LAND, BUILDING AND MACHINERY

1. When an entity purchases land and a building and immediately tears down the building, the cost incurred to tear down the building isa. Expensed immediatelyb. Added to the cost of the plantc. Added to the cost of the landd. Allocated to the cost of the plant and cost of the land on a prorata basis

2. An entity purchased land to be used as the site for the construction of a plant. Timber was cut from the building site. The proceeds from the sale of timber should bea. Credited to incomeb. Netted against the cost to clear the land and expensed as incurredc. Deducted from the cost of the plantd. Deducted from the cost of land

3. The cost of land includes all of the following, excepta. Commission related to acquisitionb. Property tax after date of acquisition assumed by the purchaserc. Property tax to date of acquisition assumed by the purchaserd. Cost of survey

4. The cost of land does not includea. Cost of grading, filling, draining and clearingb. Cost of removing old buildingc. Cost of improvement with limited lifeD. Special assessment

5. The term betterment refers toa. An expenditure made for new facilities with increase capacityb. An expenditure made to restore capacity after abandonment or retirementc. An expenditure made to improve existing facilities by increasing capacityd. An expenditure made to help insure continuity of service capacity

6. The cost of building includes all of the following, excepta. Any renovating or remodeling cost incurred to put the building purchased in a condition for the intended useb. Cost of excavationc. Expenditure for service equipment and fixture made a permanent part of the structureD. Cost incurred to have existing building removed to make room for new construction

7. An improvement made to a machine which increased the fair value and production capacity without extending the useful life should bea. Expensed immediatelyb. Debited to accumulated depreciationc. Capitalized in the machine accountd. Allocated between accumulated depreciation and the machine account

8. Which of the following subsequent outlays should be expensed immediately?a. Expenditure made to increase the efficiency or effectiveness of an existing assetb. Expenditure made to extend the useful life of an existingc. Expenditure made to maintain an existing asset in operating conditiond. Expenditure made ti add new asset

9. An expenditure made in connection with a machine being used by an entity should bea. Expensed if it merely extends the useful life but does not improve the qualityb. Expensed if it merely improves the quality but does not extend the useful lifec. Capitalized if it maintains the machine in normal operating conditiond. Capitalized if it increases the quantity of units produced by the machine

10. Gain or loss from disposal of plant asset is equal to the difference betweena. Fair value of the asset and the carrying amountb. Net realizable value and the carrying amountc. Net proceeds from disposal and the cost of the assetd. Net proceeds from disposal and the carrying amount of the asset

11. Noeme company commenced operations at the beginning of the current year. The following costs are incurred by the entity:Payment for land and an old building which is to be demolished 1,000,000Payment of property taxes in arrears 130,000Title search and insurance 50,000Option paid for an alternative land which was not acquired 30,000Cost of relocating squatters 10,000Special assessment for city improvements on water and sewer system150,000Demolition of old building, net of salvage of P10,000100,000Survey before construction of new building 60,000Contract price for factory building 5,000,000Architect fee230,000Building permit or payment to city hall for approval of building construction120,000Excavation before new construction110,000Liability insurance during construction 55,000Safety fence around construction site 35,000Safety inspection on building 30,000Removal of safety fence after completion of factory building 20,000New fence surrounding the factory 80,000Driveways, parking bays and safety lighting550,000Cost of trees, shrubs and other landscaping250,000What amount should be reported respectively as initial measurement of the land and building?a. 1,500,000 and 5,600,000c. 1,610,000 and 5,490,000b. 1,440,000 and 5,660,000d. 2,380,000 and 5,600,000

12. During the current year, Jocelyn company purchased a second hand machine at a price of P5,000,000. A cash payment of P1,000,000 was made and a tow-year, noninterest bearing note was issued for the balance of P4,000,000. Recent transactions involving similar machine indicate that the used machine has a second hand market value of P4,500,000. A new machine would cost of P6,500,000. The following costs were incurred during the year:Cost of removing old machine that is replaced350,000Cash proceeds from the sale of the old machine replaced100,000Cost of hauling the machine from vendor to entity premises 40,000Overhaul and repairs to recondition machine prior to use220,000Cost of installation190,000Cost of testing machine prior to use150,000Safety device added to the machine300,000Cost of spare parts to cover breakdowns 80,000Cost of repairing damage to machine caused when the machine was droppedduring installation 50,000Repairs incurred during the first year of operation160,000Cost of training workers to operate the machine 25,000What total amount should be capitalized as cost of the second hand machine?a. 5,900,000b. 5,400,000c. 5,650,000d. 5,425,000

13. Paula company acquired a machine at the beginning of the current year:Cash paid for machine, including VAT of P96,000896,000Cost of transporting machine 30,000Labor cost of installation by expert fitter 50,000Labor cost of testing machine 40,000Cost of safety rails and platform surrounding machine 60,000Cost of water device to keep machine cool 80,000Cost of adjustment to machine to make it operate more efficiently 75,000Estimated dismantling cost to be incurred as required by contract 65,000Insurance cost for the current year 15,000Cost of training personnel who will use the machine 25,000What total amount should be capitalized as cost of the machine?a. 1,135,000b. 1,231,000c. 1,200,000d. 1,150,000