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Define investment property

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Reference no: EM132584195

Twosome Sdn Bhd owns 3 identical freehold properties - Utara, Selatan and Timur.

The properties were:

Utara :Used as the head office by Twosome Sdn Bhd

Selatan :Let out (rented) to a subsidiary

Timur; Let out (rented) to an associated company

Twosome Sdn Bhd also had a leased property, Barat. Barat was a lease hold property with an unexpired period of 15 years. Barat was rented to XYZ, a company outside the group.

Required:

Problem 1: State which, if any of these properties, which likely to be an investment property of Twosome Sdn Bhd

Problem 2: Define investment property and describe the available accounting treatment for investment properties.

Problem 3: Sinar Bhd. Purchased a building as an investment property on 1 January 2015 for RM5 million. The legal cost relating to the purchase of property was RM30,000. The building is expected to have a useful life of 25 years and a scrap value of RM150,000. The building is expected to have a useful life of 25 years and a residual value of RM150,000. The building is appraised on 31 December every year. The fair value of the building is determined to be RM6 million and RM7 million at 31 December 2015 and 2016, respectively. Sinar Bhd uses the cost model to account its investment property. The company also uses straight-line method to depreciate its non-current assets.

Required:

a. show a journal entries relating to the acquisition of the property and any adjusting entries required at 31 December 2015 and 2016.

b. Refer to question above, now assume that Sinar Bhd applies the fair value model to account its investment property instead.

Reference no: EM132584195

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