MABUTINGEHEMPLO, Inc. obtained a land with an old building, that will be accounted for under property, plant and equipment. The Company intends to demolish the old building, since the old building is already deemed unusable. The following information relates to the land and building: Purchase price of the land and building P3,500,000 Fair value of the land 3,000,000 Historical cost Land 2,000,000 Old building 6,000,000 Demolition costs 700,000
Mortgages
A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.
Mortgage
The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.
MABUTINGEHEMPLO, Inc. obtained a land with an old building, that will be accounted for under property, plant and equipment. The Company intends to demolish the old building, since the old building is already deemed unusable. The following information relates to the land and building:
Purchase price of the land and building P3,500,000
Fair value of the land 3,000,000
Historical cost
Land 2,000,000
Old building 6,000,000
Demolition costs 700,000
Which of the following statements are true?
a. The cost of land is deemed to be P3,000,000.
b. The demolition costs would be capitalized as part of land.
c. The amount of expense to be recognized is P700,000. Which is equal to the demolition costs since the old building is already unusable
d. The cost of the new building is P17,100,000 million.
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