PPE ACQUISITION

1. On October 1, 2005, Bitoy Company purchased a machine for P250,000 that was
placed in service on November 30, 2005. Bitoy incurred additional costs for this
machine, as follows:
Shipping 10,000
Installation 15,000
Testing 35,000
In Bitoy’s December 31, 2005 balance sheet, the machine’s cost should be
reported at
a. 250000
b. 295,000
c. 300,000
d. 310,000
2. On August 1, 2006, Bamco purchased a new machine on a deferred payment
basis. A down payment of P100,000 was made and the balance is payable in
P100,000 annually for 4 years. The current interest is 12%.The present value of an
annuity at 12% for 5 years is 3.04 and the present value of an amount at the end of
5th year at 12% is .064.
The same machine could be acquired on cash basis at P400,000.
Bamco should record the machine at
a. 500,000 b. 400,000 c. 403,735 d. 303,735
EXCHANGE
1. To save transportation costs, X acquired its needed equipment in exchange of its
inventory located in the supplier’s business place. The equipment acquired has
cash price of P650,000. The inventory of X has cost of P550,000, and X paid
P80,000 cash for the difference in fair value of the two assets in exchange.
In the books of X, the exchange is to be accounted as resulting to
a. gain of P20,000
b. loss of P20,000
c. gain of P30,000
d. loss of P30,000
2. X issued 100,000 of its common shares in the treasury stocks, in exchange for a
delivery truck. The treasury stocks with P10 par were selling at P12 at date of
exchange. The treasury shares were previously acquired at cost of P11/share. The
delivery truck has cash price of P1,250,000.
In the books of X, the exchange will result to
a. gain of P150,000 b. loss of P50,000 c. gain of P50,000 d. no gain/no loss
3. A P5,000,000 face value bonds were issued to acquire a building. At the time of
acquisition, the fair value of the building is properly determined at P5,300,000
and the bonds are quoted at 110.
The building is depreciated under the double declining method of depreciation with
estimated economic life of 25 years and scrap value of P200,000.
This was sold for P4,500,000 at end of its 2 nd year . The gain (loss ) fro