Hardin Company received P40,000 in cash and a used computer with a fair value of P120,000

from Page Corporation for Hardin Company's existing computer having a fair value of P160,000
and an undepreciated cost of P150,000 recorded on its books.
1) If the transaction has no commercial substance.How much gain should Hardin recognize
on this exchange, and at what amount should the acquired computer be recorded,
respectively? P0 and P110,000
2) If the transaction has commercial substance. How much gain should Hardin recognize on
this exchange, and at what amount should the acquired computer be recorded,
respectively?
FV of asset given P 160,000
BV of asset given 150,000
Gain P 10,000
FV of asset given P 160,000
Less Cash received 40,000
Cost of the new computer P 120,000
Horner Company buys a delivery van with a list price of P800,000. The dealer grants a 15%
reduction in list price and an additional 2% cash discount on the net price if payment is made in
30 days. Input tax amount to P79,968 and the company paid an extra P3,000 to have a special
horn installed.
3) What should be the recorded cost of the van?
P800,000 X 85% X 98% + P3,000 = P669,400

On August 1, 2010, Hayes Corporation purchased a new machine on a deferred payment basis.
A down payment of P3,000 was made and 4 monthly installments of P2,500 each are to be
made beginning on September 1, 2010. The cash equivalent price of the machine was P12,000.
Hayes incurred and paid installation costs amounting to P500.
4) The amount to be capitalized as the cost of the machine is
(P12,000 + P500) = P12,500

Cheng Company has recently decided to accept a proposal from the City of BelAire that publicly
owned property with a large warehouse located on it will be donated to Cheng if Cheng will build
a branch plant in BelAire. The fair value of the property is P490,000 and of the warehouse is
P980,000.

5) What is the entry to record the donation?

Warehouse P980,000
Land 490,000
Income from donation P1,470,000

Siegle Company exchanged 400 shares of Guinn Company ordinary shares, which Siegle was
holding as an investment, for equipment from Mayo Company. The Guinn Company ordinary
share, which had been purchased by Siegle for P50 per share, had a quoted market value of
P58 per share at the date of exchange. The equipment had a recorded amount on Mayo's
books of P21,000 and a fair value of P23,000.
6) What journal entry should Siegle make to record this exchange?
a. Equipment ......................................................................... 20,000
Investment in Equity Security ..................................... 20,000
b. Equipment ......................................................................... 23,000
Investment in Equity Security ..................................... 20,000
Gain on Disposal of Investment ................................ 3,000
c. Equipment ......................................................................... 21,000
Loss on Disposal of Investment ......................................... 2,200
Investment in Equity Security ..................................... 23,200
d. Equipment ......................................................................... 23,200
Investment in Equity Security ..................................... 20,000
Gain on Disposal of Investment ................................ 3,200

An equipment was acquired through issuance of promissory note on April 1, 2013. The
equipment has no market value. The promissory note is payable in 5 annual installment of
P150,000 starting April 1, 2013, in addition the company also incurred installation cost of
P15,000 for cash.

7) How much would be the cost of the equipment, if the note market rate of interest is 10%
and what will be the journal entry to record the purchase?

Equipment 625,479.82
Discount on Notes Payable 124,520.18
Cash 150,000
Notes Payable 600,000
Equipment 15,000.00
Cash 15,000
8) How much interest expense is reported in 2014 profit or loss? (39,864.08)

Wilson Co. purchased land as a factory site for P600,000. Wilson paid P60,000 to tear down
two buildings on the land. Salvage was sold for P5,400. Legal fees of P3,480 were paid for title
investigation and making the purchase. Architect's fees were P31,200. Title insurance cost
P2,400, and liability insurance during construction cost P2,600. Excavation cost P10,440. The
contractor was paid P2,200,000. An assessment made by the city for pavement was P6,400.
Interest costs during construction were P170,000.

9) The cost of the land that should be recorded by Wilson Co. is

10) The cost of the building that should be recorded by Wilson Co. is

On February 1, 2010, Nelson Corporation purchased a parcel of land as a factory site for
P200,000. An old building on the property was demolished, and construction began on a
new building which was completed on November 1, 2010. Costs incurred during this
period are listed below:
Demolition of old building P 20,000
 Architect's fees 35,000
Legal fees for title investigation and purchase contract 5,000
Construction costs 1,090,000
(Salvaged materials resulting from demolition were sold for P10,000.)
Nelson should record the cost of the land and new building, respectively, as

11) Worthington Chandler Company purchased equipment for P10,000. Input tax on the
purchase was P1,200. Other costs incurred were freight charges of P200, repairs of P350
for damage during installation, and installation costs of P225. What is the cost of the
equipment?

12) Fogelberg Company purchased equipment for P12,000. Other costs incurred were
freight charges of P240, repairs of P420 for damage during installation, and installation
costs of P270. What is the cost of the equipment?
13) During self-construction of an asset by Samuelson Company, the following were among
the costs incurred:
Fixed overhead for the year P1,000,000
Portion of P1,000,000 fixed overhead that would
be allocated to asset if it were normal production 40,000
Variable overhead attributable to self-construction 35,000
What amount of overhead should be included in the cost of the self-constructed asset?
14) During self-construction of an asset by Richardson Company, the following were among
the costs incurred:
Fixed overhead for the year P1,000,000
Portion of P1,000,000 fixed overhead that would
be allocated to asset if it were normal production 60,000
Variable overhead attributable to self-construction 55,000

15) What amount of overhead should be included in the cost of the self-constructed asset?