Old Room Co. purchased land and building for a lump-sum price of ₱48,000,000. The existing building will be demolished and a new building will be constructed. Old Room incurred the following additional costs:  Title guarantee  80,000  Option paid for the land and old building acquired  24,000  Payments to tenants to vacate premises  48,000  Cost of razing the old building   240,000  Construction cost of new building (completed)  34,000,000    The land and old building have fair values of ₱20,000,000 and ₱40,000,000, respectively.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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  1. Old Room Co. purchased land and building for a lump-sum price of ₱48,000,000. The existing building will be demolished and a new building will be constructed. Old Room incurred the following additional costs: 

Title guarantee 

80,000 

Option paid for the land and old building acquired 

24,000 

Payments to tenants to vacate premises 

48,000 

Cost of razing the old building  

240,000 

Construction cost of new building (completed) 

34,000,000 

 

  • The land and old building have fair values of ₱20,000,000 and ₱40,000,000, respectively.  
  • Some salvaged wood planks from the demolition were used as wall panels in the new building. Old Room estimates that the salvaged wood planks have a fair value of ₱120,000. The other salvaged materials were sold for ₱60,000. 

 

What amount of the costs above is charged as expense? 

  1. 48,000  c. 32,048,000 
  2. 32,000,000  d. 0  
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