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What is the carrying value of investment property as of dec

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On August 31, 2018, ABC purchased a building at P13,000,000 to earn rent income from operating leases. The entity incurred legal fees and transfer taxes of P500,000. The building has a residual value of P1,500,000 and an estimated useful life of 30 years. During the first year of acquisition, incurred operating costs of P2,000,000 but only earned rent income of P500,000. It was valued at P16,000,000 and P14,000,000 as of the end of 2018 and 2019.

Problem 1. What is the carrying value of the investment property as of Dec. 31, 2018 using the cost model?

Problem 2. What is the gain/(loss) on change in fair value for the year 2019 if the entity uses the fair value model?

Problem 3. When initially recognizing the cash surrender value, what is the reason behind the allocation between deducting from insurance expense and crediting to retained earnings? What application of matching principle concept is used?

Reference no: EM132836690

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