Scribd
Upload
513 views2 pages

Name: Mercado, Kath DATE: 01/15 Score: Activity Answer The Following Items On A Separate Sheet of Paper. Show Your Computations. (4 Items X 5 Points)

Cosmo, Inc. constructed production equipment for $5,220,000. This includes $1,920,000 for direct materials, $1,200,000 for direct labor, $1,800,000 for incremental overhead of 150% of direct labor, and $300,000 in interest costs from borrowing $3,000,000 at 10% interest for 2 years. Bamboo Company acquired plant assets from Pine Corporation in exchange for shares worth $4,500,000. The total cost of the land was $830,000 which includes its appraised value of $750,000 plus a $80,000 special assessment. The total cost of the buildings was $3,315,

Uploaded by

Kathleen Mercado
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
513 views2 pages

Name: Mercado, Kath DATE: 01/15 Score: Activity Answer The Following Items On A Separate Sheet of Paper. Show Your Computations. (4 Items X 5 Points)

Cosmo, Inc. constructed production equipment for $5,220,000. This includes $1,920,000 for direct materials, $1,200,000 for direct labor, $1,800,000 for incremental overhead of 150% of direct labor, and $300,000 in interest costs from borrowing $3,000,000 at 10% interest for 2 years. Bamboo Company acquired plant assets from Pine Corporation in exchange for shares worth $4,500,000. The total cost of the land was $830,000 which includes its appraised value of $750,000 plus a $80,000 special assessment. The total cost of the buildings was $3,315,

Uploaded by

Kathleen Mercado
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 2

BM2008

NAME: MERCADO,KATH DATE: 01/15 SCORE:

ACTIVITY
Answer the following items on a separate sheet of paper. Show your computations. (4 items x 5
points)

Cosmo, Inc. has constructed a production equipment needed for the company’s expansion program.
Cosmo received a P3,000,000 bid from a reputable manufacturer for the construction of the equipment.

The costs of direct material and direct labor incurred were P1,920,000 and P1,200,000, respectively. It is
estimated that incremental overhead costs for construction amount to 150% of direct labor costs.

Fixed costs (excluding interest) of P4,200,000 were incurred during the construction period. This amount
was allocated to construction based on total prime costs – the sum of direct materials and direct labor. The
prime costs incurred to construct the new equipment amounted to 40% of the total prime costs incurred for
the period. The company’s policy is to capitalize all possible costs on self-construction projects.

To assist in financing the construction of the production equipment, Cosmo borrowed P3,000,000 at the
beginning of the six-month construction period. The loan was for two (2) years with interest at 10.

1. What is the total cost of the self-constructed equipment? P5,220,000


Allocated Overhead
Direct Materials P1,920,000
Direct Labor P1,200,000
Incremental 150% of Direct Labor P1,800,000
Interest P 300,000
Total P5,220,000

On February 14, 201A, Bamboo Company acquired the plant assets of Pine Corporation in exchange for
25,000 ordinary shares (P100 par value), which had a fair value of P180 per share on the date of the
purchase of the property. The property had the following appraised value:

Land P1,600,000
Building 4,800,000
Machinery and Equipment 3,200,000

Below is the summary of Bamboo’s cash outflows between the acquisition date and December 29, when it
first occupied the building.

Repairs to building P420,000


Construction of bases for machinery to be installed later 540,000
Driveways and parking lots 490,000
Remodeling of office space in building, including new 645,000
partitions and walls
Special assessment by the city government on land 80,000

On December 27, Bamboo paid cash for machinery, P560,000 (subject to 2% cash discount) and freight
on machinery of P25,000.

Compute the total cost of the following:


2. Land P830,000
Ordinary Shares Issued 25,000
Fair Value per share 180
Fair Market Value 4,500,000

Land 1,600,000 750,000


Building 4,800,000 2,250,000
Machinery & Equipment 3,200,000 1,500,000
Total 9,600,000 4,500,000
FV of Land 750,000
Assessment 80,000
COST OF LAND 830,000

3. Buildings P3,315,000 _

Fair Value of Building 2,250,000


Repairs to Building 420,000
Remodeling 645,000
COST OF BUILDING 3,315,000

4. Machinery and Equipment P2,613,800

Fair Value of Machinery & Equipment 1,500,000


Cost of Installation 540,000
Discounted Purchased Machine Price 548,800
Freight-In 25,000
COST OF MACHINERY & EQUIPMENT 2,613,800

Rubric for problem solving:


Performance Indicators Points
Correct accounts and amounts used 3
Computed final amounts are correct/balanced 2
Total 5

07 Activity 1 *Property of STI


Page 1 of 1

You might also like