Nevine Corporation owns and manages a small 10-store shopping centre and classifies the shopping centre as an

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Nevine Corporation owns and manages a small 10-store shopping centre and classifies the shopping centre as an investment property. Nevine has a May 31 year end and initially recognized the property at its acquisition cost of $10.8 million on June 2, 2016. The acquisition cost consisted of the purchase price of $10 million, costs to survey and transfer the property of $500,000, and legal fees for the acquisition of the property of $300,000. Nevine determines that approximately 25% of the shopping centre's value is attributable to the land, with the remainder attributable to the building. The following fair values are determined:

Nevine Corporation owns and manages a small 10-store shopping centre

Nevine expects the shopping centre building to have a 35-year useful life and a residual value of $1.1 million. Nevine uses the straight-line method for depreciation.
Instructions
(a) Assume that Nevine decides to apply the cost model. What journal entries, if any, are required each year, and how will the investment property be reported on each year-end statement of financial position?
(b) Assume that Nevine decides to apply the fair value model. Prepare the journal entries, if any, required at each year end. In addition, explain how the property would be reported if Nevine prepared a statement of financial position shortly after acquisition in 2016.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Related Book For  book-img-for-question

Intermediate Accounting

ISBN: 978-1119048534

11th Canadian edition Volume 1

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy

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