Reference no: EM132817610
On April 1, 20x1, ABC 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.
Additional costs relating to the purchase include the following:
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 (demolition cost) 240,000
Proceeds from sale of salvaged materials 60,000
Fair value of materials salvaged from the old building and used in the new building 120,000
Construction cost of new building (completed) 34,000,000
Problem 1: The land and old building have fair values of ?20,000,000 and ?40,000,000, respectively. How much are the allocated costs of the land and the new building?
Land New building
a. 16,864,000 33,780,000
b. 16,104,000 34,180,000
c. 15,980,000 36,670,000
d. 16,014,000 34,810,000
Problem 2: The land and old building have fair values of ?20,000,000 and ?40,000,000, respectively. How much is charged as loss on initial recognition?
a. 48,000
b. 32,000,000
c. 32,048,000
d. 0
Problem 3: The old building is unusable and has an insignificant fair value. How much are the allocated costs of the land and the new building?
Land New building
a. 46,640,000 33,780,000
b. 46,104,000 34,180,000
c. 48,152,000 34,180,000
d. 46,140,000 34,810,000
Problem 4: The old building is unusable and has an insignificant fair value. How much is charged as loss on initial recognition?
a. 48,000
b. 32,000,000
c. 32,048,000
d. 0
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