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Unformatted text preview: 10 11 12 13 14 15 A company building used as employee’s quarters and for which the company receives rentals. ANSWER: C. Property, Plant and Equipment (because the company's employees are renting it, whether or not they are
paying at market rate} A hotel managed and operated by a real-estate company.
ANSWER: C. Property, Plant and Equipment (hotels are for rental, not for sale} A manufacturing companVs administrative building which is currently being developed for sale within one year. ANSWER: A. Current Asset — Separate Line Item (because it is PROPERTY HELD FOR SALE. As it already has the intention to
sell, and if it will be held for sale within one year} A manufacturing compamfs factory building which was recently abandoned. Its use is currently still undetermined. ANSWER: E. Other Non-Current Asset (because there is still no purpose. If to be used as back-up = PPE, ifto be sold within
one year = CA - Separate Line Item or Property Held for Sale. However, if its LAND it will be INVESTMENT PROPERTY} building leased out by a parent company to a subsidiary under an operating lease. If individual financial statements are
prepared, the building is classified as ANSWER: D. Investment Property (because it is rented out under an operating lease and it has an individual financial
statement. However, if it is a CDNSOLI DATED FINANCIAL STATEMENT = PPE} On April 1, 2020, ABC Manufacturing Company purchased land and building for P5,000,000 which is to be allocated 40% to land and 60% to the building. The building has an estimated useful life of 30 years and is to be leased out under an operating
lease. On December 31, 2020, the fair value of the property was P6,000,000. On July 1, 2021, the property was occupied by
the company and used as an administrative building. Applying the fair value model, give the journal entry on: transfers from IP to OOP/INVTY = FV is the new cost
April 1, 2020 to record the purchase
D. Investment Property 5,000,000 A. Cash 5,000,000 December 31, 2020 to take up the fair value. D. Investment Property 1,000,000
G. Gain from Change in Fair Value 1,000,000
Fair Value 6,000,000
Cost of the Investment Property 5,000,000
Increase in Fair
Value 1,000,000 July 1, 2021 to record transfer.
B. Land 2,400,000 < (6,000,000 x 40%}
C. Building 3,600,000 < {6,000,000 x 60%}
D. Investment Property 6,000,000 ...
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