On March 1 2014 Jessi Corp acquired a 10 unit residential
On March 1, 2014, Jessi Corp. acquired a 10-unit residential complex for $1,275,000, paid in cash. An independent appraiser determined that 7 5% of the total purchase price should be allocated to buildings, with the remainder allocated to land. On the date of acquisition, estimated useful life of the building was 25 years, with estimated residual value of $325,000. Jessi estimates that straight-line depreciation would best reflect the pattern of benefits to be received from the building. Fair value of the complex, as assessed by an independent appraiser on each date, is as follows:
Date Fair Value
December 31, 2014 ............. $1,322,000
December 31, 2015 ............. $1,255,000
December 31, 2016 ............. $1,223,000
The complex qualifies as an investment property under IAS 40 l11vestmtmt Property. Jessi has a December 31 year end.
Instructions
(a) Prepare the journal entries required for 2014, 2015, and 2016, assun1ing that Jessi applies the fair value model to all of its investment property.
(b) Prepare the journal entries required for 2014, 2015, and 2016, assuming that Jessi applies the cost model to all of its investment property.
(c) Comment on the effects on the 2014 statement of comprehensive income with respect to parts (a) and (b).
(d) Comment on the effects on the December 31, 2014 statement of financial position with respect to parts (a) and (b).
(e) From the perspective of an investor in Jessi, discuss the financial statement effects of using the fair value model to determine the property’s carrying amount.
Membership TRY NOW
  • Access to 800,000+ Textbook Solutions
  • Ask any question from 24/7 available
    Tutors
  • Live Video Consultation with Tutors
  • 50,000+ Answers by Tutors
OR
Relevant Tutors available to help