LUCERO, LOUIEZE ANTONIO P.

INTERMEDIATE ACCOUNTING 2

BSA 2-5 PROFESSOR MARK PERLAS

INVESTMENT PROPERTY

3-1) SEBASTIAN CORPORATION

a) Land Site Purchase Price ₱ 8,600,000.00

Commission to real estate agent ₱ 430,000.00
Cost to clear the land ₱ 135,000.00
Less: Recovered and sold timber and gravel ₱ 65,000.00 ₱ 70,000.00
Total Cost ₱ 9,100,000.00

b) Down Payment ₱ 4,000,000.00

Market Value of shares issued (20,000 x 240) ₱ 4,800,000.00
Present Value of non-interest bearing note
issued (2,000,000 x 2.486852) ₱ 4,973,704.00
Total Cost of Land and Building ₱ 13,773,704.00

Cost of the Land (13,773,704 x 30%) ₱ 4,132,111.20

Cost of the Building (13,773,704 x 70%) ₱ 9,641,592.80
Total Cost of Land and Building ₱ 13,773,704.00
`

3-2) PRECIOUS REALTY CORPORATION

Jan 2, 2019 Buildings ₱ 8,200,000.00

Accumulated Depreciation - Building Held as IP ₱ 4,200,000.00
Building Held as Investment Property ₱ 8,200,000.00
Accumulated Depreciation - Buildings ₱ 4,200,000.00

Dec 31, 2019 Depreciation Expense - Buildings ₱ 200,000.00

Accumulated Depreciation - Buildings ₱ 200,000.00
3-3) PIONEER PROPERTY CORPORATION

July 1, 2019 Depreciation Expense - Buildings ₱ 100,000.00

Accumulated Depreciation- Buildings ₱ 100,000.00
(200,000 x 6/12)

July 1, 2019 Building Held as Investment Property ₱ 5,000,000.00

Accumulated Depreciation - Buildings ₱ 4,300,000.00
Buildings ₱ 8,200,000.00
Revaluation Surplus ₱ 1,100,000.00

3-4) ABSOLUTE COMPANY

Cost Model

a) Land Held as Investment Property ₱ 5,000,000.00

Building Held as Investment Property ₱ 20,000,000.00
Less Accumulated Depreciation (20,000,000 / 40) ₱ 500,000.00 ₱ 19,500,000.00
Total Investment Property ₱ 24,500,000.00

b) Rent Revenue ₱ 3,000,000.00

Less: Depreciation Expense -₱ 500,000.00
Administrative and Security Salaries -₱ 200,000.00
Real Property Taxes -₱ 120,000.00
Maintenance -₱ 340,000.00
Profit ₱ 1,840,000.00
 Fair Value Model

a) Land Held as Investment Property Dec 31, 2019 ₱ 6,800,000.00

Building Held as Investment Property ₱ 20,000,000.00
Total Investment Property ₱ 26,800,000.00

Rent Revenue ₱ 3,000,000.00

Land Held as Investment Property Jan 1, 2019 ₱ 6,000,000.00
Land Held as Investment Property Dec 31, 2019 ₱ 6,800,000.00
Add: Revaluation Surplus ₱ 800,000.00
Building Held as Investment Property Jan 1, 2019 ₱ 19,000,000.00
Building Held as Investment Property Dec 31, 2019 ₱ 20,000,000.00
Add: Revaluation Surplus ₱ 1,000,000.00
Less: Administrative and Security Salaries -₱ 200,000.00
Real Property Taxes -₱ 120,000.00
Maintenance -₱ 340,000.00
Profit ₱ 4,140,000.00

3-5) ADAM COMPANY

a) Cost Model

Land Held as Investment Property ₱ 20,000,000.00

Land ₱ 20,000,000.00

Building Held as Investment Property ₱ 50,000,000.00

Accumulated Depreciation - Building ₱ 15,000,000.00
Buildings ₱ 50,000,000.00
Accumulated Depreciation - Building Held as IP ₱ 15,000,000.00

b) Fair Value Model

Land Held as Investment Property ₱ 28,000,000.00

Land ₱ 20,000,000.00
Revaluation Surplus ₱ 8,000,000.00

Building Held as Investment Property ₱ 42,000,000.00

Accumulated Depreciation - Buildings ₱ 15,000,000.00
Buildings ₱ 50,000,000.00
Revaluation Surplus ₱ 7,000,000.00
3-6) ACCURATE COMPANY

Cost Model

Cost of Investment Property ₱ 2,500,000.00

Less Residual Value -₱ 100,000.00
Depreciable Cost ₱ 2,400,000.00
Divide Useful Life 10
Annual Depreciation ₱ 240,000.00
Divide 12 moths
Monthly Depreciation ₱ 20,000.00
Multiply 52 months
Accumulated Depreciation ₱ 1,040,000.00

Sales Price ₱ 2,200,000.00

Cost of Investment Property ₱ 2,500,000.00
Less: Accumulated Depreciation ₱ 1,040,000.00 ₱ 1,460,000.00
Gain on Sales ₱ 740,000.00

Fair Value Model

Sales Price ₱ 2,200,000.00

Fair Value at Dec 31, 2018 ₱ 2,300,000.00
Loss on Sales -₱ 100,000.00

3-7) CONCEPTUAL COMPANY

a) Cost of Investment Property ₱ 5,800,000.00

Less Residual Value -₱ 400,000.00
Depreciable Cost ₱ 5,400,000.00
Divide Useful Life 40 years
Annual Depreciation ₱ 135,000.00

Amount reported in 2019 profit or loss

Depreciation Expense ₱ 135,000.00

b) Cost of Investment Property ₱ 5,800,000.00

Less Accumulated Depreciation ( 135,000 x 3.5yrs) ₱ 472,500.00
Carrying Amount at Dec 31, 2019 ₱ 5,327,500.00
 NCA HELD FOR SALE

6-1) PATRIARCH INC.

a) Dec 31, 2019 Machinery Group Held For Sale ₱ 1,400,000.00

Accumulated Depreciation - Machinery ₱ 1,200,000.00
Impairment Loss - Machinery ₱ 200,000.00
Machinery ₱ 2,200,000.00
Machinery Tools ₱ 380,000.00
Machinery Parts ₱ 220,000.00

b) Mar 17, 2020 Cash ₱ 1,460,000.00

Machinery Group Held For Sale ₱ 1,400,000.00
Gain on Sales ₱ 60,000.00
(1,520,000 - 60,000)

6-2) INVERCARGILL LTD.

a) Impairment Loss - Equipment ₱ 15,000.00

Loss from Decline in NRV of Inventory ₱ 5,000.00
Accumulated Depreciation - Equipment ₱ 15,000.00
Inventory ₱ 5,000.00

b) Assets Held For Sale ₱ 350,000.00

Accumulated Depreciation ₱ 95,000.00
Impairment Loss ₱ 30,000.00
Plant ₱ 220,000.00
Equipment ₱ 160,000.00
Inventory ₱ 75,000.00
Goodwill ₱ 20,000.00

c) Cash ₱ 350,000.00
Assets Held For Sale ₱ 350,000.00
6-3)

a) Mar 31, 2019 Depreciation Expense ₱ 3,500.00

Accumulated Depreciation ₱ 3,500.00
(42,000 / 3/5 = 70,000)
(70,000 / 5 = 14,000 x 3/12)

Assets Held For Sale ₱ 36,000.00

Accumulated Depreciation - Equipment ₱ 31,500.00
Impairment Loss ₱ 2,500.00
Equipment ₱ 70,000.00
(42,000 / 3/5 = 70,000)
(70,000 / 5 x 2.25 = 31, 500 )
(70,000 -36,000 - 31,500 = 2,500)

Dec 31, 2019 Assets Held For Sale ₱ 2,500.00

Impairment Loss ₱ 2,500.00

b) Dec 31, 2019 Impairment Loss ₱ 1,000.00

Assets Held For Sale ₱ 1,000.00

6-4)

Mar 31, 2019 Depreciation Expense ₱ 25,000.00

Accumulated Depreciation - Equipment ₱ 25,000.00
(800,000 / 8 /12 x 3)

Assets Held For Sale ₱ 400,000.00

Accumulated Depreciation - Equipment ₱ 225,000.00
Impairment Loss ₱ 175,000.00
Equipment ₱ 800,000.00
(800,000 / 8 x 2.25)

Dec 31, 2019 Assets Held For Sale ₱ 20,000.00

Impairment Loss ₱ 20,000.00
(420,000 - 400,000)

July 1, 2020 Equipment ₱ 800,000.00

Assets Held For Sale ₱ 420,000.00
Accumulated Depreciation ₱ 350,000.00
Impairment Loss ₱ 30,000.00
Solution
Carrying Amount Held For Sale on Dec 31, 2019
₱ 420,000.00
(FV less cost to sell is lower than the CA of 575, 000)

Carrying Amount had the asset not been reclassified:

Cost ₱ 800,000.00
Accumulated Depreciation, updated
(225,000 plus assumed depreciation from 125, 000) ₱ 350,000.00
Adjusted Carrying Amount under PPE ₱ 450,000.00

Recoverable Amount at July 1, 2020 ₱ 500,000.00