NFCPAR- Auditing Problems

Solution Guide Property, Plant, and Equipment

PROBLEM NO. 3
Old building will not be demolished

On March 1, 2018, Levy Co. acquired land and building by paying ₱ 9,000,000 and assuming
a mortgage of ₱ 1,000,000. The old building will be demolished for the construction of a new
building.

1. Unpaid real property taxes up to the date of acquisition 14,000

2. Cost of option of the acquired property 20,000
3. Excavation cost 12,000
4. Escrow fees on the properties acquired 11,000
5. Cost of relocating and reconstructing the property belonging to others in order to
acquire the property 23,000
6. Payment to real estate agent 40,000
7. Payments to tenants of the building to induce them to vacate the premises 3,000
8. Legal fees for contract to purchase land 11,000
9. Cost of removing trees from the land 70,000
10. Building permit and licenses 60,000
11. Architect fee 50,000
12. Materials used in all construction 600,000
13. Driveway and walk to building (part of the building plan) 30,000
14. Payment for claim for injuries not covered by insurance 40,000
15. Broker’s fee on the properties acquired 10,000
16. Rental fees generated on the portion of the building being used as a parking site 23,500
17. Cost of paving parking lot adjoining building 50,000
18. Other overhead cost incurred as a result of construction 220,000
19. Service equipment and fixture made a PERMANENT part of the structure 11,000
20. Safety fence around construction site 35,000
21. Removal of safety fence 9,800
22. Demolition cost of the old building 33,000
23. Proceeds from salvage of the demolition 4,000

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