Question
On 1 January 2021, Nobleman plc agreed to buy a luxury property in London for 12 million from Aristocrat plc. Contracts were exchanged in June
On 1 January 2021, Nobleman plc agreed to buy a luxury property in London for 12 million from Aristocrat plc. Contracts were exchanged in June 2021 and over the six-month period from the agreement to the exchange of the contracts, Londons property prices had significantly risen. Belgravia plc sold an identical property for 15 million. Nonetheless, in order to honour the gentlemens agreement stipulated with the chief executive of Nobleman plc, the director of Aristocrat plc agreed to exchange contracts at the original price of 12 million. The legal costs to Nobleman plc of buying the property were 120,000 and the selling costs to Aristocrat plc were 180,000. Nobleman plc estimates that from the ownership of the property they can derive an annuity of 1 million per year for the following 30 years. The cost of capital is expected to remain constant at 5%.
From the data provided in the question, identify various values for the initial measurement of the property in the financial statements of Nobleman plc.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started