TEST BANK_IFA PART 1B

ACCOUNTING 405: TEST BANK_IFA PART 1B Chapter 14: Multiple choice – Computational (SET B) – (For classroom instruction purposes) Acquisition on cash basis 1. LOQUACIOUS TALKATIVE Co. acquired a factory equipment overseas on cash basis for 400,000. Additional costs incurred include the following: ₱ commissions paid to brokers for the purchase of the equipment, 20,000; ₱ import duties of 100,000; non-refundable purchase taxes of 40,000; freight ₱ ₱ cost of transferring the equipment to LOQUACIOUS’ premises, 4,000; costs of ₱ assembling and installing the equipment, 8,000; costs of testing the ₱ equipment, 6,000; administration and other general overhead costs, ₱ ₱16,800; and advertisement and promotion costs of the new product to be produced by the equipment, 15,200. The samples generated from testing the ₱ equipment were sold at 2,000. How much is the initial cost of the ₱ equipment? a. 578,000 b. 594,800 c. 576,000 d. 592,800 Acquisition on account 2. PRECLUDE PREVENT Co. acquired an equipment for 448,000 on account ₱ with a credit term of 2/15, n/30. Any discount is computed based on the purchase price. The purchase price is inclusive of 12% value added tax (VAT). PRECLUDE Co. is VAT-registered and any input VAT paid is refundable through deduction from monthly output VAT remitted to the Bureau of Internal Revenue (BIR). Additional costs incurred include 40,000 cost of training staff ₱ who will be operating the equipment and 60,000 cost of relocating the ₱ equipment to a new location after it was installed in a location originally intended by management. How much is the initial cost of the equipment? a. 400,000 b. 391,040 c. 491,040 d. 392,000 Deferred settlement – with cash price equivalent 3. On January 1, 20x1, SQUAMOUS SCALY Co. purchased furniture with an installment price of 520,000 and a cash price equivalent of 400,000 by ₱ ₱ paying 40,000 down payment and issuing a one-year noninterest-bearing ₱ note of 120,000 payable in equal semi-annual installments on July 1 and ₱ December 31, 20x1. How much is the initial cost of the furniture? a. 520,000 b. 480,000 c. 400,000 d. 360,000 Deferred settlement – no cash price equivalent 4. On January 1, 20x1, REEDY SLENDER Co. purchased fixtures with an installment price of 520,000 by paying 40,000 down payment and issuing a ₱ ₱ three-year noninterest bearing note of 480,000 payable in three equal ₱ annual installments starting December 31, 20x1. The prevailing rate for the note as of January 1, 20x1 is 12%. How much is the initial cost of the fixtures? a. 520,000 b. 480,000 c. 424,293 d. 360,000 Deferred settlement – no cash price equivalent 5. On January 1, 20x1 ABC Co. acquired a building for 380,000, including ₱ ₱20,000 non-refundable purchase taxes. The purchase agreement provided for payment to be made in full on December 31, 20x1. Legal fees of 8,000 ₱ were incurred in acquiring the building and paid on January 1, 20x1. An appropriate discount rate is 10%. How much is the initial cost of the building? 35 a. 368,000 b. 388,000 c. 424,634 d. 353,456 Classes of PPE 6. ABC Co. had the following assets on December 31, 20x1. Land used as plant site 50,000 Land and building classified as held for sale 780,000 Building used as off