Question 1
A business owns a building which it has been using as a head
office. In order to reduce costs, on 30 June 20X9 it moved its head office
functions to one of its production centres and is now letting out its head
office. Company policy is to use the fair value model for investment property.
The building had an original cost on 1 January 20X0 of $250,000
and was being depreciated over 50 years. At 30 June 20X9 its fair value was
judged to be $350,000.
Required:
How will this appear in the financial statements at 31 December
20X9?
Solution
Question 2
An entity owns two investment properties, X and Y, the fair values
of which are:
31
December 2006 31 December 2007
$
million $ million
Property X 15 20
Property Y 10 8
The original cost of the properties was $9 million each when they
were acquired on 1
January 2005. The entity uses the fair value model to value all
its investment properties.
Required:
How will these transactions be accounted for in the financial
statement.
Question 3
An entity purchased an investment property on 1 January 2004, for
a cost of $400,000. The property has a useful life of 50 years, with no
residual value, and at 31 December 2006 had a fair value of $560,000. On 1
January 2007 the property was sold for net proceeds of $540,000.
Required:
How will the disposal be treated using the Cost Model and the Fair
Value Model.
Question 4
XYZ plc owns three investment property, X, Y, Z, the values of
which are:
31
December 2002 31 December 2003
$
million $ million
Property X 27 32
Property Y 18 24.5
Property Z 26 23.5
The original cost of the properties was $20million each when they
were purchased on 1st January 2001. The entity uses the fair value model
to value all its investment properties.
Required:
Show the financial statement extract for each of the three years
ended 31st December, 2003.
