Investment Property

PAS 40 shall be applied to which of the following?

• biological assets related to agricultural activity

• inventories held for sale in the ordinary course of business

• mineral rights and mineral reserves such as oil, natural gas and similar non-regenerative resources.

• building that is vacant but is held to be leased out under one or more operating leases

Which of the following statements best describe 'owner-occupied property', according to PAS40 Investment property?

• Property held for sale in the ordinary course of business

• Property held for use in the production and supply of goods or services

• Property held to earn rentals

• Property held for capital appreciation

Which of the following would not be reported as investment property?

• Property owned by the entity and leased out under one or more operating leases.

• Property held by the entity under finance lease to be leased out under one or more operating leases

• Real estate held for an undetermined future use.

• Property owned by the entity and leased out to another entity under a finance lease

In accounting for investment property,

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.

• True, True

• True, False

• False, True

• False, False

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

• Profit or loss for the year.

• General reserve in the shareholders’ equity.

• Valuation reserve in the shareholders’ equity.

• None of the above.

Which is correct regarding the fair value model for investment property?

• 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

• Investment properties are initially measured at fair value, any subsequent changes in fair value are recognized in profit or loss

• Change of policy from the fair value model to the cost model is least likely to happen

• Investment properties are initially recognized at fair value, any subsequent changes in fair value are recognized as revaluation in equity

An investment property is derecognized when

• It is disposed to a third party.

• It is permanently withdrawn from use.

• No future economic benefits are expected from its disposal.

• in any of these

Transfers from investment property to property, plant, and equipment are appropriate

• When there is change of use.

• Based on the entity’s discretion.

• Only when the entity adopts the fair value model under PAS 38.

• The entity can never transfer property into another classification on the balance sheet once it is classified as investment property.

MODULATE Co. has the following assets.

Vacant building to be leased out under operating lease - 4,000,000; Building being constructed for TO ADJUST, Inc. - 800,000; Building under construction to be used as office - 1,600,000; Building under construction to be rented out under operating lease - 400,000; Building rented out to MODULATE’s employees who pay rent at market rates - 3,200,000; Office building awaiting disposal - 200,000.

How much is the total investment property?

• P4,200,000

• P4,400,000

• P4,600,000

• P7,600,000

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

• P360,000 depreciation

• P400,000 unrealized gain

• P200,000 unrealized gain

• P1,200,000 unrealized gain