Reference no: EM132781548
Problem - Galore Company ventured into construction of a condominium in Makati which is rated as the largest state-of-the-art structure. The entity's board of directors decided that instead of selling the condominium, the entity would hold this property for purposes of earning rentals by letting out space to business executives in the area.
The construction of the condominium was completed and the property was placed in service on January 1, 2018. The cost of the construction was P50,000,000. The useful life of the condominium is 25 years and its residual value is P5,000,000. An independent valuation expert provided the following fair value at each subsequent year-end:
December 31, 2018 55,000,000
December 31, 2019 53,000,000
December 31, 2020 60,000,000
Required -
1. Under the cost model, what amount should Galore Company report as depreciation of investment property for 2011?
2. Under the fair value model, what amount should Galore Company recognize as gain from change in fair value in 2020?