Health Co. purchased land and building at a lump-sum price of P6,000,000. After the acquisition, Health Co. demolished the existing building and started the construction of a new one. Health Co. incurred P30,000 in razing the old structure.Materials salvaged from the demolition were sold for P7,500. Heatlh incurred the following additional costs: Legal fees in conveying title to land 10,000 Option paid for the land and old building acquired 3,000 Payments to tenants to vacate premises 6,000 Materials, labor and construction overhead incurred in the construction of the new building 4,250,000 Case 1: The land and old building have fair values of P2,500,000 and P5,000,000, respectively. Requirements: Allocate the costs. Provide the journal entries. Case 2: The old building is unusable and has an insignifacant fair value. Requirements: Allocate the costs. Provide the journal entries.
Health Co. purchased land and building at a lump-sum price of P6,000,000. After the acquisition, Health Co. demolished the existing building and started the construction of a new one. Health Co. incurred P30,000 in razing the old structure.Materials salvaged from the demolition were sold for P7,500. Heatlh incurred the following additional costs:
Legal fees in conveying title to land 10,000
Option paid for the land and old building acquired 3,000
Payments to tenants to vacate premises 6,000
Materials, labor and construction overhead incurred
in the construction of the new building 4,250,000
Case 1: The land and old building have fair values of P2,500,000 and P5,000,000, respectively.
Requirements:
- Allocate the costs.
- Provide the
journal entries.
Case 2: The old building is unusable and has an insignifacant fair value.
Requirements:
- Allocate the costs.
- Provide the journal entries.
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