Pharoah Corporation owns and manages a small 10-store shopping centre, which it classifies as an investment property. Pharoah has a May 31 year end and initially recognized the property at its acquisition cost of $10.8 million on June 2, 2022. The acquisition cost consisted of the purchase price of $10 million, costs to survey and transfer the property of $458,000, and legal fees to acquire the property of $342,000. Pharoah determines that approximately 25% of the shopping centre's value is attributable to the land, with the remainder attributable to the building. The following fair values are determined: Date May 31, 2023 May 31, 2024 May 31, 2025 Fair Value $10,610,000 $10,509,000 $11,120,000 Pharoah expects the shopping centre building to have a 35-year useful life and a residual value of $1.38 million. Pharoah uses the straight-line method for depreciation.
Pharoah Corporation owns and manages a small 10-store shopping centre, which it classifies as an investment property. Pharoah has a May 31 year end and initially recognized the property at its acquisition cost of $10.8 million on June 2, 2022. The acquisition cost consisted of the purchase price of $10 million, costs to survey and transfer the property of $458,000, and legal fees to acquire the property of $342,000. Pharoah determines that approximately 25% of the shopping centre's value is attributable to the land, with the remainder attributable to the building. The following fair values are determined: Date May 31, 2023 May 31, 2024 May 31, 2025 Fair Value $10,610,000 $10,509,000 $11,120,000 Pharoah expects the shopping centre building to have a 35-year useful life and a residual value of $1.38 million. Pharoah uses the straight-line method for depreciation.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:How will the investment property be reported on each year-end statement of financial position?
Land, at cost
Buildings, at cost less accumulated depreciation
PHAROAH CORPORATION
Statement of Financial Position (Partial)
May 31, 2023
$
LA
+A
LA
May 31, 2024
ta
LA
Transcribed Image Text:Pharoah Corporation owns and manages a small 10-store shopping centre, which it classifies as an investment property. Pharoah has a
May 31 year end and initially recognized the property at its acquisition cost of $10.8 million on June 2, 2022. The acquisition cost
consisted of the purchase price of $10 million, costs to survey and transfer the property of $458,000, and legal fees to acquire the
property of $342,000. Pharoah determines that approximately 25% of the shopping centre's value is attributable to the land, with the
remainder attributable to the building. The following fair values are determined:
Date
May 31, 2023
May 31, 2024
May 31, 2025
Fair Value
$10,610,000
$10,509,000
$11,120,000
Pharoah expects the shopping centre building to have a 35-year useful life and a residual value of $1.38 million. Pharoah uses the
straight-line method for depreciation.
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