Page |1

Chapter 15
PPE Part 1
NAME: Date:
Professor: Section: Score:

QUIZ:
1. Which of the following standards addresses the accounting for property, plant and equipment?
a. PAS 12 c. PAS 26
b. PAS 16 d. PFRS 5

2. Which of the following is least likely capitalized as cost of land?

a. Grading, filling, draining clearing and similar site development activities
b. Survey
c. Landscaping and similar improvements that have limited useful lives.
d. Special assessment

3. LOQUACIOUS TALKATIVE Co. acquired a piece of factory equipment overseas on cash basis
for ₱400,000. Additional costs incurred include the following: commission paid to broker for the
purchase of the equipment, ₱20,000; import duties of ₱100,000; non-refundable purchase taxes of
₱40,000; freight cost of transferring the equipment to LOQUACIOUS’ premises, ₱4,000; costs of
assembling and installing the equipment, ₱8,000; costs of testing the equipment, ₱6,000;
administration and other general overhead costs, ₱16,800; and advertisement and promotion
costs of the new product to be produced by the equipment, ₱15,200. The samples generated from
testing the equipment were sold at ₱2,000. How much is the initial cost of the equipment?
a. 576,000 c.592,800
b. 578,000 d. 594,800

4. On January 1, 20x1, REEDY SLENDER Co. purchased fixtures at an installment price of ₱520,000.
REEDYpaid₱40,000 cash down payment and issued a three-year noninterest bearing note of
₱480,000 payable in three equal annual installments starting December 31, 20x1 for the balance.
The prevailing rate for the note as of January 1, 20x1 is 12%. How much is the initial cost of the
fixtures?
a. 360,000 c.480,000
b. 424,293 d. 520,000

5. On April 1, 20x1, ESCULENT EDIBLE Co. purchased land and building by paying ₱40,000,000
and assuming a mortgage of ₱8,000,000. The land and building have appraised values of
₱20,000,000 and ₱40,000,000, respectively. The building will be used by ESCULENT Co. as its
new office.
Additional costs relating to the purchase include the following:
Legal cost of conveying and registering title to land ₱32,000
Payment to tenants to vacate premises 36,000
Option paid on the land and building 24,000
Option paid on similar land and building not acquired 12,000
Broker's fee on the land and building 60,000
Unpaid real estate taxes prior to April 1, 20x1 120,000
assumed
 Page |2

by ESCULENT Co. – assessed on land

Real estate taxes after April 1, 20x1 80,000
Repairs and renovation costs before the building
is occupied 160,000
Repair costs after the building is occupied 200,000

How much are the respective costs of the land and the building?
Land Building
a. 14,592,000 24,440,000
b. 15,492,000 32,640,000
c. 16,192,000 32,240,000
d. 17,292,000 23,420,000

6. Old Room Co. purchased land and building for a lump-sum price of ₱48,000,000. The existing
building will be demolished and a new building will be constructed. Old Room incurred the
following additional costs:
Title guarantee 80,000
Option paid for the land and old building acquired 24,000
Payments to tenants to vacate premises 48,000
Cost of razing the old building 240,000
Construction cost of new building (completed) 34,000,000

 The land and old building have fair values of ₱20,000,000 and ₱40,000,000, respectively.
 Some salvaged wood planks from the demolition were used as wall panels in the new building.
Old Room estimates that the salvaged wood planks have a fair value of ₱120,000. The other
salvaged materials were sold for ₱60,000.

How much are the allocated costs of the land and the new building?
Land New building Land New building
a. 16,864,000 33,780,000 c. 15,980,000 36,670,000
b. 16,104,000 34,180,000 d. 16,014,000 34,810,000

7. LOATH HATE Co. purchased a lot for ₱8,000,000. Immediately after the purchase, LOATH Co.
started the construction of a new building on the lot. Additional information follows:
Legal cost of conveying title to land ₱ 40,000
Special assessment 20,000
Survey costs 60,000
Materials, labor, and overhead costs 22,000,000
Cash discounts on materials purchased not taken 120,000
Clerical and other costs related to construction 56,000
Excavation costs 400,000
Architectural fees and building permit 240,000
Supervision by management on construction 48,000
Insurance premiums paid for workers 520,000
Payment for claim for injuries not covered by
insurance 180,000
Savings on construction 800,000
Cost of changes to plans and specifications due to 560,000
 Page |3

inefficiencies
Paving of streets and sidewalks (not included in
blueprint) 40,000
Income earned on a vacant space rented as parking
lot during construction 36,000

How much are the capitalized costs of the land and the building?
Land Building Land Building
a. 8,160,000 23,096,000 c. 8,100,000 23,184,000
b. 8,120,000 23,144,000 d. 8,060,000 23,264,000

8. FEEBLE Co. exchanged equipment with WEAK, Inc. Pertinent data are shown below:
FEEBLE Co. WEAK, Inc.
Equipment 4,000,000 8,000,000
Accumulated depreciation 800,000 3,200,000
Carrying amount 3,200,000 4,800,000
Fair value 3,800,000 4,400,000
Cash paid by FEEBLE to WEAK 600,000 600,000

In WEAK’s books, what amounts are recognized for the following?

Equipment Gain (Loss) Equipment Gain (Loss)
a. 3,400,000 400,000 c. 4,400,000 (1,000,000)
b. 3,800,000 (400,000) d. 5,000,000 0

9. TRANSCEND EXCEED Co. traded-in an old machine for a new model. Pertinent data are as
follows:
Old equipment:
Cost 200,000
Accumulated depreciation 80,000
Average published retail value 24,000

New equipment:
List price 380,000
Cash price without trade in 280,000
Cash price with trade in 220,000

How much is the gain (loss) recognized by TRANSCEND Co. on the transaction?
a. 60,000 c. (60,000)
b. 160,000 d. 0

10. Nail Bite Co. acquired land with fair value of ₱4,000,000 in exchange for Nail Bite’s 10,000 shares
with par value of ₱40 per share and quoted price of ₱360 per share.How much gain (loss)
shouldNail Bite Co.recognize on the exchange?
a. 3,200,000 c. (400,000)
b. 400,000 d. 0

“From the ends of the earth I call to you, I call as my heart grows faint; lead me to the rock that is higher than I.”
(Psalms 61:2)
- END -