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Investment Property Problems

The document discusses accounting for investment properties using different models. It provides examples of: 1) Acquiring land and building an investment property with a down payment, shares issued, and note payable. 2) Recording depreciation expense on a building held as an investment property over 2019. 3) Revaluing the building upward with a credit to revaluation surplus. 4) Calculating gain or loss on sale of the investment property under the cost and fair value models. 5) Continuing to depreciate a new investment property under the cost model and calculating its carrying amount at year-end.

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Abigail Talusan
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160 views3 pages

Investment Property Problems

The document discusses accounting for investment properties using different models. It provides examples of: 1) Acquiring land and building an investment property with a down payment, shares issued, and note payable. 2) Recording depreciation expense on a building held as an investment property over 2019. 3) Revaluing the building upward with a credit to revaluation surplus. 4) Calculating gain or loss on sale of the investment property under the cost and fair value models. 5) Continuing to depreciate a new investment property under the cost model and calculating its carrying amount at year-end.

Uploaded by

Abigail Talusan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Talusan, Abigail G.

BSA 2-14

Investment Property – Problems

1.
a. Land acquired for capital appreciation

Acquisition price 8 600 000


Direct costs
Commission to a real estate agent 430 000
Cost of clearing 135 000
Recovery ( 65 000 )
Capitalized costs 9 100 000

b. Land and building held for lease

Downpayment 4 000 000


Issuance of shares 4 800 000
( 20 000 shares at 240 )
Non-interest bearing note 4 973 800
( 2 000 000 x 2.4869)
Total 13 773 800

Land (13 773 800 x .30) 4 132 140


Building (13 773 800 x .70) 9 641 660

2. 2019

January 2 Building 8 200 000


Accumulated Depreciation- Building held as 4 200 000
Investment Property
Building Held as Investment Property 8 200 000
Accumulated Depreciation- Building 4 200 000

December 31 Depreciation Expense – Building 200 000


Accumulated Depreciation- Building 200 000

3. 2019

July 1 Depreciation Expense – Building 100 000


Accumulated Depreciation- Building 100 000

Building Held as Investment Property 5 000 000


Accumulated Depreciation- Building 4 300 000
Revaluation Surplus 1 100 000
Building 8 200 000
5.
a. cost model

Building Held as Investment Property 50 000 000


Land Held as Investment Property 20 000 000
Accumulated Depreciation 15 000 000
Building 50 000 000
Accumulated Depreciation- Building Held as 15 000 000
Investment Property

b. fair value model

Building Held as Investment Property 42 000 000


Land Held as Investment Property 28 000 000
Accumulated Depreciation- Building 15 000 000
Revaluation Surplus 15 000 000
Building 50 000 000
Land 20 000 000

6. Gain or loss to be recognized in p and l for the year ended December 31, 2019

Cost model

Cost 2 500 000


Residual value (100 000)
Depreciable cost 2 400 000 / 10 years
Depreciation expense = 240 000

Cost 2 500 000


Accumulated Depreciation (1 040 000)
(240 000 x 3/12 = 60 000)
(240 000 x 4 = 960 000)
(240 000 x 1/12 = 20 000)
Carrying value, February 2019 1 460 000

Net proceeds 2 200 000


Carrying value (1 460 000)
Gain on sale 740 000

Fair value model

Net proceeds 2 200 000


Fair value (2 300 000)
Loss on sale 100 000
7. Cost model

a. Amount reported in 2019 in profit or loss

Cost 5 800 000


Residual value (400 000)
Depreciable cost 5 400 000 / 40 years
Depreciation expense = 135 000

b. Carrying amount of investment property at December 31, 2019

Cost 5 800 000


Accumulated Depreciation ( 472 500)
(135 000 x 6/12 = 67 500)
(135 000 x 3 = 405 000)
Carrying value, December 2019 5 327 500

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