Property, Plant and Equipment Questions
PPE – Cost
Problem 11 – 1
On August 1, 2012, Benigno Company purchased a new machinery on a deferred payment basis. A down payment of P 500,000 was made and 4 monthly instalments of P 1,250,000 each are to be made starting September 1, 2012. The cash equivalent price of the machine was P 4,750,000. Benigno incurred and paid installation costs amounting to P 150,000. What si the amount to be capitalized as a cost of the machine?
a. P 4,750,000 b. P 5,500,000 c. P 4,900,000 d. P 5,650,000
Solution 11 – 1 Answer is c
Cash Price P 4,750,000
Installation cost 150,000
Total P 4,900,000
Problem 11 – 2
On December 31, 2012, Magdalena Company purchased an equipment in exchange for a noninterest bearing note requiring eight payments of P 250,000. The first payment was made on December 31, 2012, and the others are due annually on December 31. At the date of issuance, the prevailing rate of interest for this note is 13%.
PV of an ordinary annuity of 1 at 13% for 8 periods 4.799
PV of an annuity of 1 in advance at 13% for 8 periods 5.423
What amount should be recorded as initial cost of equipment?
a. P 1,355,750 b. P 2,000,000 c. P 1,199,750 d. P 1,400,000
Solution 11 – 2 Answer is a
Present value of future payments (250,000 * 5.423) P 1,355,750
Problem 11 – 3
Honda Company purchased land with a current market value of P 7,680,000. The carrying amount of the land was P 1,305,000. In exchange for the land, Honda issued
64,000 ordinary shares with par value of P 100 and market value of P 140 per share. The shares are traded in an established stock exchange. What amount should Honda record as cost of land?
a. P 4,176,000 b. P 6,400,000 c. P 7,680,000 d. P 8,960,000
Solution 11 – 3 Answer is c
Current market value of land P 7,680,000
Problem 11 – 4
Kyrie Company purchased machinery by making a down payment of P 400,000 and issuing a note
Problem 11 – 1
On August 1, 2012, Benigno Company purchased a new machinery on a deferred payment basis. A down payment of P 500,000 was made and 4 monthly instalments of P 1,250,000 each are to be made starting September 1, 2012. The cash equivalent price of the machine was P 4,750,000. Benigno incurred and paid installation costs amounting to P 150,000. What si the amount to be capitalized as a cost of the machine?
a. P 4,750,000 b. P 5,500,000 c. P 4,900,000 d. P 5,650,000
Solution 11 – 1 Answer is c
Cash Price P 4,750,000
Installation cost 150,000
Total P 4,900,000
Problem 11 – 2
On December 31, 2012, Magdalena Company purchased an equipment in exchange for a noninterest bearing note requiring eight payments of P 250,000. The first payment was made on December 31, 2012, and the others are due annually on December 31. At the date of issuance, the prevailing rate of interest for this note is 13%.
PV of an ordinary annuity of 1 at 13% for 8 periods 4.799
PV of an annuity of 1 in advance at 13% for 8 periods 5.423
What amount should be recorded as initial cost of equipment?
a. P 1,355,750 b. P 2,000,000 c. P 1,199,750 d. P 1,400,000
Solution 11 – 2 Answer is a
Present value of future payments (250,000 * 5.423) P 1,355,750
Problem 11 – 3
Honda Company purchased land with a current market value of P 7,680,000. The carrying amount of the land was P 1,305,000. In exchange for the land, Honda issued
64,000 ordinary shares with par value of P 100 and market value of P 140 per share. The shares are traded in an established stock exchange. What amount should Honda record as cost of land?
a. P 4,176,000 b. P 6,400,000 c. P 7,680,000 d. P 8,960,000
Solution 11 – 3 Answer is c
Current market value of land P 7,680,000
Problem 11 – 4
Kyrie Company purchased machinery by making a down payment of P 400,000 and issuing a note