Plaza Holdings Inc., a publicly listed company in Canada, ventured into construction of a mega shopping mall
Question:
According to the company's accounting department, the total construction cost of the shopping mall was $50 million. T he company used an independent appraiser to determine the mall's fair value annually. According to the appraisal, the fair values of the shopping mall at the end of2014 and at each subsequent year end were:
2014 ................. $50 million
2015 ................. $60 million
2016 ................. $63 million
2017 ................. $58 million
The independent appraiser felt that the useful life of the shopping mall was 20 years and its residual value was $5 million.
Instructions
Describe the impact on the company's income statement and prepare the necessary journal entries for 2015, 2016, and 2017 if it decides to treat the shopping mall as an invesonent property under IAS 40:
(a) Using the fair value model.
(b) Using the cost model.
The mall's rental income and expenses would be the same under both options, and thus can be omitted from the analysis for this exercise.
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Related Book For
Intermediate Accounting
ISBN: 978-0176509736
10th Canadian Edition, Volume 1
Authors: Donald Kieso, Jerry Weygandt, Terry Warfield, Nicola Young,
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