1.

On December 31, 2019, Bart Company purchased a machine in exchange for a noninterest
bearing note requiring eight payments of P200,000. The first payment was made on December
31, 2019 and the others are due annually on December 31. At date of issuance, the prevailing
rate of interest for this type of note was 11%. PV of an ordinary annuity of 1 at 11% for 8
periods, 5.146. PV of an annuity of 1 in advance at 11% for 8 periods, 5.712. What is the carrying
amount of note payable on December 31, 2020?

The carrying amount is the original cost of an asset as reflected in a company’s books or balance
sheet Balance Sheet

846,064

2. Yola Company and Zaro Company are fuel oil distributors. To facilitate the delivery of oil to their
customers, Yola and Zaro exchanged ownership of 1,200 barrels of oil without physically moving
the oil. Yola paid Zaro P300,000 to compensate for a difference in the grade of oil. It is reliably
determined that the exchange lacks commercial substance. On the date of the exchange, cost
and fair value of the oil of Yola Company were P1,000,000 and P1,200,000, respectively. What
amount should Yola Company record as cost of the oil inventory received in exchange?

1,300,000

Cost of oil given P 1,000,000

Cash payment 300,000

Cash of oil received 1,300,000

 3. Tower 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. 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. What is the total cost of land?

6,160,000

4. Amiable Company exchanged a truck with a carrying amount of P1,200,000 and a fair value of
P2,000,000 for a truck and P200,000 cash. The fair value of the truck received was P1,800,000.
The cash flows from the new truck are not expected to be significantly different from the cash
flows of the old truck. At what amount should the truck received in the exchange be recorded?

1,000,000

5. Tower 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. 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. What is the total cost of building?

9,240,000 = 3,240,000 + 6,000,000

6. On December 31, 2019, Bart Company purchased a machine in exchange for a

noninterest bearing note requiring eight payments of P200,000. The first payment was
made on December 31, 2019 and the others are due annually on December 31. At date
of issuance, the prevailing rate of interest for this type of note was 11%. PV of an
ordinary annuity of 1 at 11% for 8 periods, 5.146. PV of an annuity of 1 in advance at
11% for 8 periods, 5.712. What amount should be recorded as initial cost of the
machine?

1,142,400 = 200k x 5.712

7. At the beginning of the current year, Winn Company traded in an old machine having a carrying
amount of P2,000,000 and paid a cash difference of P600,000 for a new machine having a cash
price of P2,500,000. What amount of loss should be recognized on the exchange?

100,000

Trade in value (2,500, 000 – 600, 000) P 1, 900, 000

Carrying amount 2,000, 000
Loss of Mr. Right P 100,000
8. On December 31, 2019, Bart Company purchased a machine in exchange for a
noninterest bearing note requiring eight payments of P200,000. The first
payment was made on December 31, 2019 and the others are due annually on
December 31. At date of issuance, the prevailing rate of interest for this type of
note was 11%. PV of an ordinary annuity of 1 at 11% for 8 periods, 5.146. PV of
an annuity of 1 in advance at 11% for 8 periods, 5.712. What is the discount on
note payable on December 31, 2019?
457,600
9. On December 31, 2019, Bart Company purchased a machine in exchange for a
noninterest bearing note requiring eight payments of P200,000. The first payment was
made on December 31, 2019 and the others are due annually on December 31. At date
of issuance, the prevailing rate of interest for this type of note was 11%. PV of an
ordinary annuity of 1 at 11% for 8 periods, 5.146. PV of an annuity of 1 in advance at
11% for 8 periods, 5.712. What amount should be reported as interest expense for
2020?

103,664
10. Precious Company had the following property acquisitions during the current year:
Acquired a tract of land in exchange for 50,000 shares of Precious Company with P100
par value that had a 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. Received land
from a major shareholder as an inducement to locate a plant in the city. No payment
was required but the entity paid P50,000 for legal expenses for land transfer. The land
is fairly valued at P1,200,000. What is the total increase in land as a result of the
acquisitions?

7,200,000

11. During the current year, Ewing Company exchanged an old packing machine, which
cost P1,200,000 and was 50% depreciated, for another used machine and paid a cash
difference of P160,000. The fair value of the old packaging machine was determined to
be P700,000. What is the cost of the machine acquired in the exchange?

860,000
12. Taiwan Company fabricated equipment for office use during the current year. The
following data were taken from the accounting records: Finished goods, Materials,
1,000,000; Direct labor, 1,500,000; Office equipment, Materials. 600,000; Direct labor,
500,000; Factory overhead amounted to P1,200,000. Normal production of finished
goods is 50,000 units. Due to the fabrication of the office equipment, finished goods
produced totaled 35,000 units only in the current year. The office equipment is to be
charged with the overhead which would have been apportioned to the 15,000 units
which were not produced. What is the total cost of office equipment after the
apportionment of factory overhead?

1,460,000

13. Josey Company entered into a contract to acquire a new machine which had a cash
price of P2,000,000. Down payment, 400,000; Note payable in 3 equal annual
installments, 1,200,000 20,000 ordinary shares with a par value of P25 and fair value of
P40 per share, 800,000; 2,400,000; Prior to use, installation cost of P50,000 was
incurred. The machine has an estimated residual value of P100,000. What is the initial
cost of the machine?

2,050,000
 14. Grab Company purchased a ten-ton draw press at a cost of P3,600,000 with terms of
5/15, n/45. Payment was made within the discount period. Shipping cost was P90,000
which included P4,000 for insurance in transit. Installation cost totaled P240,000 which
included P80,000 for taking out a section of a wall and rebuilding it because the press
was too large for the doorway. What is the capitalized cost of the ten-ton draw press?

3,750,000

15. Anxious Company acquired two items of machinery. On December 31, 2019, Anxious
Company purchased a machine in exchange for a noninterest bearing note requiring
the payments of P500,000. The first payment was made on December 31, 2020, and
the others are due annually on December 31. The prevailing rate of interest for this
type of note at date of issuance was 12%. The present value of an ordinary annuity of 1
at 12% is 5.33 for nine periods and 5.65 for ten periods. On December 31, 2019,
Anxious Company acquired used machinery by issuing the seller a two-year,
noninterest-bearing note for P3,000,000. In recent borrowing, the entity has paid a 12%
interest for this type of note. The present value of 1 at 12% for 2 years is.89 and the
present value of an ordinary annuity of 1 at 12% for 2 years is 1.69. What is the total
cost of the machinery?

5,225,000
16. Bamco Company purchased a new machine on a deferred payment basis. A down
payment of P100,000 was made and 4 monthly installments of P250,000 are to be
made at the end of each month. The cash equivalent price of the machine was
P950,000. The entity incurred and paid installation costs amounting to P30,000. What
is the amount to be capitalized as cost of the machine?

980,000

17. Caine Company exchanged a car from inventory for a computer to be used as a long-
term asset. The following information relates to this exchange: Carrying amount of the
car, 600,000List selling price of the car, 900,000’ Fair value of the computer, 860,000’;
Cash difference paid by Caine, 100,000. What is the cost of the computer acquired in
exchange?

860,000
18. Lax Company recently acquired two items of equipment. 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 and installation cost amounted to
P200,000. 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 cost of P100,000. What is the total increase in the equipment account as a result of
the transactions?

4,900,000
19. Holiday Company purchased a high speed industrial centrifuge at a cost of P840,000.
Shipping cost amounted to P50,000. Foundation work to house the centrifuge cost
P80,000.An additional water line had to be run to the equipment at cost of P40,000.
Labor and testing cost totaled P60,000. Materials used up in testing cost P30,000.
What is the capitalized cost of the equipment?
1,100,000

20. During the current year, Beam Company paid P100,000 cash and traded inventory,
which had a carrying amount of P2,000,000 and a fair value of P2,100,000, for other
inventory in the same line of business with a fair value of P2,200,000. What amount
should be recorded as cost of the inventory received in exchange?

2,200,000

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