Robust Company purchased an investment property on January 1, 2019, at a cost of P4,000,000. The property had a useful life of 20years and on December 31, 2020, had a fair value of P4,800,000. On December 31, 2020, the property was sold for net proceeds ofP4,500,000. The entity used the cost model to account for the investment property.What is the gain to be recognized for 2020 regarding the disposal of the investment property?a. 900,000b. 500,000c. 800,000d. 700,000

A recognized gain occurs when an investment or asset is sold for a price that is larger than what…

Robust Company purchased an investment property on January 1, 2019, at a cost of P4,000,000. The property had a usefu vears and on December 31, 2020, had a fair value of P4,800,000. On December 31, 2020, the property was sold for net pr P4,500,000. The entity used the cost model to account for the investment property. What is the gain to be recognized for 2020 regarding the disposal of the investment property? a. 900,000 b. 500,000 c. 800,000 700 0 0

Robust Company purchased an investment property on January 1, 2019, at a cost of P4,000,000. The property had a usefu vears and on December 31, 2020, had a fair value of P4,800,000. On December 31, 2020, the property was sold for net pr P4,500,000. The entity used the cost model to account for the investment property. What is the gain to be recognized for 2020 regarding the disposal of the investment property? a. 900,000 b. 500,000 c. 800,000 700 0 0

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

Robust Company purchased an investment property on January 1, 2019, at a cost of P4,000,000. The property had a useful life of 20
years and on December 31, 2020, had a fair value of P4,800,000. On December 31, 2020, the property was sold for net proceeds of
P4,500,000. The entity used the cost model to account for the investment property.
What is the gain to be recognized for 2020 regarding the disposal of the investment property?
a. 900,000
b. 500,000
c. 800,000
d. 700,000

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