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Module 3 Quiz On Investment Properties

The document provides details about an investment property owned by Cheddar the Dog Corp. including: 1) Construction of an administrative building in 2021 for PHP 14 million, with an estimated useful life of 10 years and residual value of PHP 1 million. 2) Recognition of an impairment loss of PHP 480,000 in 2023. 3) Reclassification of the building to an investment property in 2025 when it will be rented out, with a fair value of PHP 10.05 million determined on the same date. 4) Subsequent fair values of the investment property in 2025 and 2026. 5) Reclassification back to PPE in 2027 when decided for use as the

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3K views

Module 3 Quiz On Investment Properties

The document provides details about an investment property owned by Cheddar the Dog Corp. including: 1) Construction of an administrative building in 2021 for PHP 14 million, with an estimated useful life of 10 years and residual value of PHP 1 million. 2) Recognition of an impairment loss of PHP 480,000 in 2023. 3) Reclassification of the building to an investment property in 2025 when it will be rented out, with a fair value of PHP 10.05 million determined on the same date. 4) Subsequent fair values of the investment property in 2025 and 2026. 5) Reclassification back to PPE in 2027 when decided for use as the

Uploaded by

Loven Boado
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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xAC10&11 INTERMEDIATE ACCOUNTING PART 2

Investment Properties
Quiz 2:

For numbers 1-6, please refer to the following problem:

On May 3, 2021, CHEDDAR THE DOG CORP. completed the construction of a building for
administrative use at a total cost of Php 14,000,000. The building is estimated to have
an estimated residual value of Php 1,000,000 and useful life to 10 years. The company
uses cost model in the valuation of the building and uses straight-line method.

On December 31, 2023, the company performed impairment test and an impairment
loss of Php 480,000 was recognized.

On October 31, 2025, the building was reclassified to investment property as the
property will be rented out under an operating lease. No change in useful life and
residual value is expected after the change. CHEDDAR THE DOG’s policy on the
investment property is to measure it using fair value model. On the same date, the fair
value of the asset was determined to be Php 10,050,000.

The fair value of the building on December 31, 2025 and 2026 was Php 11,000,000 and
Php 11,450,000, respectively.

During the first quarter of 2027, the company decided to use the building as their head
office and factory site. Therefore, on May 1, 2027, the investment property was
reclassified back to P.P.E when the fair value was Php 9,500,000.

1. What is the net amount to be presented in the Statement of Comprehensive


Income for the period ended 2021?
a. 1,400,000
b. 933,333
c. 1,300,000
d. 866,667

2. What is the net amount to be presented in the Statement of Comprehensive


Income for the period ended 2023?
a. 1,780,000
b. 480,000
c. 1,300,000
d. NIL
3. What is the net amount to be presented in the Statement of Comprehensive
Income for the period ended 2024?
a. 1,370,909
b. 1,234,545
c. 1,300,000
d. NIL

4. What is the net amount to be presented in the Statement of Comprehensive


Income for the period ended 2025?
a. 4,238,788
b. 2,181,212
c. 3,210,000
d. 1,231,212

5. What is the net amount to be presented in the Statement of Comprehensive


Income for the period ended 2026?
a. 2,095,455
b. 450,000
c. 1,645,455
d. NIL

6. What is the net amount to be presented in the Statement of Comprehensive


Income for the period ended 2027?
a. 4,272,222
b. 1,950,000
c. 2,322,222
d. NIL
SOLUTION to #1-6:

2021

2024

2024
2025
2025

2026
2025

2027
2027
2027
7. Identify the correct statements from the following:
I. Investment property may be valued subsequent to initial recognition using
the cost model or the revaluation model.
II. Depreciable properties measured under the revaluation model are subject to
depreciation.
III. Depreciable investment properties measured under the fair value model are
not subject to depreciation.
IV. The fair value of a property classified as investment property measured under
the fair value model is required to be determined more frequently than the
fair value of a property measured under the revaluation model.

a. I, II, III, IV
b. II, III, IV
c. III, IV
d. III

8. Select the correct statement:


a. A leasing company should treat all of its assets used in providing lease
services as investment property.
b. Investment properties that are to be disposed of without further
development are treated as investment property until they are
derecognized.
c. All investment properties held for capital appreciation will be classified as
held for sale in the long run.
d. Investment properties being re-developed as investment properties on
behalf of third parties are investment properties.

9. Which of the following circumstances demonstrate a change from owner-


occupied property to investment property?
a. Commencement of development with a view to sale
b. End of re-development of the investment property for use as investment
property
c. Commencement of owner occupation
d. End of use of property for administrative purposes to be leased in one or
more operating leases.
10. Which of the following statements are true?
I. Investment properties under full PFRS is measured either at cost or fair value
model. The entity has a choice.
II. Investment properties under PFRS for SMEs is measured at fair if the fair value
can be measured reliably without undue cost or effort on an ongoing basis.
The fair value model is by circumstance not by choice. The cost model or
revaluation is used when the fair value cannot be measured reliably without
undue cost or effort.

a. Both statements are true.


b. Both statements are false.
c. Only the first statement is correct.
d. Only the second statement is correct.

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