At 30 November 20X3, Joey carried a property in its statement of financial position at its revalued amount of $14 million in accordance with IAS 16, Property, Plant and Equipment. Depreciation is charged at $300,000 per year on the straight line basis. In March 20X4, the management decided to sell the property and it was advertised for sale. By 31 March 20X4, the sale was considered to be highly probable and the criteria for IFRS 5, Non-current Assets Held for Sale and Discontinued Operations were met at this date. At that date, the asset's fair value was $12.4 million and its value in use was $12.5 million. Costs to sell the asset were estimated at $300,000. On 30 November 20X4, the property was sold for $16.3 million. The trans- actions regarding the property are deemed to be material and no entries have been made in the financial statements regarding this property since 30 November 20X3 as the cash receipts from the sale were not received until December 20X4. Required: Discuss how the above item should be dealt with in the financial statements of Joey for the year ended 30 November 20X4.

At 30 November 20X3, Joey carried a property in its statement of financial position at its revalued amount of $14 million in accordance with IAS 16, Property, Plant and Equipment. Depreciation is charged at $300,000 per year on the straight line basis. In March 20X4, the management decided to sell the property and it was advertised for sale. By 31 March 20X4, the sale was considered to be highly probable and the criteria for IFRS 5, Non-current Assets Held for Sale and Discontinued Operations were met at this date. At that date, the asset's fair value was $12.4 million and its value in use was $12.5 million. Costs to sell the asset were estimated at $300,000. On 30 November 20X4, the property was sold for $16.3 million. The trans- actions regarding the property are deemed to be material and no entries have been made in the financial statements regarding this property since 30 November 20X3 as the cash receipts from the sale were not received until December 20X4. Required: Discuss how the above item should be dealt with in the financial statements of Joey for the year ended 30 November 20X4.

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter14: Property Transactions: Capital Gains And Losses, § 1231, And Recapture Provisions

Section: Chapter Questions

Problem 75P

See similar textbooks

Similar questions

Bliss Company owns an asset with an estimated life of 15 years and an estimated residual value of zero. Bliss uses the straight -line method of depreciation. At the beginning of the sixth year, the assets book value is 200,000 and Bliss changes the estimate of the assets life to 25 years, so that 20 years now remain in the assets life. Explain how this change will be accounted for in Blisss financial statements, and compute the current and future annual depreciation expense.
The following intangible assets were purchased by Hanna Unlimited: A. A patent with a remaining legal life of twelve years is bought, and Hanna expects to be able to use it for six years. It is purchased at a cost of $48,000. B. A copyright with a remaining life of thirty years is purchased, and Hanna expects to be able to use it for ten years. It is purchased for $70,000. Determine the annual amortization amount for each intangible asset.
Assume that on January 2, 20X6, Sanoma of Michigan purchased fixtures for $8,100 cash, expecting the fixtures to remain in service for five years. Sanoma has depreciated the fixtures on a double-declining-balance basis, with $1,400 estimated residual value. On October 31, 20X7, Sanoma sold the fixtures for $2,600 cash. Requirement 1. Record both the depreciation expense on the fixtures for 20X7 and the sale of the fixtures. Apart from your journal entry, also show how to compute the gain or loss on Sanoma's disposal of these fixtures. Start by recording depreciation expense on the fixtures for 20X7. (Record debits first, then credits. Explanations are not required. Leave unused cells blank.) Journal Entry Date Oct 31 Accounts Debit Credit
On 28 April 20X2, Peele Realty purchased land and building for $5.25 million and $3.39 million, respectively. The company uses the revaluation model for the land and building. Assume that the land is revalued annually. The building is revalued every two years. The fair value of the land at the end of 20X2, 20X3 and 20X4 was $5.32 million, $4.97 million and $5.40 million. The fair value of the building at the end of 20X3 was $3.75 million. The building is amortized on a straight-line basis and has a 30-year useful life. Peele takes a full year of depreciation in the year acquired. Required: Prepare the journal entries under the revaluation model for the land in 20X2, 20X3 and 20X4. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Prepare the journal entries under the revaluation model for the building in 20X3 and 20X4 (the year 20X4 has no revaluation per the above question, but does require recording of depreciation…
On December 31, 20x1, an entity classified a building with an original cost of P20,000,000, carrying amount of P8,000,000 and remaining useful of 8 years as held for sale. The entity uses the straight-line method of depreciationwith no residual value for this asset. The fair value of the building on December 31, 20x1 is P7,000,000 while costs to sell are estimated at P200,000. The building is being marketed at a sale price of P7,000,000. On December 31, 20x2, the building remains unsold. The fair value of the building on December 31, 20x2 is P6,800,000 while costs to sell are estimated at P200,000. The entity decreased the sale price to P6,000,000.On December 31, 20x3, the building still remains unsold. The fair value of the machinery on December 31, 20x3 is P8,800,000 while costs to sell are estimated at P200,000. The failure to locate a buyer and complete the sale is beyond the entity’s control. The entity further decreased the sale price to P5,800,000. On December 31. 20x4, the…
Lauren Ltd bought some land on 1 January 20X4 for GHS 500,000. On 31 December 20X5, this land was revalued to GHS 700,000. On 31 December 20X7, the fair value less costs to sell off this land was estimated at GHS 400,000 and its value in use at GHS 450,000. According to IAS 36 Impairment of Assets, what amount will be included in the income statement of Lauren Ltd for the year ended 31 December 20X7 in respect of the impairment loss on this land?
Lauren Ltd bought some land on 1 January 20X4 for GHS 500,000. On 31 December 20X5, this land was revalued to GHS 700,000. On 31 December 20X7, the fair value less costs to sell off this land was estimated at GHS 400,000 and its value in use at GHS 450,000. According to IAS 36 Impairment of Assets, what amount will be included in the income statement of Lauren Ltd for the year ended 31 December 20X7 in respect of the impairment loss on this land? A. GHS Nil B. GHS 50,000 C. GHS 200,000 D. GHS 250,000
On January 1, 20x8, Pares Company classified its property interest under an operating lease from Allan Company, the lessor, as an investment property. The asset was recognized at P 8M with an estimated remaining useful life of 15 years. The fair value of such asset is P 8.1M on December 31, 20x8. Pares adopts the cost model in valuing its investment properties subsequent to initial recognition. The investment property account of Pares, excluding the transaction described above, is composed of the following: Asset CV 1/1/x8 Remaining Useful Life FV 12/31/x8 A 4.5M NA 5M B 6.55M 16 4.89M C 10.6M 20 11.050M If Pares uses the straight-line method in computing for depreciation expense, how much is the net amount of investment property to be reported in the December 31, 20x8 statement of financial position?
On January 1, 20x8, Pares Company classified its property interest under an operating lease from Allan Company, the lessor, as investment property. The asset was recognized at P 8M with an estimated remaining useful life of 15 years. The fair value of such asset is P 8.1M on December 31, 20x8. Pares adopts the cost model in valuing its investment properties subsequent to initial recognition. The investment property account of Pares, excluding the transaction described above, is composed of the following Asset CV 1/1/x8 Remaining Useful Life FV 12/31/x8 A 4.5M NA 5M B 6.55M 16 4.89M C 10.6M 20 11.050MIf Pares uses the straight line method in computing for depreciation expense, how much is the net amount of investment property to be reported in the December 31, 20x8 statement of financial position
PEARS Company owned three investment properties. Details of the properties are as follows: Initial Cost Fair Value Dec. 31, 2019 Fair Value Dec. 31, 2020 Property 1 2,700,000 3,200,000 3,500,000 Propert 2 3,450,000 3,000,000 2,800,000 Property 3 3,300,000 3,900,000 3,400,000 Each property had an estimated useful life of 50 years. The accounting policy is to use the fair value model for investment properties. What is the carrying value of the investment properties that should be presented in the 2020 statement of financial position?
On January 1, 20x1, NURTURE REAR Co. acquired a building with an estimated useful life of 10 years and 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 P5,200,000. NURTURE estimates that if the building is sold currently on December 31, 20x1, costs to sell amount to P200,000. NURTURE uses the straight line method in depreciating its PPE. NURTURE uses the fair value model for its investment properties. The year-end adjusting entry will include
During the current year, Hitchcock Developers disposed of plant assets in the following transactions. Feb. 10 office equipment costing $24,000 was given to a scrap dealer at no charge. At the date of disposal, accumulated depreciation on the office equipment amounted to $21,800. Apr. 1 Hitchcock sold land and building to Claypool Associates for $900,000, receiving $100,000 cash and 5 years, 9 percent note receivables for the remaining balance. Hitchcock’s records showed the following amount: Land, $50,000; building, $550,000; accumulated depreciation: building (at the date of disposal), $250,000 Aug. 15 Hitchcock traded in an old truck for a new one. The old truck had cost $26,000, and its accumulated depreciation amounted to $18,000. The list price the new truck was $39,000, but Hitchcock received a $10,000 trade in allowance for the old truck and paid $28,000 in cash. Hitchcock includes trucks in its Vehicles account. Oct. 1 Hitchcock traded in its old computer system as part of the…