Pulse Limited (“Pulse”) owns the following property at 1 April 2020: Property A This is an office building purchased by Pulse on 1 April 2015 for administrative purposes with a depreciated historical cost of $2 million and useful life of 25 years. After a reorganization on 1 October 2020, the property was let to a third party. An independent valuer assessed the property to have a fair value of $2.3 million at 1 October 2020, which had risen to $2.34 million at 31 March 2021.The company adopts the cost model for self-used property and the fair value model for investment property. Depreciation, if applicable, is calculated straight-line on a monthly basis.

Required:

(a) Define investment property under financial reporting. Specify the relevant accounting standard.

(b) Explain how the treatment of an investment property carried under the fair value model differs from an owner-occupied property carried under the revaluation model.

(c) Explain the implication of the reorganization on the classification and the effective date for Property A.

(d) Prepare all necessary journal entries for Property A for the year ended 31 March 2021.

Answer rating: 100% (QA)

a An investment property is a property land or building of an owner or a lessee under a finance leas... View the full answer