You were able to gather the following during your audit: a. To acquire land and building, the company paid P98,000 cash and 10,000 shares of its 9% cumulative preferred shares, P100 par value per share. The shares were then selling at P120. b. Legal fees covered the following: Cost of incorporation P 9,500 Examination of title covering purchase of the land 4,000 Legal work in connection with construction contract 1,500 P 15,000 c. Because of a general increase in construction costs after entering into the building contract, the board of directors increased the value of the building by P500,000, believing such increase is justified to reflect current market value at the time the building was completed. Retained earnings was credited for this amount. d. Estimated useful life of the building is 25 years. REQUIRED: 1. Prepare the necessary adjusting journal entries as of December 31, 2019. 2. Determine the adjusted balances of the following as of December 31, 2019: a. Land and building b. Land c. Carrying value of building d. Organization cost, net (presented under Noncurrent Assets)

You were able to gather the following during your audit: a. To acquire land and building, the company paid P98,000 cash and 10,000 shares of its 9% cumulative preferred shares, P100 par value per share. The shares were then selling at P120. b. Legal fees covered the following: Cost of incorporation P 9,500 Examination of title covering purchase of the land 4,000 Legal work in connection with construction contract 1,500 P 15,000 c. Because of a general increase in construction costs after entering into the building contract, the board of directors increased the value of the building by P500,000, believing such increase is justified to reflect current market value at the time the building was completed. Retained earnings was credited for this amount. d. Estimated useful life of the building is 25 years. REQUIRED: 1. Prepare the necessary adjusting journal entries as of December 31, 2019. 2. Determine the adjusted balances of the following as of December 31, 2019: a. Land and building b. Land c. Carrying value of building d. Organization cost, net (presented under Noncurrent Assets)

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter18: Accounting Periods And Methods

Section: Chapter Questions

Problem 57P

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

The Royal Family Inc. was incorporated on January 2, 2019, but was unable to begin manufacturing
activities until July 1, 2019 because the new factory facilities were not
completed until that date.
The "Land and Building" account at December 31, 2019 follows:
Date
Particulars
Amount
Jan. 31
Land and building
P 1,098,000
Feb. 28
Cost of removal of old building
60,000
May 02
Partial payment on new construction
700,000
02
Legal fees paid
15,000
June 01
Second payment on new construction
600,000
July 01
Fire insurance premium – 1 year
26,000
01
Final payment on new construction
200,000

Dec. 31
Asset write-up
500,000
P 3,199,000
Dec. 31 Depreciation – 2019, at 1% of account balance
31,990
P 3,167,010
You were able to gather the following during your audit:
a. To acquire land and building, the company paid P98,000 cash and 10,000 shares of its 9% cumulative
preferred shares, P100 par value per share. The shares were then selling at P120.
b. Legal fees covered the following:
Cost of incorporation
P 9,500
Examination of title covering purchase of the land
4,000
Legal work in connection with construction contract
1,500
P 15,000
c. Because of a general increase in construction costs after entering into the building
contract, the board of directors increased the value of the building by P500,000,
believing such increase is justified to reflect current market value :
the time the
building was completed. Retained earnings was credited for this amount.
d. Estimated useful life of the building is 25 years.
REQUIRED:
1. Prepare the necessary adjusting journal entries as of December 31, 2019.
2. Determine the adjusted balances of the following as of December 31, 2019:
a. Land and building
b. Land
c. Carying value of building
d. Organization cost, net (presented under Noncurrent Assets)

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