Reference no: EM133133610

Problem 1 - In April 5, 2021, A Corporation acquired a land and an old building in exchange for P4,800,000 cash and 50,000 shares of its own ordinary shares with a par value of P30 per share. The company's ordinary shares were selling at P95 per share when the acquisition was made. Moreover, the company incurred the following costs in relation to the acquisition: Legal fees to complete the transaction; 400,000; Property taxes for three calendar years including current year - 1,800,000; Payments to tenants of old building - 300,000; Cost of demolishing the old building - 660,000; Salvage proceeds from the demolition - 60,000.

1. At what cost shall the land be recorded

2. What is the correct cost of the building?

Problem 2 - Various equipment used by C Co. in its operations are either purchased from dealers or self-constructed. The company is self-constructing a manufacturing equipment incurring the following costs: Materials and purchased parts at gross invoice price (C Co. failed to take the 2% cash discount) - 300K; Imputed interest on funds used during construction (stock financing) - 21K; Labor cost - 285K; Overhead cost - 75K (fixed - 30K and variable - 45K); Gain on self-construction - 45K; and Installation costs - 6.6K. What is the total cost of the self-constructed equipment?