On January 1 , 2020 , Lazarus Company reported the following property, plant and equipment and transactions during the current year: Land 1,500,000 Building 4,000,000 Lessehold Improvements 500,000 a. Land site number 621 was acquired for P3,000,000. Additionally, to acquire the land the entity paid a P60,000 commission to a real estate agent. Cost of P15,000 was incurred to clear the land for the intended use but not to make room for the construction of a new building. During the course of clearing the land, timber and gravel were recovered and sold for P5,000. b. A second tract of land site number 622 with a building was acquired for P4,000,000. The closing statement indicted that the land fair value was P2,500,000 and the building fair value was P1,500,000. Shortly after acquisition, the building was demolished at a cost of P300,000 to make room for the construction of new building c. A third tract of land site number 623 was acquired for P2,000,000 and was classified as held for sale. d. Extensive work was done to a building occupied by the entity under a lense agreement that expires on December 31, 2026. The total cost of the work was P1,250,000 which consisted of the following: Painting of ceiling 100,000 Electrical work with useful life of 10 years 350,000 Construction of extension to current working 800,000 The lessor paid one-half of the cost incurred in connection with the extension to the current working area. e. The related During December 2020 , an amount of P650,000 w will terminate in December 31 , 2022 and is not expected contracted for P5,000,000 plus the following costs to be renewed. f. The new building on the second tract of land was constructed for 5,000,000 plus the following costs:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

On January 1 , 2020 , Lazarus Company reported the following property, plant and equipment and transactions during the current year:

Land 1,500,000
Building 4,000,000
Lessehold Improvements 500,000

a. Land site number 621 was acquired for P3,000,000.

Additionally, to acquire the land the entity paid a P60,000 commission to a real estate agent. Cost of P15,000 was incurred to clear the land for the intended use but not to make room for the construction of a new building. During the course of clearing the land, timber and gravel were recovered and sold for P5,000.

b. A second tract of land site number 622 with a building was acquired for P4,000,000. The closing statement indicted that the land fair value was P2,500,000 and the building fair value was P1,500,000. Shortly after acquisition, the building was demolished at a cost of P300,000 to make room for the construction of new building

c. A third tract of land site number 623 was acquired for P2,000,000 and was classified as held for sale.

d. Extensive work was done to a building occupied by the entity under a lense agreement that expires on December 31, 2026. The total cost of the work was P1,250,000 which consisted of the following:

Painting of ceiling 100,000 Electrical work with useful life of 10 years 350,000
Construction of extension to current working 800,000

The lessor paid one-half of the cost incurred in connection with the extension to the current working area.

e. The related During December 2020 , an amount of P650,000 w will terminate in December 31 , 2022 and is not expected contracted for P5,000,000 plus the following costs to be renewed.

f. The new building on the second tract of land was constructed for 5,000,000 plus the following costs:

Excavation Fee 50,000
Architectural design fee 150,000 Building permit 40,000
Imputed interest on funds used during construction 500,000

1. What total cost of land should be reported on December 31, 2020 under property, plant and equipment?
a. 7,070,000
b. 7,060,000
c. 7,370,000
d. 7,000,000

2. What total cost of building should be reported on December 31, 2020?
a. 9,000,000
b. 9,540,000
c. 9,240,000
d. 9,490,000

3. What total cost of leasehold improvements should be reported on December 31, 2020?
a. 2,300,000
b. 1,250,000
c. 1,900,000
d. 1,500,000

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Accounting for Property, Plant and Equipment

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.