscaping 660,000

A portion og the building site had been temporarily used by Sasuke to operate a car park while

the building was being constructed. A total of P325,000 was earned by Sasuke from this

incidental activity

What is the cost of the land? 9,740,000

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 19. What is the cost of the land improvement? 1,460,000

20. What is the cost of building? 58,160,000

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