Reference no: EM132804666
Questions - Please provide solution and explanation
Q1. On January 1, 20x1, NURTURE REAR Co. acquired a building with an estimated useful life of 10 years and residual value of 400,000 for a total cost of 4,000,000. The fair value of the building on January 1, 20x1 is 4,800,000 while the fair value on December 31, 20x1 is 5,200,000. NURTURE estimates that if the building is sold currently on December 31, 20x1, costs to sell amount to 200,000. 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
a. 360,000 depreciation
b. 400,000 unrealized gain
c. 200,000 unrealized gain
d. 1,200,000 unrealized gain
Q2. On December 31, 20x1, DECAPITATE BEHEAD Co. decided to lease out under operating lease one of its buildings that was previously used as office space. The building has an original cost of 12,000,000 and accumulated depreciation of 8,000,000 as of January 1, 20x1. Annual depreciation is 400,000. DECAPITATE Co. uses the fair value model for investment property. The fair value of the building on December 31, 20x1 is 6,000,000. The entry to record the transfer of the building to investment property includes a
a. credit to gain on reclassification for 2,000,000.
b. credit to revaluation surplus for 2,000,000.
c. debit to building for 12,000,000.
d. credit to revaluation surplus for 2,400,000.
Q3. PERIODIC REGULAR Co. acquired a building on January 1, 20x1 for a total cost of 24,000,000 and classified it as investment property. PERIODIC Co. uses the fair value model for its investment property. On January 1, 20x5, when the carrying amount of the building is P16,000,000, the elevator in the building was replaced for a total cost of 3,200,000. It is impracticable to determine the fair value of the replaced part. The fair value of the building on December 31, 20x5 is 17,200,000. How much is the loss recognized during the year?
a. 3,200,000
b. 2,000,000
c. no loss
d. indeterminable
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