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Appendix D OO UNIT 3 EXERCISE WORKSHEET Unit 3 - Exercises INSTRUCTIONS: Write the answers for each requirements on a yellow paper, use as many sheets as needed. Show all supporting computations. Organize your answers and group them by exercise number. Submission of your papers may be physical copy or in electronic submission PDF format. If you opt for the PDF file submission you have to contact your instructor first via communications channel in the welcome page of this module. This is for you to agree on the file name format and what email address to submit your outputs to. Exercise 1 - Investment property Journal entries On January 1, 2020, Saitama Investment Corp acquired the following investments for cash: Land P7,500,000 Building P9,000,000 Saitama spent P400,000 for repainting of the building and minor repair before the building can commence its primary purpose of renting out to tenants. The building has an expected useful life of 10 years. An expert provided the following fair values of the building: December 31, 2020 P8,000,000 December 31, 2021 P7,500,000 Saitama paid broker's fees of P200,000 for the acquisition of the parcel of land. Clearing costs of P20,000 were incurred in creating an access route for the land and uprooting unwanted shrubs and trees. The land is to be held for capital appreciation. The land had the following appraised values: December 31, 2020 P8,500,000 of bot.job December 31, 2021 P9,500,000 Prepare the journal entries for 2020 & 2021 if Saitama accounts for the properties under: 1. Fair value model 2. Cost model Exercise 2 - Investment property using cost & fair value model. on January 1, 2016, Genos Company owned an investment property which had an original cost of P5, 800,000 and useful life of 40 years. On December 31, 2018, the fair value was P6,000,000 and on December 31, 2019, the fair value was P 5,900,000 Required: 1. Under the fair value model, what is the gain or loss to be presented in the income statement for the year ended December 31, 2019? under the cost model, what is the expense to be presented in the income statement for the year ended December 31, 2019? Exercise 3 - Investment property transfers, December company, a real estate entity, had a building with a carrying amount of P20, 000,000 on per 31, 2019. The building was used as offices of the entity's administrative staff. On December 31, 2019, the entity intended to rent out the building to independent third parties. Thestaff will be moved to a new building purchased early in 2019. On December 31, 2019, the original building had a fair value of P35, 000,000. On December 31, 2019, the entity also had land that was held for sale in the ordinary course of business. The land has a carrying amount of P10, 000,000 and fair value of P 15,000,000 on December 31, 2019. On such date, the entity decided to hold the land for capital appreciation. The accounting policy is to carry all investment property at fair value. Required: 1. On December 31, 2019, what amount should be recognized in revaluation surplus as a result of transfer of the building to investment property? 2. On December 31, 2019, what amount should be recognized in the income statement as a result of transfer of the land to investment property? 3. Prepare the journal entry to record the transfer to investment property. Exercise 4 - Investment property transfers. Cabarroguis, Inc., a real estate company, has a property included in its inventory with a cost of P10,000,000 and net realizable value of P8,000,000 on December 31, 2019. Because of the decline in the real estate industry, the company decided to lease out the property to a tenant under an operating lease in 2020 when the fair value of the property was P7,000,000. Required: 1. If the company will use the cost model to measure the investment property, how much should be recognized in the 2020 income statement as a result of the transfer from inventory to investment property? 2. If the company will use the fair value model to measure the investment property, how much should be recognized in the 2020 income statement as a result of the transfer from inventory to investment property? Exercise 5 - Investment property transfers Dachan, Inc. owns a building purchased on January 1, 2016 for P100 million. The building was used as the company'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 fair value on the date of reclassification was P70 million. Required: What amount of gain or loss will be presented in the 2020 profit or loss as a result of the transfer from owner-occupied to investment property? Exercise 6 - Investment property disposal. The Minguk Company purchased an investment property on 1 January 2017 for a cost of P220,000. The property had a useful life of 40 years and at 31 December 2019 had a fair value of P300,000. On 1 January 2020 the property was sold for net proceeds of P290,000. Minguk uses the cost model to account for investment properties. Required: What is the gain or loss to be recognized in profit or loss for the year ended 31 December 2020 regarding the disposal of the property?| Exercise 7 -' Investment property transfers : 0n january 1, 2020, He'dchala Corp. owns a mall held for rentals to small businesses. Th: mifiggs rs being carried at its current fair value of P35,000,000. The mall has a remaining \"59f\"! 1' e o yea with no residual value. Required: Prepare the journal entries in 2020 under the following assumptions. 1. During the year the board of directors decided to cease operating the mall and hold it for immediate sale. - 2. During the year the board of directors decided to cease operating the mall and commenced owner-occupation. Exercise 8 - investment e transfers On January 1_ 2020, Dubious Corp. owns a building developed with a view to sale. The commercial complex has a cost of P2 5,000,000. The building has been on real property sales listing on different markets for three years now that Dubious 15 starting to doubt the saleability of the property in order to minimize the losses that DUbiOUS Will incur an operating lease was signed to another for ve years. Dubious will be earning rent from the property from the time of ' P arty 1, 2020. The commercial building has a fair value of P occupation on January . 23,500,000 and a remaining life of 15 years at that time. - \"gs; journal entries to record the transfer of the building to i PM; Cost Model . meme\" Property under: 2: Fair Value model
