ABC’s primary business activity is the purchase and sale of residential property. In January 2015, the company purchased twelve bungalow units from another real estate company for the price of RM1,500,000 each. On 24 May 2015, market research revealed that the fair value of the bungalow units have dropped to RM1,280,000 each. In the long-term, ABC plans to sell six of these bungalow units for RM1,640,000 each, retain two of them as administrative offices and rent out the remaining four bungalow units at RM15,400 per month for rental income. Consequently, market research showed that the fair value of these bungalow units declined to RM1,320,000 on 31 December 2015.

Required: 

Explain the recognition and treatment of the bungalow units in ABC's financial statements in accordance with MFRS 140 Investment Property.

Answer rating: 100% (QA)

In accordance with MFRS 140 Investment Property An investment property means either a land or building or a part of both or both held by the owner or ... View the full answer