Case Study 4 The following are independent situations: Chyna, Inc. completed the construction of a building at the end of 2018 for a total cost of P100 million. The building is estimated to be economically useful for 25 years. The building was constructed for the purpose of earning rentals under operating leases. The tenants began occupying the building after its completion. The company opted to use the fair value model to measure the building. An independent valuation expert was used by the company to estimate the fair value of the building on an annual basis. According to the expert the fair values of the building at the end of 2018, 2019 and 2020 were P105 million, P120 million and P118 million, respectively. The company's business expanded in 2019. As a result, the company started to use the building in its operations on January 1, 2020. Because of the change in use, the company reclassified the building from investment property to property, plant and equipment. 2. Deena, Inc. owns a building purchased on January 1, 2016 for P100 million. The building was used as the com- pany's head office. The building has an estimated useful life of 25 years. In 2020, the company transferred its head office and decided to lease out the old building. Tenants began occupying the old building by the end of 2020. On December 31, 2020, the company reclassified the building as investment property to be carried at fair value. The Case stugon the date of reclassification was P85 million. cided tifawhistead opstap of selling the siffpping mall to consYeah ,ABarWiny enteneriffe 15, Which he progressively increased during the year of construction, the com- manyowould bedo this poronethefor the augnose of caruranpairs can tung onionanime sPAen as pall tastemarie chains that then a29649is Pf isters,680,do vary remaining soar ing ofgo for mega shopping mall, and within months of the completion of the construction the shopping mall was fully rented out. On January 1, 2021, Finnick Company decided to convert this building into an investment property that is to be The cornerbetifairorvalue shopping maipoortion hereajulius isipropificantbylased result ofthe changedTo f 2019:84- cording toitheadketpoly's onthaduridinepartmelaabbin abag at 01 0 502040of the construction of the shopping mall was P100 million. An independent valuation expert was used by the company to fair value the shopping mall on an annual Basis According to the fair valuation expert the fair values of the shopping mall at the end of 2019 and at each subse- quent year-end thereafter were: 2019 P100 million 2020 120 million 2021 125 million 2022 115 million The independent valuation expert was of the opinion that the useful life of the shopping mall was ten years and its residual value was P10 million. Required What would be the impact on the profit and loss account of the company if it decides to treat the shopping mall as an investment property under PAS 40? Case Stird thefair value model Using the cost model ABC Company owns three properties, which are classified as investment properties. Details of the properties are as fol- lows: Initial cost Fair value, 12/31/19 Fair value, 12/31/20 Property 1 P2,700,000 P3,200,000 P3,500,000 Property 2 3,450,000 3,000,000 2,800,000 Property 3 3,300,000 3,900,000 3,400,000 Each property was acquired in 2014 with a useful life of 50 years. The entity's accounting policy is to use the fair value model for investment properties. Required a. Determine gain or loss for 2020. b. Determine the balance of investment property on 2020. C. Assuming the company is using the cost model for investment properties, how much should be the balance of mber 31. 2020