Property Development BV (PD) is the owner of investment property that is leased (operating lease) to

other people or organizations to earn rentals. The investment property is accounted for using the cost

model (valuation at historical costs less accumulated depreciation and less any impairment losses).

PD depreciates its investment property over 20 years on a straight line basis, with an estimated

residual value of 15 percent of the original costs. In 2013 PD did not buy or sell investment property.

Until now there were never impairment losses on PD's property. The marginal tax expense is 25%.

Some information derived from PD's balance sheets and notes:

	December 31,2013	January 1 2013
Investment property at cost	200,000,000	200,000,000
Accumulated depreciation on investment	?	68,000,000
Investment property	Debit ?	Debit 132,000,000
Owner equity	Credit 72,000,000	Credit 70,000,000
Deferred tax liability		5,500,000

a. Calculate the depreciation expense for 2013.

b. Calculate the book value of the investment assets on December 31, 2013.

c. What is the average age of the investment property on January 1, 2013.

A financial analyst compares a number of companies in the investment property market. The analyst

wants to adjust the annual report information to a uniform annual straight line depreciation rate of 4%,

assuming that there will be no residual value.

d. Which adjustments are necessary for the balance sheet of PD on January 1, 2013?

e. Which adjustments are necessary for the balance sheet and 2013 income statement of PD on

December 31, 2013?

Now assume that on July 1 new investment property was bought for 16,000,000.

f. Answer question e. again, now including the information on the purchase of new investment

property.

Notes to the balance sheet and the statement of earnings and other information: