Reference no: EM133127904
Question - Republican Corporation which commenced operations on January 1, 2018. During the following year, the company acquired a tract of land, demolished the building on the land and built a new factory. Equipment was acquired for the factory and in September 2019, the plant was ready to commence operation. A gala opening was held on September 18, with the City Mayor opening the factory. The first items were ready for sale on September 25. During this period, the following cash inflows and outflows occurred:
While searching for a suitable block of land, Republican placed an option to buy with three real estate agents at a cost of P1,000 each.
Payment of option fees P3,000
Receipt of loan from bank 3,000,000
Payment to settlement agent for title search, stamp duties, and settlement fees 100,000
Payment of delinquent property taxes assumed by Republican Corporation 50,000
Payment for land 1,000,000 Geodetic engineer's fee 100,000
Payment for demolition of old building 120,000
Proceeds from sale of material from old building 55,000
Payment to architect 230,000 Excavation fee 100,000
Payment to City Hall for approval of building construction 120,000
Payment for safety fence around construction site 34,000
Payment to construction contractor for factory building 2,400,000
Payment for external driveways, parking bays and safety lighting 540,000
Payment of interest on construction loan 400,000
Payment for safety inspection on building 30,000
Payment for equipment 640,000
Payment of freight and insurance costs on delivery of equipment 56,000
Payment of installation cost on equipment 120,000
Payment for safety equipment surrounding equipment 110,000
Payment for removal of safety fence 20,000
Payment for new fence surrounding the factory 80,000
Payment for advertisements in the newspaper about the forthcoming factory and its benefits to the community 5,000
Payment for opening ceremony 60,000
Payments to adjust equipment to more efficient operating levels subsequent to initial operation 33,000
Required -
1. What is the cost of the land?
a. P1,218,000 b. P1,251,000 c. P1,151,000 d. P1,271,000
2. What is the cost of the building?
a. P3,299,000 b. P3,399,000 c. P3,284,000 d. P3,234,000
3. What is the cost of the land improvements?
a. P620,000 b. P114,000 c. P654,000 d. P134,000
4. What is the cost of the equipment?
a. P959,000 b. P903,000 c. P849,000 d. P1,359,000