Question 1
A
business owns a building which it has been using as a head office. In order to
reduce cost, on 30 June 20X9 it moved its head office functions to one of its
production centres and is now letting out its head office. Company policy is to
use the fair value model for investment property.
The
building had an original cost on 1 January 20X0 of $250,000 and was being
depreciated over 50 years. At 30 June 20X9 its fair value was judged to be
$350,000.
Required:
How
will this appear in the financial statements at 31 December 20X9?
Solution
Question 2
An
entity purchased an investment property on 1 January 2004, for a cost of
$400,000. The property has a useful life of 50 years, with no residual value,
and at 31 December 2006 had a fair value of $560,000. On 1 January 2007 the
property was sold for net proceeds of $540,000.
Required:
How
will the disposal be treated using the Cost Model and the Fair Value Model.
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