On January 1, 20x1, Impact Co. acquired a building as an investment property with an estimated useful life of 10 years and a residual value of P400,000 for a total cost of P4,000,000. The fair value of the building on January 1, 20x1 is P4,800,000 while the fair value on December 31, 20x1 is P5,400,000. Impact estimates that if the building is sold currently on December 31, 20x1, costs to sell amount to P200,000. Impact uses the straight-line method in depreciating its PPE. Impact uses the fair value model for its investment properties.

During the year 20x2, the company wasn't able to determine the fair value of the building reliably. Hence, cost model was used to adjust the carrying value of the property at year-end.

How much is the gain from the change in fair value of the investment property for the year 20x1? How much is the depreciation for the year 20x2?

Answer rating: 100% (QA)

Solution Annual Depreciation on building Cost of Asset Residual value Useful life P4000... View the full answer