This study source was downloaded by 100000813617715 from CourseHero com on 08 14 2022 21 32 20 GMT 05 00 https www coursehero com file 120316604 Investment Propertydocx ANSWERS Problem 22 3A3 CProblem 22 4B4 DProblem 22 5A5 AProblem 22 6BProblem 22 101 CProblem 22 7A2 CProblem 22 8DProblem 22 14CProblem 22 91 AProblem 22 15D2 BProblem 22 3 IFRS Robust Company purchased an investment property on January 1 2019 at a cost of P4 000 000 The property had a useful life of 20 years and on December 31 2020 had a fair value ofP4 800 000 On December 31 2020 the property was sold net proceeds of P4 500 000 The entity used the cost model to account for the investment property What is the gain to be recognized for 2020 regarding the disposal of the investment property a 900 000b 500 000c 800 000d 700 000Solution Under the cost model investment property is carried at its cost less any accumulateddepreciation and any impairment losses Any change in fair value is not recognized Cost January 1 20194 000 000Accumulative depreciation 4 000 000 20 x 2 years 400 000 Carrying amount December 31 20203 600 000Sales price4 500 000Carrying amount December 31 20203 600 000Gain on disposal 9 00 000 Problem 22 4 IFRS Nonchalant Company owned three investment properties with the following details InitialFair value Fair value cost December 31 2020December 31 2021CHAPTER 22 INVESTMENT PROPERTY This study source was downloaded by 100000813617715 from CourseHero com on 08 14 2022 21 32 20 GMT 05 00 https www coursehero com file 120316604 Investment Propertydocx Property 1 2 700 000 3 200 0004 000 000Property 2 3 450 000 3 000 0002 100 000Property 3 3 300 000 3 900 0003 600 000Each property was acquired in 2020 with a useful life of 10 years The accounting policy is touse the fair value model for investment property What is the gain or loss to be recognized for 2021 a 900 000 lossb 400 000 lossc 650 000 gaind 300 000 lossSolution Under the fair value model the investment property is carried at its fair value and the investmentis not depreciated The unrealized loss from the fair value change is analyzed below Total fair value December 31 201910 100 000Total fair value December 31 2020 9 7 00 000 Decrease in value unrealized loss 4 00 000 Fair valueFair valueGain loss 12 31 201912 31 2020Property 1 3 200 000 4 000 000 800 000Property 2 3 000 000 2 100 000 900 000 Property 3 3 900 000 3 600 000 300 000 Net loss from change in fair value 400 000 Problem 22 5 IFRS Ingenuous Company acquired a building on January 1 2020 for P9 000 000 At that date thebuilding had a useful life of 30 years On December 31 2020 the fair value of the building was P9 600 000 and on December 31 2021 the fair value is P9 800 000 The building was classified as an investment property and accounted for under the cost model What amounts should be carried in the statement of financial position and recognized in profit orloss for 2021 Carrying amountProfit or lossa 8 400 000300 000 expenseb 9 000 000No gain no loss This study source was downloaded by 100000813617715 from CourseHero com on 08 14 2022 21 32 20 GMT 05 00 https www coursehero com file 120316604 Investment Propertydocx c 9 800 000200 000 gaind 8 700 000300 000 expenseSolution Cost January 1 20209 000 000Accumulative depreciation 9 000 000 30 x 2 years 600 000 Carrying amount December 31 20218 400 000Depreciation expense 9 000 000 30 300 000Problem 22 6 IFRS Considerate Company has a single investment property which had an original cost of P5 800 000on January 1 2018 On December 31 2020 the fair value was P6 000 000 and on December 31 2021 the fair valuewas P5 900 000 On acquisition the property had a useful life of 40 years What is the expense recognized in profit or loss for 2021 under the fair value model and costmodel Fair value modelCost modela 147 500 145 000b 100 000 145 000c 145 000 100 000d 100 000 147 500Fair value modelFair value December 31 20206 000 000Fair value December 31 20215 900 000Loss from change in fair value 100 000Cost modelDepreciation expense for 2021 5 800 000 40 145 000Problem 22 7 IFRS Paradise Company s accounting policy with respect to investment property is fair value model atthe end of each reporting period One investment property had a fair value of P8 000 000 onDecember 31 2020 This study source was downloaded by 100000813617715 from CourseHero com on 08 14 2022 21 32 20 GMT 05 00 https www coursehero com file 120316604 Investment Propertydocx The property had been acquired on January 1 2020 for a total of P7 600 000 made up ofP6 900 000 paid to the vendor P300 000 paid to the local authority as a property transfer tax andP400 000 paid to professional advisers The useful life of the property is 40 years What is the gain to be recognized for 2020 in respect of the investment property a 400 000b 700 000c 800 000d 590 000Solution Acquisition cost January 1 20207 600 000Fair value December 31 20208 000 000Gain from change in fair value 400 000Problem 22 8 IFRS On January 1 2020 Scholastic Company acquired a building to be held as investment property ina remote location for P5 000 000 After initial recognition the entity measured the investmentproperty using the cost model because the fair value cannot be measured reliably On December 31 2020 management assessed the useful life of the building at 20 years from thedate of acquisition and presumed the residual value to be nil because the fair value cannot bedetermined reliably At year end the entity declined an unsolicited offer to purchase the building for P6 500 000 Thisis a one time offer that is unlikely to be repeated in the foreseeable future What is the carrying amount of the building on December 31 2020 a 5 000 000b 6 500 000c 6 175 000d 4 750 000Solution Cost January 1 20205 000 000Accumulative depreciation 5 000 000 20 x 1 year 250 000 Carrying amount December 31 20204 750 000Problem 22 9 IFRS On January 1 2020 Wee Company acquired property consisting of ten identical freeholddetached houses each with separate legal title including the land on which it is built forP200 000 000 20 of which is attributable to the land The units have a useful life of 50 years This study source was downloaded by 100000813617715 from CourseHero com on 08 14 2022 21 32 20 GMT 05 00 https www coursehero com file 120316604 Investment Propertydocx The following costs are also incurred on such date Nonrefundable transfer taxes not included in the purchase price20 000 000 Legal cost directly attributable to the acquisition 1