Reference no: EM132934552
PROBLEM - On January 1, 2021, DIAZ INC. acquired property consisting of ten bungalows, each with separate legal title including the land on it which it is built for Php 200,000,000.
20% of which is attributable to the land. The bungalow units have a useful life of 50 years.
The following costs are also incurred and paid on such date:
Non-refundable transfer taxes not included in the purchase price 20,000,000
Legal fees directly attributable to the acquisition 1,000,000
Reimbursement to the previous owner for prepaying non-refundable property taxes for the six-month period ending June 30, 2021 100,000
Marketing and advertising expenses on flyers and commercials 500,000
Ribbon cutting expense to celebrate the opening of the new rental business 200,000
On June 30, 2021, DIAZ paid local property taxes of Php 100,000 for the year ending December 31, 2021.
On August 1, 2021, the entity incurred repairs and maintenance of Php 120,000.
DIAZ used one of the ten bungalows to accommodate administration and maintenance personnel. The other nine units are rented out to customers under an operating lease.
On December 31, 2021, the fair value of each unit was reliably estimated at Php 25,000,000. The accounting policy is to use the fair value model of the investment property.
Required - Answer the following:
A. What is initial measurement of investment property?
B. What is the initial measurement of the land to be accounted as property, plant and equipment?
C. What is the initial measurement of the building to be accounted as property, plant and equipment?
D. What is the gain from increase in fair value of investment property for the current year?
E. What is the depreciation expense of the building for the current year?
F. Prepare for the journal entries for 2021.