Ias 16

AUDITING AND ASSURANCE: CONCEPTS AND APPLICATIONS 2
QUIZZER 1
TOPIC: PROPERTY, PLANT AND EQUIPMENT
PROBLEM 1
Presented below is a list of items that may or may not be reported as property, plant, and equipment in a statement of
financial position of BAHALA NA Company
Annual crops related to agricultural activity 440,000

Bearer animals related to agricultural activity 310,000
Land held for capital appreciation 1,500,000
Head office building 1,900,000
Machinery used in production 850,000
Store building 650,000
Delivery vehicle 450,000
Land and building held for resale in the ordinary course of business 3,000,000
Factory building 2,000,000
Research and development building 1,000,000
Office furniture and fixtures 380,000
Equipment held for sale in the ordinary course of business 1,400,000
Equipment held for sale in accordance with IFRS 5 115,000
Dogs used in rendering security services 75,000
Equipment for rental to others under operating leases 270,000
Equipment for rental to others under finance leases 355,000
Land and building for rentals to others under operating leases 2,500,000
Land and building for rentals to others under finance leases 4,000,000
Plants displayed in administrative office 35,000
Bearer plants related to agricultural activity (excluding
produce growing on bearer plants valued at P 120,000) 370,000
Question: How much should be reported as property, plant and equipment?
PROBLEM 2
ANO DAW Co. was incorporated on 1/2/22 but was unable to begin manufacturing activities until 8/1/22 because new factory
facilities were not completed until that date. The Land and Building account at 12/31/22 per books were as follows:
Date Item Amount

1/31/22 Land and old building P300,000
2/28/22 Cost of removing building (demolition or razing cost) 4,000
4/1/22 Legal fees 6,000
5/1/22 Fire insurance premium payment 5,400
5/1/22 Special tax assessment for streets 4,500
1
5/1/22 Partial payment of new building construction 150,000
5/15/22 Hospitalization of injured construction worker
(not covered by insurance) 10,000
6/1/22 Insurance premiums for accident insurance during
construction 12,000
8/1/22 Final payment on building construction (The building is 150,000
already completed; Useful life 20 years. No Salvage
value)
8/1/22 General expenses 30,000
9/1/22 Construction of fences 24,000
12/31/22 Asset write-up 75,000
Additional information:
 To acquire the land and building on 1/31/22, the company paid P300,000 cash. The market value of the land and
building is P150,000 and P50,000, respectively.
 When the old building was removed, ANO DAW paid Tagagiba Co. P4,000, but also received P1,000 from the sale
of salvaged material (credited to other income). At that time, the old building is still usable.
 Legal fees covered the following:

Cost of organization P2,500
Examination of title covering purchase of land 2,000
Legal work in connection with the building construction 1,500
P6,000
 The fire insurance premium covered premiums for a three-year term beginning May 1, 2022.
 General expenses covered the following for the period 1/2/22 to 8/1/22.
President's salary P15,000
Cost of broken window destroyed by barbarians 5,000
Plant superintendent covering supervision of new building 10,000
P30,000
 The fences are not part of the original blue print of the building. The useful life is estimated to be 10 years.
 Because of the rising land costs, the president was sure that the land was worth at least P75,000 more than
what it cost the company.
Compute for the following:
Question 1: Land
Question 2: New Building
Question 3: Land Improvements
Question 4: Amount to be charged to Income Statement in 2022

PROBLEM 3
BATMAN made the following individual cash purchases:

Land and Building P 3,000,000
Machinery and office equipment 900,000
Delivery equipment 250,000
An appraisal was made which disclosed the following values:

Land P 500,000
Building 1,500,000
Machinery 400,000
Office Equipment 200,000
Delivery Equipment 175,000
Question: How much is the cost of the machinery purchased by PICCOLLO?
PROBLEM 4
SUPERMAN Entity acquired the assets of NAMEK Company. The following values of the property are available:
BOOK VALUES FAIR VALUES
Land P 300,000 P 500,000
Building 1,800,000 2,500,000
Machinery 750,000 1,000,000
SUPERMAN Company gave 30,000 ordinary shares of its P 100 par value in exchange. The shares had a quoted
price of P 200 per share on that date of purchase of the property.
Question: How much is the cost of the building?
PROBLEM 5
SPIDERMAN Company acquired a welding machine with an invoice price of P3,360,000 subject to a cash discount of 5%
which was not taken. SPIDERMAN incurred freight and insurance during shipment of P50,000 and testing and installation
cost of P200,000. SPIDERMAN also incurred cost of P20,000 in removing the old welding machine prior to the installation of
the new one. Welding supplies were acquired at a cost of P100,000. The VAT on the acquisition is P360,000.
Question: What is the cost of the welding machine?

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AUDITING AND ASSURANCE: CONCEPTS AND APPLICATIONS 2

Annual crops related to agricultural activity 440,000

Question: How much should be reported as property, plant and equipment?

Date Item Amount

 Legal fees covered the following:

Compute for the following:

Question 2: New Building

Question 3: Land Improvements

Question 4: Amount to be charged to Income Statement in 2022

BATMAN made the following individual cash purchases:

An appraisal was made which disclosed the following values:

Question: How much is the cost of the machinery purchased by PICCOLLO?

Question: How much is the cost of the building?

Question: What is the cost of the welding machine?

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