INVESTMENT PROPERTY

1. A company had the following items of property on December 31, 2021:

Land which at the date of acquisition is not intended for any
specific use in the future P 2,500,000
Condominium building acquired exclusively with a view to
subsequent development and resale 10,500,000
Building leased out under operating lease (the company
provides security and maintenance services to the lessees) 3,000,000
Equipment leased out to unrelated party under operating lease 1,000,000
Administrative and production building 3,000,000
Building leased out to unrelated party under a finance lease 5,000,000
Land held as future plant site 7,500,000
Building in process of construction intended to be leased
under operating leases 6,000,000

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Five-star hotel owned and managed by the company 5,500,000

How much should be classified as investment property in the company’s December 31,

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2021, statement of financial position?
a. P8,500,000
b. P11,500,000
c. P12,500,000
d. P17,000,000
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2. How much should be classified as owner-occupied property in the company’s December
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31, 2021, statement of financial position?
a. P11,500,000
b. P17,000,000
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c. P22,000,000
d. P32,500,000

3. A parent company listed the following properties on December 31, 2021:

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Condominium building occupied by employees (employees

pay rent at market rate) 3,500,000
Condominium building occupied by employees (employees
pay rent at below market rate) 1,250,000
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Building leased out to a subsidiary under operating lease 5,000,000

How much of these properties should be classified as investment property in the

company’s December 31, 2021, separate statement of financial position?
a. P3,500,000
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b. P5,000,000
c. P8,500,000
d. P9,750,000

4. How much of these properties should be classified as owner-occupied property in the

December 31, 2021, consolidated statement of financial position?
a. P1,250,000
b. P5,000,000
c. P6,250,000
d. P9,750,000

5. REO Co. made the following lease transactions in 2021:

• Leased out a building costing P4,500,000 to an unrelated party under operating lease.
 • Leased out a land costing P5,000,000 to Subs, Co., a subsidiary, under operating
lease.
• Leased out a right-of-use building costing P6,000,000, from Par, Corp., its parent
company, and subleased the same building to an unrelated party under operating
lease.

What amount will be reported as investment property in the separate statement of

financial of position of REO, Co.?
a. P4,500,000
b. P9,500,000
c. P10,500,000
d. P15,500,000

6. What amount will be reported as investment property in the consolidated statement of

financial of position of the group?
a. P9,500,000

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b. P11,500,000
c. P11,000,000

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d. P15,500,000

7. On January 2, 2019, a company completed the construction of a building which was

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intended for future use as investment property for a total cost P15,000,000. The estimated
useful life of the property was 50 years using a straight-line method and the residual
value is 10%. The fair values and the costs to sell of the property follow:
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Date Fair Value Cost to sell
December 31, 2019 P14,950,000 200,000
December 31, 2020 P14,450,000 225,000
December 31, 2021 P14,475,000 175,000
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8. What was the carrying value of the investment at the end of 2021 using the cost model?
a. P14,325,000
b. P14,190,000
c. P14,150,000
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d. P12,690,000

9. What was the carrying value of the investment at the end of 2021 using the fair value
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model?
a. P14,4750,000
b. P14,190,000
c. P14,300,000
d. P14,015,000
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10. What amount of gain from change in fair value was recognized in 2021 profit or loss if
the investment is accounted for using the fair value model?
a. P25,000
b. P75,000
c. P110,000
d. P285,000

11. If the investment property was carried under cost model, and it was sold on December 31,
2021, at its fair value, what was the gain or loss on sale?
a. P285,000 gain
b. P285,000 loss
c. P110,000 gain
d. P110,000 los
12. On January 3, 2020, a company acquired an investment property for P5,000,000. The
estimated useful life of the property was 25 years and it was depreciated using straight-
line method. On the date of acquisition, the company decided to account this investment
under the fair value model. On December 31, 2020, the property had a fair value of
P5,400,000. On December 31, 2021, the investment was reclassified to owner-occupied
property when the fair value of the investment property was P5,250,000. What would be
the initial cost of the owner-occupied property on transfer date?
a. P4,600,000
b. P4,800,000
c. P5,250,000
d. P5,400,000

13. On January 2, 2021, a company reclassified its owner-occupied building to investment

property to be carried at fair value. The carrying value of the building in the company’s
books on that date was P5,000,000 while its fair value was P6,100,000. On the date of
reclassification, the company should

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a. recognize a gain of P1,100,000 in profit or loss
b. recognize a revaluation surplus of P1,100,000 in other comprehensive income

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c. recognize a gain of P1,100,000 in retained earnings
d. record a gain of P1,100,000 in the notes

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14. Which of the following is not included in the cost of investment property?
a. Costs incurred initially to acquire an investment property.
b. Costs incurred subsequently to add to or replace part of the investment property.
c. Costs incurred subsequently to service the investment property (other than day-to-
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day servicing).
d. All of the above are included in the cost of investment property.

15. An entity acquired an investment property in exchange for another non-monetary asset.
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The exchange lacks commercial substance, but the fair values of both assets are reliably
measurable. In this case, how should the investment property be measured?
a. Fair value of the investment property
b. Fair value of the non-monetary asset
c. Carrying value of the investment property
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d. Carrying value of the non-monetary asset

16. An entity had two investment properties: a self-constructed building, and a vacant lot
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held as a right-of-use asset. Which of the following statements is true in relation to the
subsequent measurement of these investment properties?
a. An entity may choose to measure the building using the fair value model while the
vacant lot using the cost model.
b. If the entity will choose the fair value model, both the building and lot should be
measured using the fair value model.
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c. If the entity will choose the cost model, both the building and lot should be measured
applying the provisions of IAS 16 for the cost model.
d. Only b and c are correct.

17. An owner-occupied property occupied by employees who, in return, pay rent at market
rates, is classified as
a. investment property.
b. owner-occupied property.
c. asset held for sale.
d. Extraordinary asset.

18. An owner-managed hotel is an example of

a. Investment property
b. Owner-occupied property
 c. Asset held for sale
d. Inventory

19. For a transfer from investment property carried at fair value to owner-occupied property
or inventories, the property’s deemed cost for subsequent accounting shall be
a. the fair value at the date of change in use.
b. the cost.
c. the book value at the date of change in use.
d. the depreciated replacement cost at the date of change in use.

20. In accounting for investment property accounted for using the fair value model, an
equipment such as air-conditioning unit which is an integral part of a building
(investment property), is reported
a. as part of the investment property.
b. separately as building equipment.
c. separately as building improvement.

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d. none of the above.

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END OF HANDOUT

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