Determine carrying amount of the building as of december

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Q1. A Company has appointed you to determine the appropriate offer to accept from potential buyers of the business.

The cumulative net earnings for the past 5 years amounted to P23,000,000. Included in this are gains from a lawsuit that the company won for a total remuneration for damages of P3,000,000. a The fair value of identifiable net assets amounted to P15,000,000.

Assuming a normal rate of return of 15%, determine the goodwill recognized if annual average earnings are capitalized at 20%

Q2. By the end of 2018, Company A was able to finish construction on a building for a total cost of P10,000,000. This was intended to earn rentals under an operating lease. The estimated useful life of the structure was estimated at 25 years. This property was carried in Company A's books using the fair value model. An independent valuation expert estimated the fair value of the building at P11,000,000, P12,000,000 and P12,500,000 at the end of 2018, 2019 and 2020, respectively.

On January 1, 2020, the company started to use the building as headquarters and reclassified the building. The entity uses cost model to measure all its PPE.

Determine carrying amount of the building as of December 31, 2020.

Reference no: EM132912374

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