Silver Fang Company, a real estate entity, had a building with a carrying amount of P 20,000,000
Question:
Silver Fang Company, a real estate entity, had a building with a carrying amount of P 20,000,000 on December 31, 2020. The building was used as offices of the entity's administrative staff. On December 31, 2020, the entity intended to rent out the building to independent third parties. The staff will be moved to a new building purchased early in 2020. On December 31, 2020, the original building had a fair value of P 40,123,000. On December 31, 2020, the entity also had land that was held for sale in the ordinary course of business. The land has carrying amount of P 18,500,000 and fair value of p 22,965,000 on December 31, 2020. On such date, the entity decided to hold the land capital appreciation. The accounting policy is to carry all investment property at fair value.
1. On December 31, 2020, what amount should be recognized in revaluation surplus as a result of transfer of the building to investment property?
2. On December 31, 2020, what amount should be recognized in the income statement as a result of transfer of the land to investment property?
3. Prepare the journal entry to record the transfers to investment property.
Auditing a risk based approach to conducting a quality audit
ISBN: 978-1133939153
9th edition
Authors: Karla Johnstone, Audrey Gramling, Larry Rittenberg