INVESTMENT PROPERTY

ILLUSTRATIVE EXAMPLES

1. Tanjiro Co. a real estate company, provides the following information on December 31, 2022:
 Land held for long-term capital appreciation P100,000
 Land held for sale in the ordinary course of business 200,000
 Land held for undetermined use 350,000
 Land held for future factory site 560,000
 Building held for administrative use 340,000
 Building leased out under an operating lease 250,000
 Building leased out under finance lease 130,000
 A building that is held for dual use; 30% is owner- occupied
and the 70% is to earn rentals 460,000
 Building owned by Thomas Co. for which the entity provides
security and maintenance services to the occupants 320,000
 Building owned by Tanjiro Co. for which significant
ancillary services are provided to occupants 240,000
 Vacant building held to be leased out under an operating lease 120,000
 Building in another location leased out under finance lease 360,000
 Property being constructed for future use as investment property 390,000
 Property being constructed for sale in the ordinary course of business 410,000
 Property held for future use as owner-occupied property 540,000
REQUIREMENTS:
 Compute for Investment Property
 Compute for Owner-occupied property

2. Nezuko Company had an existing building with 3 floors. For the current year, the 2nd and 3rd floor are
occupied by tenants and Nezuko are earnings from rentals from them. The first floor was occupied by the
sales personnel of Nezuko, and it is being used for the operation of Nezuko’s business. The building has a cost
of P1,500,000.
 What amount shall be allocated as investment property?
 What amount shall be allocated as Owner-occupied property?

3. Muichiro Corp. acquired an investment property on January 2, 2022 at a total cost of P8 million. The property
has a useful life of 25 years. Its fair value on December 31, 2022 is 9.6 million.
Case 1: The entity used the cost model
Case 2: The entity used the fair value model
Requirements:
 What is the depreciation expense for the year?
 What is the gain/loss on fair value changes to be recognized?
 What is the Carrying amount of the investment property at year end?
INVESTMENT PROPERTY

4. SHAWANA Corp., a real estate company, had a building with a carrying amount P1,000,000 on December 31,
2022. This building was used as offices of the entity’s administrative staff. On this date, the entity intended to
rent out the building to external parties. The staff will be moved to a building purchased early in 2022. The
original building has a fair value of P2,500,000.
Also, on December 31, 2022, the entity had land was held for sale in the ordinary course business. The land
has a carrying amount of P2,000,000 and a fair value of P5,000,000 December 31, 2022. The entity decided
to hold the land for capital appreciation.
Case 1: The entity’s accounting policy is to carry all investment property using cost model.
Case 2: The entity’s accounting policy is to carry all investment property using fair value model.
Requirements:
 What amount should be recognized as gain on transfer of classification of building to be reported in
profit or loss on December 31, 2022?
 What amount should be recognized as gain on transfer of classification of building to be reported in
other comprehensive income on December 31, 2022?
 What amount should be recognized as gain on transfer of classification of land to be reported in
profit or loss on December 31, 2022?
 Assuming the fair value on the original building is P800,000, what amount should be recognized as
loss in the income statement for 2022?