Professional Documents
Culture Documents
Investment Property
3. Solution:
Farming land purchased for its investment potential.
Planning permission has not been obtained for
building constructions of any kind. 700,000
APPLICABLE
OTHER ITEMS STANDARD
Factory which, due to a decline in activity, is no
PFRS 5
longer required and is now being held for sale.
Factory in the process of being constructed on
PFRS 15
behalf of the government.
New office building used as head office which
was purchased specifically in the center of a
PAS 16
major city in order to exploit its capital gains
potential.
4. D
5. B
6. B
7. A
1
8. Solution:
Acquisition cost 1,200,000
Professional fees and taxes 50,000
Repairs and renovations 200,000
Total cost 1,450,000
9. B
10. B
11. Solutions:
Requirement (a): Statement of profit or loss
(20M + 8M) – (15M – 10M) = 3,000,000 unrealized gain
12. Solutions:
Requirement (a): Statement of profit or loss
(9M + 9M) ÷ 10 = 1,800,000 depreciation expense
13. D
14. C
15. Solution:
Requirement (a):
Investment property (at fair value) 800,000
Accumulated depreciation 4,000,000
Impairment loss (squeeze) 200,000
Building 5,000,000
2
Requirement (b):
Investment property (at fair value) 1,400,000
Accumulated depreciation 4,000,000
Building 5,000,000
Revaluation surplus (squeeze) 400,000
Requirement (c):
Investment property (at carrying amount) 1,000,000
Accumulated depreciation 4,000,000
Building 5,000,000
3
PROBLEM 20-3: EXERCISES
1. Solutions:
Requirement (a):
Land held for long-term capital appreciation 200,000
Land held for a currently undetermined future use 700,000
Building rented out under operating lease 800,000
Building rented under finance lease and rented out under
operating lease 1,200,000
Total investment property 2,900,000
Requirement (b):
Other items Classification
Land held for future plant site PPE
Land held for sale in the ordinary course of business INVENTORY
Building rented out under finance lease NOT AN ASSET
Building rented under an operating lease NOT AN ASSET
Equipment leased out under an operating lease PPE
Equipment leased under a finance lease PPE
2. Solutions:
Case 1
(1,200,000 + 50,000 + 200,000) = 1,450,000 x 9.5/10 = 1,377,500
Case 2
Unrealized loss – P/L (1.4M – 1.450M) 50,000
Investment property 50,000
6. Solutions:
Case 1:
Investment property (1M x 7/10) 700,000
Accumulated depreciation (1M x 3/10) 300,000
Building 1,000,000
4
Case 2:
Investment property (fair value) 900,000
Accumulated depreciation (1M x 3/10) 300,000
Building – PPE 1,000,000
Revaluation surplus 200,000
Case 3:
Investment property (fair value) 900,000
Accumulated depreciation (1M x 3/10) 300,000
Building – PPE 1,000,000
Gain on transfer – P/L 200,000
Case 4:
Investment property (recoverable amt.) 600,000
Accumulated depreciation (1M x 3/10) 300,000
Impairment loss (squeeze) 100,000
Building 1,000,000
7. Solution:
Investment property 930,000
Loss on transfer 70,000
Inventory 1,000,000
8. Answer:
None. The event is not a change in use.
10. Solution:
Building (6M x 6/10) 3,600,000
Accumulated depreciation (6M x 4/10) 2,400,000
Investment property 6,000,000
11. Solution:
Investment property (1.5M + 1.2M + 1M) 3,700,000
Cash 3,700,000
to record the construction costs
14. Answer:
Accum. depreciation (4.2M x 4/6) 2,800,000
Loss from fire (squeeze) 1,400,000
Investment property 4,200,000
5
Compensation 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 only when the compensation
becomes receivable.
6
PROBLEM 20-4: CLASSROOM ACTIVITY
Solution:
Please refer to the accompanying power point presentation. The “pointers” in
the activity are actually the “Learning Competencies” in the lecture aid.
Best wishes,
Zeus
7
PROBLEM 20-7: MULTIPLE CHOICE: COMPUTATIONAL
1. D
Solution:
Land held for long-term capital appreciation 3,500,000
Land held for a currently undetermined future use 5,700,000
Land held for long-term speculation 1,400,000
Land owned by the entity and leased out under an operating
Lease 7,800,000
Building leased under a finance lease and leased out under
an operating lease 700,000
Building owned by the entity and leased out under an
operating lease 11,800,000
Building – currently vacant but is held to be leased out under
various operating leases 7,100,000
Warehouse currently being developed – to be used as
investment property 9,700,000
Total investment property 47,700,000
4. D
5. D
8. D
• 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.