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Question 4 (30 marks) Describe the appropriate accounting treatment for each of the following properties of Company X with reference to the prevailing accounting standards
Question 4 (30 marks) Describe the appropriate accounting treatment for each of the following properties of Company X with reference to the prevailing accounting standards in Hong Kong. a Property A was purchased five years ago for $300,000. The property is let out to private individuals for six-monthly periods. The current market value of the property is $350,000. Property B was acquired 10 years ago for $150,000. This is used by Company X as its headquarters. The residual value was estimated to be zero i iii Property C is a recently started development which is 2/3 completed. Company X intends to let this out to ABC Ltd in which Company X has a controlling interest. iv Property D is an office complex let out a number of commercial tenants. Company X provides these tenants with security and maintenance services in the building. Company X depreciates its properties at 2% per annum on cost. The company adopts the cost model of accounting for its properties (20 marks) b Discuss whether the revaluation of land and buildings other than investment properties is compatible with the fundamental accounting concepts of accrual accounting and going concern. (10 marks) Question 4 (30 marks) Describe the appropriate accounting treatment for each of the following properties of Company X with reference to the prevailing accounting standards in Hong Kong. a Property A was purchased five years ago for $300,000. The property is let out to private individuals for six-monthly periods. The current market value of the property is $350,000. Property B was acquired 10 years ago for $150,000. This is used by Company X as its headquarters. The residual value was estimated to be zero i iii Property C is a recently started development which is 2/3 completed. Company X intends to let this out to ABC Ltd in which Company X has a controlling interest. iv Property D is an office complex let out a number of commercial tenants. Company X provides these tenants with security and maintenance services in the building. Company X depreciates its properties at 2% per annum on cost. The company adopts the cost model of accounting for its properties (20 marks) b Discuss whether the revaluation of land and buildings other than investment properties is compatible with the fundamental accounting concepts of accrual accounting and going concern. (10 marks)
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