FinAcc4 Quiz 5

Which of the following statements is true with regards to an investment property?

• An investment property generates cash flows largely independently of the other assets held by an entity

• The value in use of investment property is significantly higher than of owner-occupied property

• An investment property unlike owner-occupied property shall not be depreciated over its useful life

• An investment property unlike owner-occupied property shall always be measured at its historical cost

Which of the following additional disclosures must be made when the entity chooses the cost model as its accounting policy for investment property?

• The fair value of the property

• The present value of the property

• The value in use of the property

• Deemed costThe net realizable value of the property

Under what circumstance can a lessee classify a leased property interest as investment property if it is an operating lease?

• Management believes it is more appropriate for the financial statements.

• The rents and capital appreciation created from the property are a substantial source of the firm's revenues.

• The lessee uses a fair value model and the property would otherwise meet the definition of an investment property.

• All of the above

Which of the following illustrates an investment property?

• A Vancouver condo that is rented by a grocery store for capital appreciation and rental

• A building that operates and derives its cash flow from running as a restaurant

• A building that operates and derives its cash flow from running as a hotel

• A piece of land that is used as a farm

Which of the following statements is incorrect?

• If inventory is transferred to investment property that is to be carried at fair value, the difference between carrying amount and fair value shall be included in Profit or Loss.

• Transfers from investment property to property, plant and equipment are appropriate when there is change of use.

• Subsequent to initial recognition, investment property shall be measured at either fair value or cost less accumulated depreciation and any accumulated impairment losses.

• All are correct

Libby and Co. company bought a land property at a cost of P100,000,000. In the sale and purchase agreement, P20,000,000 of the purchase price is attributed to the land portion. The building consists of 10 floors of equal space. Two floors are used for administrative purposes and the balance are let out to tenants. Libby and Co. also incurs the following costs in connection with the purchase of the property: Legal and agency fees, P3,000,000; Soft launching cost to market for tenants, P500,000; Feng Shui costs for re-arrangements of interiors, P300,000; and administrative expenses, P200,000. At what amount should the investment property be initially recognized?

• P82,400,000

• P82,800,000

• P83,200,000

• P103,000,000

At the beginning of the year 2015, Coco Company has an investment property, acquired at cost of P5,000,000. Depreciation of P100,000 is recognized annually and periodic continuing repair costs of P10,000 per year as well as property tax of P5,000 are incurred by the company on an annual basis. As of December 31, 2015, the property has no determinable fair value. What should be the carrying value of the investment property on December 31, 2017?

• P0

• P4,685,000

• P4,640,000

• P4,700,000

Bimby Company has a single investment property which had an original cost of P5,800,000 on January 1, 2006. At December 31, 2008, its fair value was P6,000,000 and at December 31, 2009, it had a fair value of P5,900,000. On acquisition, the property had a useful life of 40 years.

What should be the expense recognized in Bimby’s profit or loss for the year ended December 31, 2009 under the fair value model and cost model?

• Fair Value Model: 147,500; Cost model: 145,000

• Fair Value Model: 100,000; Cost model: 145,000

• Fair Value Model: 145,000; Cost model: 100,000

• Fair Value Model: 100,000; Cost model: 147,500

Dayanara Company owns three properties which are classified as investment properties. Details of the properties are as follows:

Property 1

Initial cost: 2,700,000

Fair value at 12/31/2008: 3,200,000

Fair value at 12/31/2009: 3,500,000

Property 2

Initial cost: 3,450,000

Fair value at 12/31/2008: 3,050,000

Fair value at 12/31/2009: 2,850,000

Property 3

Initial cost: 3,300,000

Fair value at 12/31/2008: 3,850,000

Fair value at 12/31/2009: 3,600,000

Each property was acquired in 2005 with a useful life of 25 years. The entity's accounting policy is to use the fair value model for investment properties. What is the gain or loss to be recognized for the year ended December 31,2009?

• 189,000 loss

• 150,000 loss

• 300,000 gain

• 450,000 loss

Doug Company’s accounting policy for investment properties is the fair value model. One of its investment properties was measured at P80,000,000 on December 31, 2013. The property had been acquired on January 1, 2013 for a total of P76,000,000, made up of P69,000,000 paid to the vendor, P3,000,000 paid to the local authority as a property transfer tax and P4,000,000 paid to professional advisers. The useful life of the property is 40 years. What is the amount of gain to be recognized in profit or loss for the year ended December 31, 2013?

• 4,000,000

• 7,000,000

• 8,000,000

• 5,900,000