Reference no: EM133107270
Question 1 - Glasgow Co. acquired a new machine. Details of the acquisition are as follows:
Purchase price including VAT P1,568,000
Cost of water device to keep machine cool 8,000
Cost of safety rail and platform surrounding machine 21,000
Installation cost, including site preparation and assembling 20,000
Fees paid to consultants for advice on acquisition of the machinery 13,000
Present value of the estimated dismantling cost of the new machine 18,000
Repair cost of the machine damaged while in the process of installation 5,000
Loss on premature retirement - old machine 18,000
Other nonrefundable sales tax 19,000
Cost of training for personnel who will use the machine 25,000
Cost of removing old machine 10,000
a. Assume that Glasgow Co. is a VAT-registered entity, determine the amount of cost of the machinery to be capitalized.
b. Assume that Glasgow Co. is a non-VAT registered entity, determine the amount of cost of the machinery to be capitalized.
Question 2 - Maine Company incurred the following expenditures related to land and building.
Cash paid for land and dilapidated building P1,382,000
Removal of old building to make room for construction of new building 50,000
Payment to tenants for vacating old building 15,000
Architect fee for new building 198,000
Building permit for new construction 37,000
Fee for title search 8,000
Survey before construction of new building 20,000
Excavation before new construction 100,000
New building constructed 6,000,000
Assessment by city government for drainage project 5,000
Cost of grading, leveling and landfill 48,000
Driveway and walk to new building from street as part of building plan 42,000
Temporary quarters for construction crew 80,000
Temporary building to house tools and materials 60,000
Cost of changes during construction to make new building more efficient 51,000
Cost of windows broken by vandals 25,000
a. What amount should be recorded as cost of land?
b. What amount should be recorded as cost of new building?
c. What amount should be allocated to the cost of old building?
Question 3 - Lisbon Corp. commenced operations early in 2018. During its first nine months. Lisbon acquired real estate for the construction of a building and other facilities. Operating equipment was purchased and installed, and the company began operating activities in April 2018. The company's accountant, who was not sure how to record some of the transactions, opened a PPE ledger account and recorded debits and (credits) to this account as follows:
A. Cost of real estate purchased as a building site P 1,728,000
B. Paid architect's fee for design of new building 238,000
C. Paid for the demolition of an old building on the building site purchased in A 280,000
D. Paid property tax on the real estate purchased as a building site in A 19,000
E. Paid excavation costs for the new building 150,000
F. Made the first payment to the building contractor 2,500,000
G. Paid for equipment to be installed in the new building 1,477,000
H. Received from sale of salvaged materials from demolishing the old building (68,000)
I. Made final payment to the building contractor 3,480,000
J. Imputed interest on Lisbon's own construction fund 220,000
K. Paid freight on equipment purchased 22,000
L. Paid installation costs of equipment 42,000
M. Paid for repair of equipment damaged during installation 24,000
PPE ledger account balance P10,112,000
Based on the preceding information, determine the amount to be charged to each of the following:
a. Land
b. Land improvements
c. Building
d. Manufacturing equipment
e. Expenses (excluding depreciation)