2 PROBLEMS Problem 23-1 (IAA) Erica Company had the following property acquisitions during the current year: 1, Acquired a tract of land in exchange for 50,000 ordinary shares with P100 par value and market price of P120 per share on the date of acquisition. The last property tax bill indicated assessed value of P4,500,000 for the land. 2. Received land from a major shareholder as an inducement to locate a plant in the city. No payment was required but the entity paid P50,000 for legal expenses for land transfer. The land is fairly valued at P1,000,000. 3. Purchased for P5,500,000, including appraiser fee of P100,000 a warehouse building and the land on which it is located. The land had an appraised value of P2,000,000 and original cost of P1,400,000. The building had an appraised value of P3,000,000 and original cost of P2,500,000. 4. Purchased an office building and the land on which it is located for P7,500,000 cash and assumed an existing P2,500,000 mortgage. For realty tax purposes, the property is assessed at | P9,600,000, 60% of which is allocated to building. | Required: Prepare journal entries to record the transactions for the current year. 681Problem 23-2 (ACP) Credulous Company purchased equipment on January 1, 2021 under the following terms: a. P200,000 downpayment b. Five annual payments of P100,000, the first installment note to be paid on December 31, 2021. The same equipment was available at a cash price of P580,000. Required: Prepare journal entries for 2021 and 2022. Problem 23-3 (ACP) On January 1, 2021, Enrich Company purchased a machine under the following terms: a. P100,000 downpayment b. Four annual payments of P200,000, the first installment note to be paid on December 31, 2021. The fair value of the machine is not clearly determinable on the date of acquisition. The prevailing rate of interest for this type of obligation is 10%. The present value factors at 10% for four periods are: Present value of 1 -683 Present value of ordinary annuity of 1 3.170 Required: Prepare journal entries for 2021 and 2022.Problem 23-11 (IAA) Acrophobia Company summarized the following manufacturing and construction activities for the current year: Finished goods Machinery Materials 3,000,000 500,000 Direct labor 4,000,000 1,000,000 Overhead for the prior year was 75% of the direct labor cost. Overhead in the current year related to both product manufacture and construction activities amounted to P3,600,000. Required: a. Calculate the cost of the machinery, assuming that manufacturing activities are to be charged with overhead at the rate experienced in the prior year. b. Calculate the cost of the machinery if manufacturing and construction activities are to be charged with overhead at the same rate. 687Problem 23-12 (IAA) During the year, Storm Company purchased a new machine. A P300,000 down payment was made‘and three monthly installments of P500,000. The cash price would have been P1,550,000. The entity paid no installation charges under the monthly payment plan but a P50,000 installation charge would have been incurred with a cash purchase. What amount should be capitalized as cost of the machine? a. 1,800,000 b. 1,500,000 ec. 1,600,000 d. 1,550,000Problem 23-15 (AICPA Adapted) On December 31, 2021, Bart Compan: . . a y purchased = jn exchange for a noninterest bearing note eeaianp eke payments of P200,000. g) The first payment was made on December 31, 2021 and the others are due annually on December 31. At date of issuance, the prevailing rate of interest for this type of note was 11%. PV of an ordinary annuity of 1 at 11% for 8 periods 5.146 PV of an annuity of 1 in advance at 11% for 8 periods 5.712 1. What amount should be recorded as initial cost of the machine? a. 1,600,000 b. 1,029,200 c. 1,400,000 d. 1,142,400 2. What amount should be recorded as discount on note payable on December 31, 2021? ‘ a. 657,600 b. 457,600 c. 570,800 d. 0 3. What amount should be recorded as interest expense for 2022? a. 125,664 b. 103,664 c. 118,212 d. 176,000 W hat is the carrying amount of note payable on December 31, 2022? 942,400 846,064 742,400 742,412 aes 689Problem 23-19 (IAA) Anxious Company acquired two items of machinery. * On December 31, 2021, Anxious Company purchased a machine in exchange for a noninterest bearing note requiring ten payments of P500,000. The first payment was made on December 81, 2022, and the others are due annually on December 31. The prevailing rate of interest for this type of note at date of issuance was 12%. The present value of an ordinary annuity of 1 at 12% is 5.33 for nine periods and 5.65 for ten periods. On December 31, 2021, Anxious Compary acquired used machinery by issuing the seller a two-year, noninterest-bearing note for P3,000,000. In recent borrowing, the entity has paid a 12% interest for this type of note. The present value of 1 at 12% for 2 * periods is .80 and the present value of an ordinary annuity of 1 at 12% for 2 periods is 1.69. What amount should be reported as total cost of the machinery? a. 5,065,000 b. 5,225,000 ¢c. 5,565,000 d. 8,235,000 691Problem 23-20 (IAA) rchased a ten-ton draw press at a cost of us oun cay indie terms of 5/15, n/45. Payment was made within the discount period. i i 000 for - eng cost was P90,000 which inckaded P4, f cmaaer in transit. Installation cost. totaled P240,000 which included P80,000 for taking out a section of a wall and rebuilding it because the press was too large for the doorway. What amount should be capitalized as cost of the ten-ton draw press? a. 3,420,000 b. 3,670,000 ce. 3,750,000 d. 3,715,200 Problem 23-21 (IAA) Holiday Company purchased a high speed industrial centrifuge at a cost of P840,000. Shipping cost amounted to P50,000. Foundation work to house the centrifuge cost P80,000. An additional water line had to be run to the equipment at cost of P40,000. Labor and testing cost totaled P60,000. Materials used up in testing cost P30,000. What amount should be capitalized as cost of the equipment? 1,100,000 1,060,000 1,020,000 1,040,000 aorpProblem 23-22 (AICPA Adapted) At the beginning of the current year, Hallmark C exchanged an old packaging machine, which cost 1.200.000 and was 50% depreciated, for a used machine and paid aveash difference of P200,000. The fair value of the old packaging machine was determined to be P700,000. 1. What amount should be recorded as cost of the new asset acquired? a. 700,000 b. 900,000 c. 800,000 d. 600,000 2. What amount should be yecorded as gain on exchange? 500,000 100,000 200,000 0 aorP Problem 23-23 (AICPA Adapted) At the beginning of the current year, Jam Company traded in an old machine having a carrying amount of P1,700,000 and paid a cash difference of P600,000 for a new machine with a cash price of P2,050,000. 1. What amount should be recorded as cost of the machine acquired in exchange? a. 1,680,000 b. 2,050,000 c. 1,450,000 d. 1,080,000 2. What amount of loss should be recognized on the exchange? : a. 600,000 b. 250,000 c. 350,900 d. 0 693