Activity 8_Chapter 21

1. Which statement best describes investment property?

a. Property held for sale in the ordinary course of business
b. Property held for use in the production and supply of goods and property held for
administrative purposes
c. Property held to earn rentals or for capital appreciation
d. Property held for capital appreciation

Answer: C

2. An owner-occupied property is held by an owner

a. For use in the production of goods and services.
b. For administrative purposes
c. For sale in the ordinary course of business
d. For use in production of goods and services and for administrative purposes.
Answer: D

3. Investment property includes all of the following, except,

a. Land held for capital appreciation
b. Land held for currently undetermined use
c. Building owned by the reporting entity leased out under an operating lease
d. Property held for sale in the ordinary course of business
Answer: D

4. Which of the following is an investment property?

a. Property being constructed or developed on behalf of third party
b. Property that is being constructed and developed as investment property
c. Property held for future development and subsequent use as owner-occupied property
d. Owner-occupied property awaiting disposal
Answer: B

5. An investment property shall be measured initially at

a. Cost
b. Cost less important
c. Depreciable amount less impairment
d. Fair value less impairment
Answer: A
6. If an entity owns and manages a hotel, services provided to guests are significant component
of the arrangement as a whole. In such a case, the hotel is classified as
a. Investment property
b. Owner-occupied property
c. Partly investment property and partly owner-occupied property
d. Neither investment property nor owner-occupied property
Answer: B

7. Directly attributable expenditures related to investment property include

a. Professional fees for legal services, property transfer taxes and other transaction cost.
b. Start-up costs
c. Initial operating loss incurred before the investment property achieves the planned level of
occupancy.
d. Abnormal amount of wasted material, labor and other resources incurred in constructing or
developing the property.
Answer: A

8. Which statement is incorrect in determining the fair value of an investment property?

a. An entity shall determine the fair value of investment property by deducting transaction cost
that may be incurred upon disposal
b. The fair value of investment property shall reflect market conditions at the end of the reporting
period.
c. If an office is leased on a furnished basis, the fair value of the office generally includes the fair
value of the furniture because the rental income relates to the furnished office.
d. The fair value of investment property excludes prepaid or accrued operating lease income.
Answer: A

9. Subsequent to initial recognition, the investment property shall be measured using.

a. Fair value model or revaluation model
b. Fair value through profit or loss model
c. Cost model or fair value model
d. Cost model or revaluation model
Answer: C

10. If the entity uses the fair value model for the investment property, changes in fair value are
a. Recognized in profit or loss
b. Recognized in retained earnings
c. Recognized in other comprehensive income
d. Not recognized
Answer: B