16.Dancel Associates sold office furniture for cash of P27,000. The accumulated depreciation atdate of sale amounted to P23,000, and a gain of P9,000 was recognized on the sale. The orig-inal cost of the asset must have been a.P18,000b.P41,000c.P59,000d.P32,000 17.On January 1, 2007, Ola purchased a machine that had a list price of P46,320. Ola paid cashof P18,000 and executed a one-year non-interest bearing note for the balance. The going rateof interest was 18 percent. The machine has a 6-year life and no residual value. Depreciationexpense on the SYD basis at the end of 2007 is 18.Garces Company acquired a tract of land containing an extractable natural resource. Garcesis required by the purchase contract to restore the land to a condition suitable for recreationaluse after it has extracted the natural resource. Geological surveys estimate that the land willhave a value of P1,000,000 after restoration. Relevant cost information follows:LandEstimated restoration costs P9,000,000 1,500,000 If Garces maintains no inventories of extracted material, what should be the depletion ex- pense per ton of extracted material? 19.On April 1, 2007, Mangundayao Corporation purchased all the assets and assumed all the lia-bilities of Monteagudo Company for P140,000 cash. Monteagudo’s total identifiable assetvalues as follows: Monteagudo’s book value, P200,000; estimated market value, P230,000.Monteagudo’s total liabilities were P105,000. The amount of goodwill purchased by Man-gundayao Corporation was
COMPREHENSIVE EXAMINATION Practical Accounting Problem I Page 6 of 13 20.Lymuel acquired a fast food franchise for a P50,000 cash down payment and in addition gavea P150,000, one-year, non-interest bearing note payable. The implicit interest rate is 12 per-cent. Lymuel also agreed to pay the franchiser P100,000 per year for the next 10 years forpromotional campaigns, accounting, and related services by the franchiser. Lymuel shouldrecord the cost of the franchise as a.P 183,930b.P 933,930c.P 950,000d.P1,183,930 21.We purchased all the outstanding ordinary shares of Diokno Travel Corporation, Diokno hasone asset whose market value exceeds its book value by P10,000. Diokno’s Equity isP80,000. We agreed with Diokno that its excess earnings would last for 10 years and wewere granted a 10% return on our investment. Diokno’s average income for negotiation pur-poses is P40,000 and the industry average rate of return is 30% on market value of net assets.Using the “present value of excess earnings” approach to the calculation of goodwill, what isthe purchase price for Diokno?
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