Problem 3: Galore Company ventured into construction of a condominium in Makati which is rated as the largest state-of- the-art structure. The entity's board of directors decided that instead of selling the condominium, the entity would hold this property for purposes of earning rentals by letting out space to business executives in the area. The construction of the condominium was completed and the property was placed in service on January 1 2019. The cost of the construction was P50,000,000. The useful life of the condominium is 25 years and its residual value is P5,000,000. An independent valuation expert provided the following fair value at each subsequent year-end: December 31, 2019 December 31, 2020 December 31, 2021 55,000,000 53,000,000 60,000,000 Required: Prepare all indicated entries for 2019, 2020 and 2021 assuming the investment property is accounted for under the cost model and fair value model.
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- GGG Company ventured into construction of a condominium in Baguio which is rated as the largest state-of-the-art structure. The board of directors decided that instead of selling the condominium, the entity would hold this property for purposes of earning rentals by letting out space to business executives in the area. The construction of the condominium was completed and the property was placed in service on January 1, 2019. The cost of the construction was P50,000,000. The useful life of the condominium is 25 years and the residual value is P5,000,000. An independent valuation expert provided the following hair value at each subsequent year-end: December 31, 2019 = 55,000,000; December 31, 2020 = 53,000,000; December 31, 2021 = 60,000,000. Under fair value model, what amount should be recognized as gain from change in fair value in 2019?Please provide solution 1. On December 31, 20x1, DECAPITATE BEHEAD Co. decided to lease out under operating lease one of its buildings that was previously used as office space. The building has an original cost of ₱12,000,000 and accumulated depreciation of ₱8,000,000 as of January 1, 20x1. Annual depreciation is ₱400,000. DECAPITATE Co. uses the fair value model for investment property. The fair value of the building on December 31, 20x1 is ₱6,000,000. The entry to record the transfer of the building to investment property includes a: a. credit to gain on reclassification for ₱2,000,000. b. credit to revaluation surplus for ₱2,000,000. c. debit to building for ₱12,000,000. d. credit to revaluation surplus for ₱2,400,000.Use the following information for the next three questions:Altitude Company purchased a plot of land for ₱2,000,000 as a plant site. There was a small officebuilding on the plot, conservatively appraised at ₱700,000 which the company will continue to use withsome modification and renovation.The renovation had plans drawn for a factory and received bids for its construction. It rejected all bidsand decided to construct the plant itself. Below are listed additional items that management feelsshould be included in the property, plant and equipment accounts: Materials and supplies 3,000,000 Excavation 100,000 Labor on construction 2,500,000 Cost remodeling office building 200,000 Legal cost on conveying land 10,000 Imputed interest on corporation own money used during construction 120,000 Cash discounts on materials purchased, not taken 60,000 Supervision by management 70,000 Compensation insurance premium for workers 20,000 Clerical and other expenses related to…
- 176 Cheng Company has recently decided to accept a proposal from the City of Bel Aire that publicly owned property with a large warehouse located on it will be donated to Cheng if it will build a branch plant in Bel Aire. The appraised value of the property is $500,000 and of the warehouse is $1,000,000. Instructions Prepare the entry by Cheng for the receipt of the properties.7 Company x bought a house and lot for $1,500,000. The value of the land was appraised at $900,000 and the house valued at $600,000, transactional property sales taxes of 20% apply. The company then demolished the house and cleared the lot at an additional cost of $50,000 and built a commercial tower at a cost of $2,000,000. What is the cost basis of the Commercial tower?Your Question: Hua Fat Technology Ltd Case Hua Fat Technology Ltd (Hua Fat) is a global telecommunication equipment manufacturer. The company was granted a piece of land by the government to develop its 5G business. On 1st January 2018, the company started to construct a property at the site. The property was used as a testing laboratory (the laboratory) to serve the company’s customers. The construction costs relating to the laboratory were: $000 Cost of construction materials before trade discount of 10% 50,000 Salary of construction workers for six months to 30 June 2018 4,800 Overheads related to the construction 3,600 Payment to external consultants related to the construction 2,000 Expected dismantling and restoration costs (note 3) 400 Notes: Hua Fat…
- Finley Company is looking for a new office location and sees a building with a fair value of $740,000. Finley also notices that much of the equipment in the existing building would be useful to its own operations. Finley estimates the fair value of the equipment to be $114,000. Finley offers to buy both the building and the equipment for $790,000, and the offer is accepted. Determine the amounts Finley should record in the separate accounts for building and equipment. (Do not round intermediate calculations.)In which of the following situations would an entity have a decommissioning obligation? Assume all companies follow IFRS. Question 2 options: a) Kennedy Corp. is constructing a bridge over a creek and a city inspector has indicated that if the creek is damaged, the company will be responsible for the restoration. Kennedy has estimated that there is a 5% chance of damage, and if it occurs, the cost of restoration will be approximately $120,000. b) Salem Cable Co. is in negotiations to build a new distribution facility. Based on the current planned design, the facility is expected to be dismantled in 30 years for $2.5 million. Once the company finds a project manager in the next three months, it expects to sign the final contract for construction. c) Horace Ltd. is developing 80 natural gas wells in a remote area of northern British Columbia. Horace expects that if it were to restore the wells after drilling is…Finley Co. is looking for a new office location and sees a building with a fair value of $400,000. Finley also notices that much of the equipment in the existing building would be useful to its own operations. Finley estimates the fair value of the equipment to be $80,000. Finley offers to buy both the building and the equipment for $450,000, and the offer is accepted. Determine the amounts Finley should record in the separate accounts for building and equipment.
- On December 1, 20X0, AKE Pte Ltd paid $5,000 to a Real Estate consulting company for a market report of the property market. The market survey was favourable and AKE Pte Ltd decided to make an entry into the property market. On January 1, 20X1 the company purchased two buildings paying $800,000 for Building X and $1,200,000 for Building Y. The company paid $20,000 to the property agent and incurred an additional $80,000 legal fee to finalise the transaction. Both buildings have useful life of 40 years and zero residual value. The company uses straight- line method for depreciation of all its non-current assets. The company intends to use Building X as their office and rent out Building Y. The company adopts revaluation model for its PPE and fair value model for its investment property. Any accumulated depreciation at the date of the revaluation will be eliminated against the gross carrying amount of the asset. At the end of the year 20X1, values of the two buildings were as below:…[The following information applies to the questions displayed below.] Satellite Systems modified its model Z2 satellite to incorporate a new communication device. The company made the following expenditures: Basic research to develop the technology Engineering design work Development of a prototype device. Testing and modification of the prototype Legal fees for patent application Legal fees for successful defense of the new patent Total During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all costs of the patent. Management contends that the device represents an improvement of the existing communication system of the satellite and, therefore, should be capitalized. Exercise 7-7 (Algo) Part 1 $ 3,600,000 1,120,000. 560,000 360,000 76,000 36,000 $ 5,752,000 Required: 1. How much should Satellite Systems capitalize in the Patent account in the balance sheet? Patent costs capitalizedSea shores is a property investment company that focuses on buying landing and buildings for purposes for rental and resale purposes. The company currently own the following land and buildings. Use Purchase date Depreciation policy cost Model Fair value on 31 Dec 2020 Braamfontein land Rented to the local municipality 30 June 2019 10 000 000 Fair value 14 000 000 Umhlanga building Consists of 50 apartments 30 apartments are rented to tenants 01 May 2020 20% on cost 20 000 000 Cost 25 000 000 Richards bay building Will be sold on appreciation of the value 30 April 2020 ? 8 400 000 cost 8 400 000 Richards Bay land Occupied by sea shores 1 January 2020 12 000 000 Cost 10 000 000 Pretoria Building Rented to tenants 1 February 2019 20% on cost 8 000 000 Fair value 10 545 800 Required Prepare all the necessary journal entry for the year ended 31 December 2020.