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2. Which of the following statements best describe 'owner-occupied property', according to PAS40
Investment property?
3. On January 1, 2020, NURTURE REAR Co. acquired a building with an estimated useful life of 10 years
and residual value of P400,000 for a total cost of P4,000,000. The fair value of the building on January 1,
2020 is P4,800,000 while the fair value on December 31, 2020 is P5,200,000. NURTURE estimates that if
the building is sold currently on December 31, 2020, costs to sell amount to P200,000. NURTURE uses
the straight line method in depreciating its PPE. NURTURE uses the fair value model for its investment
properties. The year-end adjusting entry will include
a. P360,000 depreciation
b. P400,000 unrealized gain
c. P200,000 unrealized gain
d. P1,200,000 unrealized gain
Statement I: The cost model used for property, plant, and equipment is the same as the cost model used
for investment property.
Statement II: The revaluation model used for property, plant, and equipment is the same as the fair
value model used for investment property.
a. True, True
b. True, False
c. False, True
d. False, False
5. PAS 40 shall be applied to which of the following?
a. Property owned by the entity and leased out under one or more operating leases.
b. Property held by the entity under finance lease to be leased out under one or more operating
leases
c. Real estate held for an undetermined future use.
d. Property owned by the entity and leased out to another entity under a finance lease
a. P4,200,000
b. P4,400,000
c. P4,600,000
d. P7,600,000
8. Which is correct regarding the fair value model for investment property?
a. Investment properties are initially measured as cost; subsequently, they are measured at fair
value, any fluctuations in fair value are recognized as revaluation in equity similar to the
revaluation model of property, plant and equipment
b. Investment properties are initially measured at fair value, any subsequent changes in fair value
are recognized in profit or loss
c. Change of policy from the fair value model to the cost model is least likely to happen
d. Investment properties are initially recognized at fair value, any subsequent changes in fair value
are recognized as revaluation in equity
9. A gain arising from a change in the fair value of an investment property for which an entity has opted
to use the fair value model is recognized in
10. Transfers from investment property to property, plant, and equipment are appropriate