On 1 June 20X0, an entity based in Country A with a functional currency of CU...

 

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On 1 June 20X0, an entity based in Country A with a functional currency of CU buys an investment property in Country B with local currency FCU for FCU500,000. The fair value of the investment property is reliably measurable in FCU without undue cost or effort on an ongoing basis. Consequently, in accordance with Section 16 Investment Property, the entity measures its investment property, after initial recognition, at fair value through profit or loss. The entity has a year-end of 31 December. The spot exchange rates and fair values of the investment property (FVIP) are as follows: 1 June 20X0: CU1 = FCU1.1 and FVIP = FCU500,000 31 December 20X0: CU1 = FCU1.05 and FVIP = FCU520,000 31 December 20X1: CU1 = FCU1.2 and FVIP = FCU540,000 On 1 April 20X2 the investment property is sold for FCU570,000 when the exchange rate is CU1 = FCU1.1. Required: i. Make Journal Entries for each of these transactions recognizing the purchase of investment property. ii. Show a journal entry Derecognizing it after it is sold. On 1 June 20X0, an entity based in Country A with a functional currency of CU buys an investment property in Country B with local currency FCU for FCU500,000. The fair value of the investment property is reliably measurable in FCU without undue cost or effort on an ongoing basis. Consequently, in accordance with Section 16 Investment Property, the entity measures its investment property, after initial recognition, at fair value through profit or loss. The entity has a year-end of 31 December. The spot exchange rates and fair values of the investment property (FVIP) are as follows: 1 June 20X0: CU1 = FCU1.1 and FVIP = FCU500,000 31 December 20X0: CU1 = FCU1.05 and FVIP = FCU520,000 31 December 20X1: CU1 = FCU1.2 and FVIP = FCU540,000 On 1 April 20X2 the investment property is sold for FCU570,000 when the exchange rate is CU1 = FCU1.1. Required: i. Make Journal Entries for each of these transactions recognizing the purchase of investment property. ii. Show a journal entry Derecognizing it after it is sold.