Name: Vanessa V.

Tormo
SR-Code: 19-53358

I. Trisha Company made the following acquisitions during the year:

● Purchased for P5,400,000, including appraiser fee of P50,000, a warehouse
building and the land on which it is located.
The land had an appraised value of P2,000,000 and original cost of P1,400,000.
The building had an appraised value of P3,000,000 and original cost of
P2,800,000.

APPRAISED VALUE ORIGINAL COST

WAREHOUSE BUILDING P3,000,000 P2,800,000
LAND P2,000,000 P1,400,000

Cost of the Land Cost of Building

= 2/5 (5,400,000) = 3/5 (5,400,000)
= 2,160,000 = 3,240,000

Journal entry
Land 2,160,000
Building 3,240,000
Cash 5,400,000

● Purchased an office building and the land on which it is located for P7,500,000
cash and assumed an existing P2,500,000 mortgage
For realty tax purposes, the property is assessed at P9,600,000, 60% of which is
allocated to the building.

Purchase Price 7,500,000

Mortgage 2,500,000
Total Cost 10,000,000

Cost of the Building Cost of Land

= 10,000,000 (40%) = 10,000,000 (40%)
= 6,000,000 = 4,000,000

Journal entry
 Land 2,160,000
Building 3,240,000
Cash 5,400,000
Mortgage Payable

● Acquired a tract of land in exchange for 25,000 shares of Trisha Company with
P100 parr value and market price of P120 per share on the date of acquisition.
The last property tax bill indicated assessed value of P2,400,000 for the land.

Cost of Land 25,000 shares x P120 = 3,000,000

Share Capital 25,000 shares x P100 = 2,500,000
Share Premium 3,000,000 – 2,500,000

Journal Entry
Land 3,000,000
Share Capital 2,500,000
Share Premium 500,000

1. What is the total cost of land?

a. 9,160,000 Solution:
b. 8,560,000 2,160,000
c. 9,000,000 4,000,000
d. 8,660,000 + 3,000,000
9,160,000
2. What is the total cost of building?
a. 8,760,000 Solution:
b. 9,240,000 3,240,000
c. 9,000,000 + 6,000,000
d. 7,760,000 9,240,000

II. Dan Company recently acquired two items of equipment. The transactions are
described below:

June 10:
Acquired a press at an invoice price of P3,000,000, subject to a 5% cash
discount which was taken.

"Costs of freight and insurance during shipment were P50,000. Installation costs
were P200,000."
November 12:
 Acquired a welding machine at an invoice price of P2,000,000, subject to a 10%
cash discount which was NOT taken. Additional welding supplies were acquired
at a total cost of P100,000.

3. The increase in the equipment account as a result of the above transactions would
be
a. 4,900,000 Solution:
b. 5,000,000 3,000,000 x 95% = 2,850,000
c. 5,100,000 Cost of Freight 50,000
d. 5,200,000 Installation cost 250,000
3,100,000
2,000,000 x 90% = 1,600,000
4,900,000

Eragon Company and its subsidiaries own the following properties at year-end:

Land held by Eragon for undetermined use 5,000,0

00
A vacant building owned by Eragon and to be
leased out under an operating lease 3,000,0
00
Property held by a subsidiary of Eragon, a real estate firm,
in the ordinary course of business 2,000,0
00
Property held by Eragon for use in production 4,000,0
00
Building owned by a subsidiary of Eragon and for which
the subsidiary provides security and maintenance services to the 1,500,0
lessees 00

Land leased by Eragon to a subsidiary under an operating lease 2,500,0

00
Property under construction for use as investment property 6,000,0
00
Land held for future factory site 3,500,0
00
Machinery leased out by Eragon to an unrelated party under an operating lease
1,000,000

4. What is the total investment property that should be reported in the consolidated
statement of financial position of the parent and its subsidiaries?
 a. 12,000,000
b. 15,500,000 Solution:
c. 10,500,000 Land held for undetermined use 5,000,000
d. 9,500,000 A vacant building owned by
Eragon and to be leased out
under an operating lease 3,000,000
Building owned by a subsidiary
of Eragon and for which the
subsidiary provides security
and maintenance services to
the lessees 1,500,000
Property under construction for
use as investment property 6,000,000
Total 15,500,000

5. What total amount should be included in property, plant and equipment in the
consolidated statement of financial position?
a. 11,000,000
b. 13,000,000 Solution:
c. 10,500,000 Property held for use
d. 8,500,000 in production 4,000,000
Land leased to a subsidiary
under an operating lease 2,500,000
Land held for future factory site 3,500,000
Machinery leased out to an
unrelated party under an
operating lease 1,000,000
Total 11,000,000
The Paradise Company's accounting policy with respect to investment properties is to
measure them at fair value at the end of each reporting period.

One of its investment properties was measured at P8,000,000 on 31 December 2020.

The useful life of the property is 40 years.

The property had been acquired on 1 January 2020 for a total of P7,600,000, made up
of P6,900,000 paid to the vendor, P300,000 paid to the local authority as a property
transfer tax and P400,000 paid to professional advisers.

6. The amount of the gain to be recognized in profit or loss in the year ended 31
December
2020 in respect of the investment property is
 a. P400,000
b. P700,000
c. P800,000
d. P590,000

Solution
Fair Value (December 31,2020) 8,000,000
Requisition Cost (7,600,000)
Increase in Fair Value 400,000

Journal Entry
January 1 Investment Property 7,600,000
Cash 7,600,000

December 1 Investment Property 400,000

Gain from change in Fair Value 400,000