Problem 23-10(IAA)

During the year, Storm Company purchased a new machine. A P300,000 down
payment was made and three monthly installments of P1,160,000. 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?
SOLUTION:
Cash price 1,550,000
Installment Charge 50,000
______________
1,600,000
Problem 23-11 (AICPA Adapted)
Grey Company acquired a machine with a cash price of P2,000,000.
Down payment 400,000
Note payable in 3 equal annual installments 1,200,000
20,000 shares of Grey Company at fair value 800,000

Prior to use, installation cost of P50,000 was incurred. The machine has a
residual value of P100,000. What is the initial measurement of the new
machine?
Cash price 2,000,000
Installment Cost 50,000
_________
Cost of the Machine P2,050,000
Problem 23-12 (IAA)
At the beginning of current year, Allison Company purchased a new machine on a deferred
payment basis. A down payment of P1,000,000 was made and four annual installments of
P1,500,000 each are to be made every year-end. The cash price of the machine was
P5,800,000.
Due to an employee strike, the entity could not install the machine immediately and thus
incurred P50,000 of storage cost. Cost of installation excluding the storage cost amounted to
P100,000.
What is the initial amount to be capitalized as the cost of the machine?
Problem 23-13 (AICPA Adapted)
Bamco Company purchased a new machine on a deferred payment basis. A down
payment of P100,000 was made and 4 monthly installments of P250,000 are to be
made at the end of each month.
The cash equivalent price of the machine was P950,000. The entity incurred and
paid installation costs amounting to P30,000.
What amount should be capitalized as cost of the machine?
Problem 23-14 (IAA)
Grab Company purchased ton draw press at a cost of P3,600,000 with terms of
5/15 n / 45 Payment was made within P3, discount period. Shipping cost was
P90,000 which included P4,000 for insurance 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?
Problem 23-15 (ΙΑΑ)

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?

Problem 23-16 (AICPA Adapted)
During the current year, Beam Company paid P100,000 and exchanged inventory which has a carrying
amount of P2,000,000 and a fair value of P2,100,000 for other inventory in the same line of business with
fair value of P2,200,000.

1. What amount should be recorded as cost of the new inventory received in exchange?

2. What amount should be recorded as gain on exchange?

Problem 23-17 (AICPA Adapted)
Yola Company and Zaro Company are fuel oil distributors. To facilitate the delivery of oil to their customers, Yola and
Zaro exchanged ownership of 1,200 barrels of oil without physically moving the oil.
Yola paid Zaro P300,000 to compensate for a difference in the grade of oil. It is reliably determined that the exchange
lacks commercial substance.
On the date of the exchange, cost and fair value of the oil of Yola Company were P1,000,000 and P1,200,000,
respectively. The cost and fair value of the oil of Zaro Company were P1,400,000 and P1,500,000, respectively

1. What amount should Yola Company record as cost of the oil inventory received in exchange?

2. What amount should Zaro Company record as cost of the oil inventory received in exchange?