Problem 3:Galore Company ventured into construction of a condominium in Makati which is rated as the largest state-of-the-art structure.The entity's board of directors decided that instead of selling the condominium, the entity would hold thisof earning rentals by letting out space to business executives in the area.property forpurposesThe construction of the condominium was completed and the property was placed in service on January 12019.The cost of the construction was P50,000,000. The useful life of the condominium is 25 years and its residualvalue is P5,000,000.An independent valuation expert provided the following fair value at each subsequent year-end:55,000,00053,000,00060,000,000December 31, 2019December 31, 2020December 31, 2021Required:Prepare all indicated entries for 2019, 2020 and 2021 assuming the investment property is accounted for underthe cost model and fair value model.

Fair value model: In the fair value model, the property is valued at its fair value and remeasured…

Answered: Problem 3: Galore Company ventured into…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On April 13, 2023, Swifty Ltd. purchased a small apartment building with eight suites. The building qualified as an investment property under IAS 40. At the time of purchase, six out of the eight suites were rented. Swifty paid the following items at the time of its acquisition of the apartment building (all items were paid in cash except for the building itself, for which Swifty took out a mortgage): Purchase price of building $4,050,000 Legal fees 7,720 Property transfer fees 24,500 Painting of empty apartments 5,390 Advertising for empty apartments 2,000 On April 14 the previous owner of the apartment building paid Swifty $13,000 for damage deposits from the existing tenants. On December 31, 2023, the apartment building had a fair value of $4,250,000. On December 31, 2024, it was determined that the apartment building had a fair value of $4,040,000. Assuming Swifty follows IFRS, prepare the journal entries required to record the above events. (Credit account titles are automatically…
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On 13 February 20X5, Reekwa Company purchased an office tower for $31.1 million. The office is a mixed-use property: it is owner- occupied and includes rental units. The fair value of the building on 31 December 20X6 is $31.5 million and $28.0 million on 31 December 20X8. At the time of purchase, the office tower has a remaining useful life of 25 years, and is amortized on a straight-line basis. Required: 1. Should the office tower be considered property, plant, and equipment or investment property? Property, plant, and equipment Investment property 2. Assume the property is determined to be PPE, and management applies the elimination method for the revaluation model. Prepare the required journal entries for the revaluation of the office tower in 20X6 and 20X8. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No 1 Date 31 December 20X6 No journal entry required 2 31 December 20X8 Accounts payable General Journal Debit × ×…
On March 31, 2023, Capital Investment Advisers paid $4,500,000 for land with two buildings on it. The plan was to demolish Building 1 and build a new store (Building 3) in its place. Building 2 was to be used as a company office and was appraised at a value of $1,119,840. A lighted parking lot near Building 2 had improvements (Land Improvements 1) valued at $653,240. Without considering the buildings or improvements, the tract of land was estimated to have a value of $2,892,920. Capital incurred the following additional costs: Cost to demolish Building 1 Cost of additional landscaping Cost to construct new building (Building 3) Cost of new land improvements near Building 2 (Land Improvements 2) Required: 1. Allocate the costs incurred by Capital to the appropriate columns and total each column. Purchase price Demolition Landscaping New building New improvements Totals $ Land 0 $ Building 2 0 $ Building 3 Land Land Improvements 1 Improvements 2 0 $ $ 682,160 268,520 3,232,400 253,200 0…
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On January 1, 2020, Brown Mining Enterprises purchased an existing coalmine. Brown expects to operate the mine for four years (i.e., until the end of 2023), after which it is legally required to dismantle the coalmine. Brown estimates that it will have to pay $500,000 to dismantle the mine and accomplish the other required asset retirement activities such as filling and restoring land etc. at the end of the mine’s life. The applicable general interest rate for Brown is 10% (considering its credit standing and the interest rates on its other borrowings). Prepare the journal entry to record the asset retirement obligation on January 1, 2020 and prepare the journal entries for depreciation and interest expense on december 31, 2020 2. Prepare journal entries for depreciation and interest expense on December 31, 2020.
15. On January 1, 2022, a company leased a land and building from an unrelated lessor for a 10- year term. The lease had a renewal option for an additional 5 years, but the entity has not reached a decision with regard to the renewal option. In early 2020, the entity completed three improvements to the property: Improvement 1 P 940,000 Improvement 2 1,500,000 360,000 Improvement 3 10 years 8 years 12 years What amount of depreciation of leasehold improvements will be reported in 2022? a. P199,228 b. P280,000 c. P311,500 d. P317,500
Jenny constructed a building for use as a residential rental property. The cost of the building was $164,976, and it was placed in service on August 1, 1998. The building has a 27.5-year MACRS life. What is the amount of depreciation on the building for 2020 for tax purposes? a.$6,547 b.$6,000 c.$3,000 d.$2,250 e.None of these choices are correct.

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