Chapter 26
Chapter 26
Chapter 26
Q1 A (950,000+8,000,000+300,000=9,250,000)
Q2 A (4,500,000+200,000 = 4,700,000)
26-2 A 4,000,000+150,000+50,000=4,200,000
26-4 A
Land Building
Purchase price of land 1,000,000
Demolition 100,000
Architect fee 175,000
Legal fee 25,000
Construction cost 5,450,000
Salvaged materials (50,000)
Total cost 1,025,000 5,675,000
26-5
Q1 A 4,550,000
Q2 A 9,700,000
Q3 A 950,000
Payment of medical bills and the cost of open house party are outright expenses because they are not a necessary
cost of acquiring the land and building.
26-10
Question 1 B
1st piece of land acquired
Cost 1,600,000
Payment of real estate agent 175,000
Cost of clearing land 50,000
Timber and gravel recovered (25,000) 1,800,000
nd
2 piece of land acquired (4,500,000 x 2/3) 3,000,000
Total cost of land under PPE 4,800,000
Question 2 B
Demolition of old building 100,000
New construction cost 5,000,000
Excavation fee 50,000
Architect fee 80,000
Building permit 70,000
Total cost of new building 5,300,000
Allocated cost of the old building is accounted for as loss because it is demolished to make room for a new
building construction.
26-11
Question 1 A
Cash paid for land 2,500,000
Mortgaged assumed including interest accrued 1,000,000
Commission 300,000
Legal fees, realty taxes and documentation 50,000
Cost of relocating squatters 100,000
Cost of land 3,950,000
Question 2 C
Cost of tearing down old building 200,000
Salvage value of old building (50,000)
Amount paid to contractor 5,000,000
Building permit fee 50,000
Excavation 50,000
Architect fee 200,000
Cost of building 5,450,000
Question 3 A
Invoice cost 2,000,000
Freight 60,000
Custom duties and other charges 140,000
Allowances and hotel accommodation 400,000
Cost of machine 2,600,000
The third tract of land should be presented as current asset because it was classified as held for sale
26-13 26-14
1. B 1. B
2. C 2. D
3. B 3. C
4. A 4. B
5. C 5. A