Question: On 1 January 20X2 Rental Incorporated purchased an apartment building

On 1 January 20X2, Rental Incorporated purchased an apartment building. Apartments in this area are high in demand, and a wait list exists for potential tenants. The following costs were incurred for the purchase: cash $ 8,000,000; legal fees $ 1,200,000; upgrades to landscaping $ 80,000, and fresh painting of the lobby $ 55,000. The ire code also required the installation of a new sprinkler system for $ 120,000. On 31 December 20X3, the fair value of the apartment building was estimated to be $ 10 million and in 20X4 $ 11.5 million. In 20X5, a decision was made to add a new wing on excess land that allowed additional apartment units. The cost of this expansion was $ 5,000,000. On December 31, 20X5 the fair value of the apartment building was estimated to be $ 18 million. The building has a security system, and an apartment manager provides routine maintenance.

Required:
1. What are the options available for recording the land and apartment buildings?
2. Assuming the fair value model is selected, provide the journal entries for 20X2, 20X3, 20X4, and 20X5.


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  • CreatedFebruary 17, 2015
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