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. • The old building is unusable and has an insignificant fair value. How much are the allocated costs of the land and the new building? Land New building a. 46,104,000 34,180,000 b. 46,140,000 34,810,000 c. 46,640,000 33,780,000 d. 48,152,000 34,180,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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.
• The old building is unusable and has an insignificant fair value.
How much are the allocated costs of the land and the new building?
Land New building
a. 46,104,000 34,180,000
b. 46,140,000 34,810,000
c. 46,640,000 33,780,000
d. 48,152,000 34,180,000

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