What are the appropriate amounts that Proton should record for the land, warehouse, and office building, respectively?
The appropriate amounts that Proton should record for the land, warehouse, and office building, respectively is as follows: Land, P300,000; warehouse, P200,000; office building, P400,000.
Proton Corporation purchased the land, warehouse, and office building for P855,000, and the purchase price of the property is less than the current assessed valuation. Thus, no gain or loss on the purchase should be recorded. The cost of the land should be recorded at P300,000; the cost of the warehouse should be recorded at P200,000; and the cost of the office building should be recorded at P400,000.
Therefore, the appropriate amounts that Proton should record for the land, warehouse, and office building, respectively is Land, P300,000; warehouse, P200,000; office building, P400,000.
Explanation:
Assessed Valuation vs. Original Cost:
The assessed valuation of the land, warehouse, and office building is P900,000, while the vendor's original cost is P800,000. In this scenario, Proton Corporation decided to purchase the property for P855,000, which is a lower price compared to the assessed valuation.
Recording of Costs:
When a company purchases a property for an amount less than the assessed valuation, it indicates that the company got a good deal on the purchase. In the case of Proton Corporation, they paid P855,000 for the property, which includes the land, warehouse, and office building. Since the purchase price is lower than the assessed valuation, no gain or loss needs to be recorded.
Proper Allocation of Costs:
To properly account for the purchase of the property, Proton Corporation needs to allocate the cost among the land, warehouse, and office building. The cost of each component should reflect their respective values. The land should be recorded at P300,000, the warehouse at P200,000, and the office building at P400,000.
Financial Reporting:
By recording the costs of the land, warehouse, and office building at P300,000, P200,000, and P400,000 respectively, Proton Corporation ensures accurate financial reporting. This allocation accurately reflects the value of each component of the property and follows proper accounting principles.
In conclusion, Proton Corporation should record the land at P300,000, the warehouse at P200,000, and the office building at P400,000 based on the purchase price and the values of each component. This approach ensures transparent financial reporting and adherence to accounting standards.