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?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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 |
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