PROBLEM 1

HAGAI COMPANY is a major supplier of computer parts and accessories. To improve delivery services to
customers, the company acquired four new trucks on July 1, 2023. Described below are the terms of
acquisition for each truck.

Truck List Price Terms

No. 1 P600,000 Acquired for a cash payment of P556,000.

No. 2 P800,000 Acquired for a down payment of P80,000 cash and a 1-year,

non-interest-bearing note with a face amount of P720,000.

There was no established cash price for the equipment. The
prevailing interest rate for this type of note is 10%.

No. 3 P640,000 Acquired in exchange for a computer package that the company

carries in inventory. The computer package cost P480,000 and is

normally sold by Hagai Co. for P608,000.

No.4 P560,000 Acquired by issuing 40,000 of Hagai Co.'s ordinary shares. The

shares have a par value per share of P10 and a market value per
share of P13.

What is the total cost of the trucks purchased on July 1, 2023?

Problem 2

On March 11, 2023, RAMBO COMPANY acquired the plant assets of Ina Corporation in exchange for
25,000 ordinary shares (P100 par value), which had a fair value per share of P180 on the date of the
purchase of the property. The property had the following appraised values:

Land P 800,000
Building P2,400,000
Machinery and equipment P1,600,000

Below is a summary of Rambo's cash outflows between the acquisition date and December 29, the date
when it first occupied the building.

Repairs to building P 210,000

Construction of bases for machinery to be installed later 270,000
Driveways and parking lots 244,000
Remodelling of office space in building,
including new partitions and walls 322,000
Special assessment by the city government on land 36,000

On December 27, Rambo paid cash for machinery, P560,000 (subject to a 2% cash discount) and freight
on machinery of P21,000.
Compute the total cost of each of the following:
a. Land
b. Buildings
c. Machinery and equipment

Problem 3

The following items are included in the PPE section of the audited statement of financial position of
DRUMS CORP. as of December 31, 2022:

Land P 3,450,000
Buildings 13,350,000
Leasehold Improvements 9,900,000
Machinery and equipment 13,125,000

The following transactions occurred during 2023:

1. Land A was acquired for P12,750,000. In connection with the acquisition, Drums paid a P765,000
commission to a real estate agent. Costs of P525,000 were incurred to clear the land. During the course
of clearing the land, timber and gravel were recovered and sold for P195,000.

2. Land B with an old building was acquired for P7,500,000. On the acquisition date, the fair value of the
land was P4,200,000 and the fair value of the building was P1,800,000. The old building was demolished
at a cost of P615,000 shortly after acquisition. A new building to be used as an owner-occupied property
was constructed for P4,950,000 plus the following costs:

Excavation fees P 570,000

Architectural design fees 165,000
Building permit fee 37,500
Imputed interest on funds used during construction (stock financing)

The building was completed and occupied on December 30, 2023.

3. Land C was acquired for P9,750,000 with the intention of selling it within 12 months from the date of
purchase.

4. During December 2023, costs of P1,335,000 were incurred to improve leased office space. The related
lease will terminate on December 31, 2025, and is not expected to be renewed.

5. A group of machines was purchased under a royalty agreement that provides for payment of royalties
based on units of production for the machines. The invoice price of the machines was P1,305,000,
freight costs were P49,500, installation costs were P36,000, and royalty payments for 2023 were
P262,500.

Based on the preceding information, determine the balances of the following PPE Items as of December
31, 2023:

1. Land
 2. Buildings
3. Leasehold Improvements
4. Machinery and equipment

Problem 4

CABARA COMPANY, whose accounting year ends on December 31, provides delivery services for
packages to be taken between the city and the airport.

On January 1, 2022, the company acquired a delivery van from Togo Trucks. The company paid cash of P
1,020,000 to Togo, which included registration fees of P20,000. Insurance costs for the firs year
amounted to P24,000. The truck is expected to have a useful life of five years. At the end of its useful life,
the asset is expected to be sold for P480,000, with costs relating to the sale amounting to PB,000

On January 1, 2023, Cabara's management decided to add another vehicle, a flat-top, to the fleet. This
vehicle was acquired from a liquidation auction at a cash price of P600,000. The vehicle needed some
repairs for the elimination of rust (cost P46,000) and the replacement of all tires (cost P12,400). The
company believed would use the flat-top for another two years and then sell it. Expected selling price
was P300,000, with selling costs estimated to be P8,000, it

On January 1, 2023, a radio communication system was installed in both vehicles at a cost per vehicle of
P6,000. This was not expected to have any material effect on the future selling price of either vehicle,

Insurance costs for 2023 were P24,000 for the first vehicle and P18,000 for the newly acquired vehicle.

On January 1, 2024, the flat-top that had been acquired at auction broke down. The company thought
about acquiring a new vehicle to replace this one but, after considering the costs, decided to repair the
flat-top instead. The vehicle was given a major overhaul at a cost of P130,000. Although this was a major
expense, management believed that the company would keep the vehicle for another two years. The
estimated selling price in three years' time is P240,000, with selling costs estimated at P6,000. Insurance
costs for 2024 were the same as for the previous year.

1. On January 1, 2022, Cabara should record the delivery van at__________________

2. What is the total cost of the flat-top vehicle? _________________.
3. What is the depreciation expense for 2022? __________________.
4. What is the depreciation expense for 2023? __________________.
5. What is the depreciation expense for 2024?___________________.

Problem 5

MANDOLIN CORP. uses different kinds of machines in its manufacturing process. It constructs some of
these machines itself and acquires others from the manufacturers. The following information relates to
two machines that it has recorded in 2023.
Machine A (purchased)

Cash paid for equipment P250,000

Cost of transporting machine - insurance and transport 9,000
Labor cost of installation by expert fitter 15,000
Labor cost of testing equipment 12,000
Insurance cost for 2023 4,500
Cost of training for personnel who will use the machine 7,500
Cost of safety rails and platforms surrounding machine 18,000
Cost of water devices to keep machine cool 24,000
Cost of adjustments to machine during 2023 to
make it operate more efficiently 22,500

Machine B (self constructed)

Cost of materials to construct machine P 210,000

Labor cost to construct machine 129,000
Allocated overhead cost- electricity, factory, space, etc. 66,000
Allocated interest cost of financing machine 30,000
Cost of installation 36,000
Profit saved by self construction 45,000
Safety inspection cost prior to use 12,000

Required:

1. What is the cost of Machine A?

2. What is the cost of Machine B?