1.ABC, Inc. purchased a machine under a deferred payment contract on December 31, 2023.

Under the terms of the contract, ABC is required to make eight annual payments of P140,000
each beginning December 31, 2024. The appropriate interest rate is 8 percent. The useful life of
the machine is 10 years. The purchase price of the machine is
140,000/8 =17,500 x 5.7466 (OA of 1) = 100,565 x 6 (remaining years) = 804, 524

2. On October 1, LMNT, Inc. exchanged 8,000 shares of its P25 par value common stock for a
parcel of land to be held for a future plant site. LMNT's common stock had a fair market value of
P80 per share on the exchange date. LMNT received P36,000 from the sale of scrap when an
existing building on the site was razed. The land should be carried at
​8,000 x 80 – 60,000 = 604,000

3. During 2022, Grant Industries, Inc. constructed a new manufacturing facility at a cost of
P12,000,000. The weighted average accumulated expenditures for 2022 were calculated to be
P5,400,000. The company had the following debt outstanding at December 31, 2022: (1) 10
percent, five-year note to finance construction of the manufacturing facility, dated January 1,
2022, P3,600,000; (2) 12 percent, 20-year bonds issued at par on April 30, 2008, P8,400,000;
(3) 8 percent, six-year note payable, dated March 1, 2021, P1,800,000. What is the
capitalization rate relative to the general borrowing? (2-decimal)
{(12 % x 8.4M) + (8% x 1.8M) / (8.4M + 1.8M)} = 11.29%

4. A company made the following cash expenditures on a self-constructed building begun

January 1 of the current year: January 1 - P50,000; June 1 - P60,000; December 1 - P90,000.
The building is still under construction at year-end. If A availed a 10% project loan amounting to
P300,000 for the construction of the building, and temporarily invested P50,000 of it and earned
P5,000 income, what cost of the building as of the end of the year?
50K+60k+90K+45k = 245,000

5. ABC, Inc. purchased a machine under a deferred payment contract on December 31, 2023.
Under the terms of the contract, ABC is required to make eight annual payments of P140,000
each beginning December 31, 2024. The appropriate interest rate is 8 percent. The useful life of
the machine is 10 years, with estimated residual value of P2,024. If ABC uses sum-of-the-year’s
digit in depreciating this asset, depreciation expense on December 31, 2024 is
Syd = 55
2023 804,524 – 2,024 = 802,500 x 10/55 = 145,910

6. WXY Company borrowed P400,000 on a 12 percent note payable to finance a new

warehouse WXY is constructing for its own use. The only other debt on WXY's books is a
P600,000, 10 percent mortgage payable on an office building. At the end of the current year,
average accumulated expenditures on the new warehouse totaled P475,000. WXY should
capitalize interest for the current year in the amount of
​Ave. exp. 475,000 – specific 400,000 = 75,000 general borrowing
​Specific 4M x12% = 48,000
​General 75,000 x 10% = 7,500
​48K + 7,500 = 55,500

7. A company made the following cash expenditures on a self-constructed building begun

January 1 of the current year: January 1 - P50,000; June 1 - P60,000; December 1 - P90,000.
The building is still under construction at year-end. What is the average accumulated
expenditures for the purpose of capitalizing interest?
1/1 = 50K X 12/12 = 50K
6/1 = 60K X 7/12 = 35K
12/1 = 90K X 1/12 = 7,500
50K+35K+7,500 = 92,500

8. Machine A was purchased at a list price of P92,000; terms 1/10, net 30. The machine invoice
was paid after the discount period. Transportation charges were P1,270; installation costs were
P920; and the cost of a trial run was P960. Normal repairs and maintenance for the first year
were P410.
​92,000 X 99% = 91,080 +1,270+920+960 = 94,320

9. On October 1, LMNT, Inc. exchanged 8,000 shares of its P25 par value common stock for a
parcel of land to be held for a future plant site. LMNT's common stock had a fair market value of
P70 per share on the exchange date. LMNT received P36,000 from the sale of scrap when an
existing building on the site was razed at P90,000. The land should be carried at
8,000 X 70,000 -36,000 + 90,000 = 614,000

10. ABC, Inc. purchased a machine under a deferred payment contract on December 31, 2023.
Under the terms of the contract, ABC is required to make eight annual payments of P140,000
each beginning December 31, 2024. The appropriate interest rate is 8 percent. The useful life of
the machine is 10 years, with estimated residual value of P2,024. If ABC uses 150% declining
balance in depreciating this asset, the total expense that will be shown in its statement of
financial performance on December 31, 2025 is