Reference no: EM132935480

Question -

Q1) On January 01, 2020, Black Corp. owns a newly built hotel property in Manila. The hotel is leased out to Green Inn under the 40-year operating lease. In the lease agreement, Black Corp. will receive yearly lease payment of P25,000,000 for 40 years plus 5% of room revenue from the operations of the hotel. At the inception of the lease, the cost of the hotel is P120,000,000 the estimated useful life is 40 years. The company uses the cost model for all its property, plant and equipment, and investment properties.

If the stream of cash flows is more of the rental cash flows rather than room revenue cash flows, what is the carrying value of the investment property as of December 31, 2020?

Q2) Blue Corp. acquired a real property for speculation purposes with the intention of selling it at a higher price in the long term. The property was acquired at a cash price of P3,000,000. The property has an unpaid real property tax worth P100,000 not assumed by Blue Corp. In addition, the company also paid the following transaction costs: broker's commission of P20,000 and registration costs of P35,000. How much should Blue Corp. record the Investment Property?