On August 1, ABC Company acquired a real property for P 4,420,000. The shares were selling on the same date at P 125. The fair values are P 800,000 and P 3,200,000 for the land and building respectively. A mortgage of P 4,000,000 was assumed by ABC on the purchase. Moreover, the company paid P 180,000 of real property taxes in the prior years. ABC paid legal fees including title search for P 15,000. ABC also paid the local government special assessment for city improvement amounting to P 120,000. In order to make the building suitable for the use of ABC, remodeling costs had to be incurred in the amount of P 900,000. This however, necessitated the demolition of a portion of the building, which resulted in recovery of salvage material sold for P 30,000. Parking lot cost the company, P 320,000 while repairs in the main hall were incurred at P45,000 prior to its use. QUESTION: What is the correct cost of the land? P1,720,000 P2,535,000 P1,855,000 P1,799,000

On August 1, ABC Company acquired a real property for P 4,420,000. The shares were selling on the same date at P 125. The fair values are P 800,000 and P 3,200,000 for the land and building respectively. A mortgage of P 4,000,000 was assumed by ABC on the purchase. Moreover, the company paid P 180,000 of real property taxes in the prior years. ABC paid legal fees including title search for P 15,000. ABC also paid the local government special assessment for city improvement amounting to P 120,000. In order to make the building suitable for the use of ABC, remodeling costs had to be incurred in the amount of P 900,000. This however, necessitated the demolition of a portion of the building, which resulted in recovery of salvage material sold for P 30,000. Parking lot cost the company, P 320,000 while repairs in the main hall were incurred at P45,000 prior to its use. QUESTION: What is the correct cost of the land? P1,720,000 P2,535,000 P1,855,000 P1,799,000

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization

Section: Chapter Questions

Problem 62P

See similar textbooks

Similar questions

Kisses Company had the following property acquisitions of machineries during the current year: (a) During the early part of current year, the entity purchased a machine for P500,000 down and four monthly installments of P1,250,000. The cash price of the machine was P4,700.000. (b) At the beginning of current year, the entity purchased a machine for P2,000,000 in exchange for a non interest bearing note requiring four payments of P500,000. The first payment was made at the end of current year. The rate of interest for this note at date of issuance was 10%. The present value of ordinary annuity of 1 at 10% is 3.17 four four periods. The present value of annuity of 1 in advance at 10% is 3.49 for four periods. (c) At the beginning of current year, the entity acquired a machine by issuing a four-year, non interest bearing note for P2,000,000. The entity has a 10% interest for this type of note. The present value of 1 at 10% for 4 years is 0.68. (d) During the year, the entity exchanged an…
On August 1, ABC Company acquired a real property for P 4,420,000. The shares were selling on the same date at P 125. The fair values are P 800,000 and P 3,200,000 for the land and building respectively. A mortgage of P 4,000,000 was assumed by ABC on the purchase. Moreover, the company paid P 180,000 of real property taxes in the prior years. ABC paid legal fees including title search for P 15,000. ABC also paid the local government special assessment for city improvement amounting to P 120,000. In order to make the building suitable for the use of ABC, remodeling costs had to be incurred in the amount of P 900,000. This however, necessitated the demolition of a portion of the building, which resulted in recovery of salvage material sold for P 30,000. Parking lot cost the company, P 320,000 while repairs in the main hall were incurred at P45,000 prior to its use. What is the correct cost of the land? P1,720,000 P2,535,000 P1,855,000 P1,799,000
Eleven years ago, Lynn, Incorporated purchased a warehouse for $315,000. This year,the corporation sold the warehouse to Firm D for $80,000 cash and D’s assumption ofa $225,000 mortgage. Through date of sale, Lynn deducted $92,300 straight-linedepreciation on the warehouse.Required:a. Compute Lynn’s gain recognized on the sale of the warehouse.b. What is the character of this gain?c. How would your answers change if Lynn was a noncorporate business?
The Polythene Pam Company purchases P2,000,000 of bonds. The asset has been designated as one at fair value through profit and loss. One year later, 10% of the bonds are sold for P400,000. Total cumulative gains previously recognized in Polythene Pam's financial statements in respect of the asset are P100,000. What is the amount of the gain on disposal to be recognized in profit or loss?
Erica Company had the following property acquisitions during the current year: 1. Acquired a tract of land in exchange for 50,000 ordinary shares with P100 par value and market price of P120 share on the date of acquisition. per The last property tax bill indicated assessed value of P4,500,000 for the land. 2. 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 P1,000,000. 3. Purchased for P5,500,000, including appraiser fee of P100,000´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 P2,500,000.
Eleven years ago, Lynn, Incorporated purchased a warehouse for $315,000. This year,the corporation sold the warehouse to Firm D for $80,000 cash and D’s assumption ofa $225,000 mortgage. Through date of sale, Lynn deducted $92,300 straight-linedepreciation on the warehouse.Required:a. Compute Lynn’s gain recognized on the sale of the warehouse.
Paula Company had the following property acquisitions during the current year: Acquired a tract of land and building in exchange for 50,000 ordinary shares of P100 par value with a market price of P120 per share on the date of acquisition. The last property tax bill indicated an assessed value of P1,200,000 for the land and P2,800,000 for the building. However, the land has a fair value of P2,000,000 and the building has a fair value of P3,500,000. Received land from a major shareholder as an inducement to locate the 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 P1,000,000. Acquired a welding machine with an invoice price of P3,000,000 subject to a cash discount of 10% which was not taken. The entity incurred cost of P50,000 in removing the old welding machine prior to the installation of the new one. Welding supplies were acquired at a cost of P150,000. What is the total increase in property,…
Paula Company had the following property acquisitions during the current year: Acquired a tract of land and building in exchange for 50,000 ordinary shares of P100 par value with a market price of P120 per share on the date of acquisition. The last property tax bill indicated assessed value of P1,200,000 for the land and P2,800,000 for the building. However, the land has a fair value of P2,000,000 and the building has fair value of P3,500,000. 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 P1,000,000. • Acquired a welding machine with an invoice price of P3,000,000 subject to a cash discount of 10% which was not taken. The entity incurred cost of P50,000 in removing the old welding machine prior to the installation of the new one. Welding supplies were acquired at a cost of P150,000. What is the total increase in property, plant…
Mee Company acquired land and building for P 5,500,000 cash at the beginning of the current year. The land was fairly valued at P 2,400,000 and the building at P 3,600,000. Unpaid property taxes assumed by Mee Company amounted to P 250,000. The entity also incurred building renovation of P 500,000, option of P 50,000 on land and building not acquired, cost of survey P 30,000, escrow fee of P 100,000 and real estate commission of P 200,000. ____ 3. What is the cost of land? a. 2,420,000 b. 2,450,000 c. 2,470,000 d. 2,500,000 _____4. What is the cost of building? a. 4,160,000 b. 4,130,000 c. 4,070,000 d. 3,800,000
The Polythene Pam Company purchases P2,000,000 of bonds. The asset has been designated as one at fair value through profit and loss. One year later, 10% of the bonds are sold for P400,000. Total cumulative gains previously recognized in Polythene Pam's financial statements in respect of the asset are P100,000. What is the amount of the gain on disposal to be recognized in profit or loss? Group of answer choices P100,000 P90,000 P190,000 P200,000
Karlyn Company had the following property acquisitions during the current year:• Acquired a tract of land with an existing building in exchange for 50,000 ordinary shares of P100 par value with a market price of P120 per share on the date of acquisition. The last property tax bill indicated assessed value of P2,800,000 for the land and P1,200,000 for the building. However, the land has a fair value of P5,500,000 and the building has no determinable fair value. Shortly after acquisition, the building was razed at a cost of P100,000 in anticipation of a new building construction.• Received land from a major shareholder as an inducement to locate a plant in the city. No payment was required but Karlyn Company paid P50,000 for legal expenses for land transfer. The land is fairly valued at P2,000,000.What is the total increase in land as a result of the acquisition
This year, Sigma, Incorporated generated $637,500 income from its routine business operations. In addition, the corporation sold the following assets, all of which were held for more than 12 months: Initial Basis $ 165,200 110,800 Accumulated Depreciation $0 88,640 223,500 206,000 Marketable securities Production equipment Business realty: Land Building. "Through date of sale. Required: a. Compute Sigma's taxable income assuming that it used the straight-line method to calculate depreciation on the building and has no nonrecaptured Section 1231 losses. b. Recompute taxable income assuming that Sigma sold the securities for $169,400 rather than $73,750. Complete this question by entering your answers in the tabs below. Sale Price $ 73,750 38,000 0 61,800 236,750 231,000 Required A Required B Compute Sigma's taxable income assuming that it used the straight-line method to calculate depreciation on the building and has no nonrecaptured Section 1231 losses. Taxable income