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On 1 July 2 0 X 1 Jack Furnishing Pte Ltd . ( JFL ) purchased two buildings: Building A for $ 1 2 million

On 1 July 20X1 Jack Furnishing Pte Ltd.(JFL) purchased two buildings: Building A for $12 million and the adjacent Building B for $20 million. The company also paid a legal fee of $120,000 and agents commission of $80,000 to complete the transfer of the title deeds for both buildings. The decision for the purchase was the result of a favourable market study which the company paid $25,000 for on 12 June 20X1. Both buildings have useful of 50 years with zero residual value. The company adopts the straight-line method for depreciation of its non-current assets. At the same time, the company was able to establish that the fair market value of the two buildings on 1 July 20X1 were as follows:
Building A: $12,100,000
Building B: $21,600,000
The company intends to use Building A for its operation and to hold Building B for capital appreciation.
On 1 October 20X2, the company moved its operation to Building B and put Building A up for sales. The company adopts the cost model for Building B from this point onward.
The fair value and value-in-use of the buildings are given as below:
\table[[Date,Fair Value ($),Value In Use ($)],[31 December 20X1,,],[Building A,11,570,000,11,781,000
Assess the information given, discuss and illustrate on the various possible accounting treatments under the International Financial Reporting Standards for the two buildings for the year 20X1 and 20X2. The company has initially not decided on which model to use for PPE but will adopt the fair value model for investment property. Workings and explanations must be clearly shown, and all necessary journal entries to be provided. The company does not practice reserve transfer for the revaluation model. When assets are adjusted for revaluations, the company adopts the elimination method. The company financial year ends on 31 December. Carrying amount of the assets must be clearly stated at the end of each reporting period.
(100 marks)
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