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Understanding Investment Property: Key Concepts and Solutions

School
Pagadian City Science High School**We aren't endorsed by this school
Course
AC 56
Subject
Accounting
Date
Dec 11, 2024
Pages
8
Uploaded by DrOryx1765
SOL. MAN. Chapter 21 Investment Property IA PART 1BBS Accountancy (University of Batangas)Scan to open on StudocuStudocu is not sponsored or endorsed by any college or universitySOL. MAN. Chapter 21 Investment Property IA PART 1BBS Accountancy (University of Batangas)Scan to open on StudocuStudocu is not sponsored or endorsed by any college or universityDownloaded by Andrea Fe Prospero (orepsorp54@gmail.com)lOMoARcPSD|36589174
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Chapter 21Investment PropertyPROBLEM 1: TRUE OR FALSE1.FALSE2.TRUE3.TRUE4.TRUE5.FALSE – initially measured at cost6.TRUE7.TRUE8.TRUE9.TRUE10. FALSE 200K loss – carrying amount of replaced escalator₱PROBLEM 2: FOR CLASSROOM DISCUSSION1.D2.B3.B4.Solution:Farming land purchased for its investment potential. Planning permission has not been obtained for building constructions of any kind.700,000 OTHER ITEMSAPPLICABLESTANDARD Factory which, due to a decline in activity, is no longer required and is now being held for sale.PFRS 5Factory in the process of being constructed on behalf of the government.PFRS 15 New office building used as head office which was purchased specifically in the center of a major city in order to exploit its capital gains potential.PAS 16 5.C6.B7.B1Downloaded by Andrea Fe Prospero (orepsorp54@gmail.com)lOMoARcPSD|36589174
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8.A9.Solution:Acquisition cost1,200,000Professional fees and taxes50,000Repairs and renovations200,000Total cost1,450,00010. Solutions:Requirement (a): Statement of profit or loss(20M + 8M) – (15M +10M) = 3,000,000 unrealized gainRequirement (b): Statement of financial position(20M + 8M) = 28,000,000Requirement (c): Adjusting entryInvestment property3,000,000Unrealized gain3,000,00011.Solutions:Requirement (a): Statement of profit or loss(9M + 9M) ÷ 10 = 1,800,000 depreciation expenseRequirement (b): Statement of financial position(9M + 9M) x 7/10 = 12,600,000Requirement (c): Adjusting entryDepreciation expense1,800,000Accumulated depreciation - Investment property1,800,00012. D13. C14. Solution:Requirement (a):Investment property (at fair value) 800,000Accumulated depreciation4,000,000Impairment loss (squeeze)200,000Building5,000,000Requirement (b):Investment property (at fair value) 1,400,000Accumulated depreciation4,000,000Building5,000,000Revaluation surplus (squeeze)400,000Requirement (c):2Downloaded by Andrea Fe Prospero (orepsorp54@gmail.com)lOMoARcPSD|36589174
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Investment property (at carrying amount) 1,000,000Accumulated depreciation4,000,000Building5,000,0003Downloaded by Andrea Fe Prospero (orepsorp54@gmail.com)lOMoARcPSD|36589174
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PROBLEM 3: EXERCISES1.Solutions:Requirement (a):Land held for long-term capital appreciation 200,000Land held for a currently undeterminedfuture use700,000Building rented out under operating lease800,000Total investment property1,700,000Requirement (b):Other itemsClassification Land held for future plant sitePPE Land held for sale in the ordinary course of businessINVENTORY Building rented out under finance leaseNOT ANASSET Equipment leased out under an operating leasePPE 2.Solutions: Case 1(1,200,000 + 50,000 + 200,000) = 1,450,000 x 9.5/10 = 1,377,500Case 2Unrealized loss – P/L (1.4M – 1.450M)50,000Investment property50,0003.Answer: None, the property is classified as investment property.4.Answer: None, the property is classified as owner-occupied property.5.Solutions:Case 1:Investment property (1M x 7/10)700,000Accumulated depreciation(1M x 3/10)300,000Building 1,000,000Case 2:Investment property (fair value)900,000Accumulated depreciation(1M x 3/10)300,000Building – PPE1,000,000Revaluation surplus200,000Case 3:Investment property (recoverable amt.)600,000Accumulated depreciation(1M x 3/10)300,000Impairment loss (squeeze)100,0004Downloaded by Andrea Fe Prospero (orepsorp54@gmail.com)lOMoARcPSD|36589174
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Building 1,000,0006.Solution:Investment property930,000Loss on transfer70,000Inventory 1,000,0007.None. The event is not a change in use.8.None. The event is not a change in use.9.Solution:Building (6M x 6/10)3,600,000Accumulated depreciation (6M x 4/10)2,400,000Investment property6,000,00010.Solution:Investment property (1.5M + 1.2M + 1M)3,700,000Cash3,700,000to record the construction costsInvestment property (4M – 3.7M)300,000Unrealized gain300,000to record the year-end adjustment11.Solution: (4,000,000 x 2/5) = 1,600,00012.Answer: 1,200,00013.Answer:Accum. depreciation (4.2M x 2/6)1,400,000Loss from fire (squeeze)2,800,000Investment property4,200,000Compensation from third parties for investment property that was impaired, lost or given up (e.g. claims from insurance company for insured property lost) shall be recognized in profit or loss onlywhen the compensation becomes receivable(in the problem, on October 10, 20x3 when the claim was approved).5Downloaded by Andrea Fe Prospero (orepsorp54@gmail.com)lOMoARcPSD|36589174
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PROBLEM 4: CLASSROOM ACTIVITYSolution:Please refer to the accompanying power point presentation. The “pointers” in the activity are actually the “Learning Objectives” in the lecture aid.Dear Fellow Teacher,Please elaborate to the learners that in real life settings,how we deal with other people (e.g., clients, colleagues, family, friends, strangers, etc.) is, more often than not, more important than the level of education that we have attained. That is why I assigned a rating of 70% for “audience impact” and 30% only tothe other criteria.If the learner understands this now, he/she will surely goa long way after graduation.Best wishes,ZeusPROBLEM 5: MULTIPLE CHOICE - THEORY1.E 6.A 2.C 7.C 3.C 8.D 4.D 9.D 5.D 10.A 6Downloaded by Andrea Fe Prospero (orepsorp54@gmail.com)lOMoARcPSD|36589174
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PROBLEM 6: MULTIPLE CHOICE: COMPUTATIONAL 1.DSolution:Land held for long-term capital appreciation 3,500,000Land held for a currently undeterminedfuture use5,700,000Land held for long-term speculation1,400,000Land owned by the entity and leased out under an operating Lease7,800,000Building owned by the entity and leased out under an operating lease11,800,000Building – currently vacant but is held to be leased out under various operating leases7,100,000Warehouse currently being developed – to be used as investment property9,700,000Total investment property47,000,0002.B (29,370,874 x 18/20) = 26,433,7873.B (6M – 480,000) = 5,520,000 carrying amt. at the beg. of the year – 240,000* depreciation for the year = 5,280,000 carrying amt. at the endof the year*(480,000 ÷ 2) = 240,0004.D5.D6.D7.B 400,000 – (1M X 6/10) = 200,000 impairment loss•Choice (a) is incorrect because the existing standard(s), i.e., in this case PAS 40 and PAS 36, apply until the date of reclassification.•Choice (c) is incorrect because the investment property is measured under the cost model.•Choice (d) is incorrect.8.C 400,000 – (1M X 6/10) = 200,000 unrealized loss(See explanations in the preceding problem)7Downloaded by Andrea Fe Prospero (orepsorp54@gmail.com)lOMoARcPSD|36589174
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