AZARCON, JUNEIL ANDREW

EXERCISE 5

January 1
Fair value model
Investment property P18,605,000
Cash 18,605,000
To record the investment property & repairs
Investment property P425,500
Cash 425,500
To record investment property & repairs

For 2020:
Loss on change in fair value P1,125,000
Investment property 1,125,000
To record fair value change

Building fair value at December 31, 2020 P8,855,000

Building cost January 1m 2020 (9,980,000)
Loss on change in fair value P1,125,000

For 2021:
Loss on change in fair value P1,111,000
Investment property 1,111,000
To record fair value change

Investment property P349,000

Cash 349,000
To record the acquisition of land

Purchase price P305,000

Clearing cost 44,000
Investment property P349,000
Investment property P70,000
Gain on change in fair value 70,000
To record fair value change

Land fair value at December 31, 2020 P8,555,000

Land cost January 1, 2020 8,625,000
Gain on change in fair value 2020 P70,000

For 2021:

Investment property P1,345,000

Gain on change in fair value 1,345,000
To record fair value change

Land fair value at December 31, 2021 P9,900,000

Land fair value at December 31, 2020 (8,555,000)
Gain on change in fair value 2021 P1,345,000

Cost model
2020:
Investment property P9,980,000
Repairs expense 425,000
Cash 10,405,000
To record investment property and repairs
Depreciation expense P499,000
Accumulated depreciation / 20 years
Annual depreciation P499,000

Depreciation expense P499,000

Accumulated depreciation 499,000
To record depreciation

Land
Investment property P8,930,000
Clearing cost 44,000
Cash 8,974,000
To record investment property & clearing cost

Purchase price P8,625,000

Purchase fee 305,000
Investment property P8,930,000
Requirement 1
Building fair value at December 31, 2022 P8,112,000
Building fair value at December 31, 2023 (7,620,000)
Gain on change in fair value P492,000

Requirement 2
Depreciable amount P8,888,000
Useful life / 25 years
Annual depreciation P355,520
Requirement 1
Fair value building P40,123,000
Carrying amount, Building (25,567,000)
Revaluation surplus P14,556,000

Requirement 2
Fair value of land P22,965,00
Carrying amount of building (18,500,000)
Gain on reclassification P4,465,000

Requirement 3
Building P14,556,000
Revaluation surplus 14,556,000
To record reclassification of building
Land
Investment property P22,965,000
Land 18,500,000
Gain on change in fair value 4,465,000
To record inventory reclassification
Requirement 1

Cost of property P15,650,000

Net realizable value (8,540,000)
Decrease in value P7,110,000

Requirement 2
Fair value of property P9,727,000
Net realizable value December 31, 2020 (8,540,000)
Gain on change in fair value P1,187,000
Annual depreciation = P185,000,000 = 4,625,000 x 6 years = P27,750,000
40 years
Cost P595,000
Accumulated depreciation (142,000)
Carrying amount P452,200

Sale price P311,000

Carrying amount (452,200)
Loss on disposal P141,700
Requirement 1
Inventory P40,485,000
Investment property 40,485,000
To record property reclassification

Requirement 2
Building P40,485,000
Investment property 40,485,000
To record property reclassification

Depreciation expense P1,520,000

Accumulated depreciation 1,520,000
To record reclassification

Annual depreciation = P40,485,000 – 2,485,000 / 25 = P1,520,000

Requirement 1
Annual depreciation = P30,789,000/30 years = P1,026,300

P1,026,300 x 5 years = P5,131,500

Carrying amount = P30,789,000 – 5,131,500 = P25,657,500

Investment property P25,657,500

Building 25,657,500
To record reclassification of building

Requirement 2
Investment property P33,567,000
Building 25,657,500
Gain on change in fair value 7,909,500
To record inventory reclassification