Perception uses fair value accounting. Perception owns two properties. 

Lot 1406 is an administrative building. On 1 May 2022 it had a carrying amount of $2 million and a remaining life of 20 years.  On 1 November 2022, a decision was made to rent the property to a third party and reclassified as an investment property. The property had a fair value of $2.3 million at 1 November 2022, and $2.34 million at 30 April 2023.

Lot 945: Another office building was rented out on a 12‐month lease to a related party of Perception. At 1 May 2022, it had a fair value of $1.5 million which had risen to $1.65 million at 30 April 20X3 

What is the gain/loss to be recorded when Lot 1406 is reclassified as an investment property?

1. Record a gain of $350,000 to other comprehensive income
2. Record a gain of $350,000 to the statement of profit or loss
3. Record a gain of $400,000 to other comprehensive income
4. Record a gain of $400,000 to the statement of profit or loss

Answer rating: 100% (QA)

The detailed answer for the above question is provided below When Lot 1406 is r... View the full answer