DEF Company owns land and building being used for its operations and administrative functions. The land and building are carried in its books using the cost model and have the following data at January 1,2023. Land: Cost - P10,000,000 Fair value - 14,000,000 Building: Cost -P20,000,000 Accumulated depreciation -13,500,000 Fair value - 9,000,000 On this date, the company vacated the old building and occupied a newly constructed one located in the commercial area of the Central Business District. The old building is then reclassified as investment property using the fair value model. The company uses the fair value model in all of its other investment property. What is the amount of fair value gain reported in profit/loss resulting from the reclassification from owner occupied to investments property due to change in use of the property?
DEF Company owns land and building being used for its operations and administrative functions. The land and building are carried in its books using the cost model and have the following data at January 1,2023. Land: Cost - P10,000,000 Fair value - 14,000,000 Building: Cost -P20,000,000 Accumulated depreciation -13,500,000 Fair value - 9,000,000 On this date, the company vacated the old building and occupied a newly constructed one located in the commercial area of the Central Business District. The old building is then reclassified as investment property using the fair value model. The company uses the fair value model in all of its other investment property. What is the amount of fair value gain reported in profit/loss resulting from the reclassification from owner occupied to investments property due to change in use of the property?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Investment Property
DEF Company owns land and building being used for its operations and administrative functions. The land and building are carried in its books using the cost model and have the following data at January 1,2023.
Land:
Cost - P10,000,000
Fair value - 14,000,000
Building:
Cost -P20,000,000
Accumulateddepreciation -13,500,000
Fair value - 9,000,000
On this date, the company vacated the old building and occupied a newly constructed one located in the commercial area of the Central Business District. The old building is then reclassified as investment property using the fair value model. The company uses the fair value model in all of its other investment property.
What is the amount of fair value gain reported inprofit/loss resulting from the reclassification from owner occupied to investments property due to change in use of the property?
DEF Company owns land and building being used for its operations and administrative functions. The land and building are carried in its books using the cost model and have the following data at January 1,2023.
Land:
Cost - P10,000,000
Fair value - 14,000,000
Building:
Cost -P20,000,000
Accumulated
Fair value - 9,000,000
On this date, the company vacated the old building and occupied a newly constructed one located in the commercial area of the Central Business District. The old building is then reclassified as investment property using the fair value model. The company uses the fair value model in all of its other investment property.
What is the amount of fair value gain reported in
a. P0
b. P2,500,000
c. P4,000,000
d. P6,500,000
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