Victoria owns several properties and has a year end of 31 December. Wherever possible, carries investment properties under the fair value model. Property 1 was acquired on 1 January Year 1. It had a cost of Rs. 1 million, comprising Rs. 500,000 for land and Rs. 500,000 for buildings. The buildings have a useful life of 40 years. Victoria uses this property as its head office. Property 2 was acquired many years ago for Rs. 1.5 million for its investment potential. On 31 December Year 7 it had a fair value of Rs. 2.3 million. By 31 December Year 8 its fair value had risen to Rs. 2.7 million. This property has a useful life of 40 years. Property 3 was acquired on 30 June Year 2 for Rs. 2 million for its investment potential. The directors believe that the fair value of this property was Rs. 3 million on 31 December Year 7 and Rs. 35 million on 31 December Year 8. However, due to the specialised nature of this property. these figures cannot be corroborated. This property has a useful life of 50 years. Required (a) For each of the above properties briefly state how it would be treated in the financial statements of Victoria for the year ended 31 December Year 8, identifying any impact on profit or loss.
Victoria owns several properties and has a year end of 31 December. Wherever possible, carries investment properties under the fair value model. Property 1 was acquired on 1 January Year 1. It had a cost of Rs. 1 million, comprising Rs. 500,000 for land and Rs. 500,000 for buildings. The buildings have a useful life of 40 years. Victoria uses this property as its head office. Property 2 was acquired many years ago for Rs. 1.5 million for its investment potential. On 31 December Year 7 it had a fair value of Rs. 2.3 million. By 31 December Year 8 its fair value had risen to Rs. 2.7 million. This property has a useful life of 40 years. Property 3 was acquired on 30 June Year 2 for Rs. 2 million for its investment potential. The directors believe that the fair value of this property was Rs. 3 million on 31 December Year 7 and Rs. 35 million on 31 December Year 8. However, due to the specialised nature of this property. these figures cannot be corroborated. This property has a useful life of 50 years. Required (a) For each of the above properties briefly state how it would be treated in the financial statements of Victoria for the year ended 31 December Year 8, identifying any impact on profit or loss.
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Victoria owns several properties and has a year end of 31 December. Wherever possible,
Victoria carries investment properties under the fair value model.
Property 1 was acquired on 1 January Year 1. It had a cost of Rs. 1 million, comprising Rs.
500,000 for land and Rs 500,000 for buildings. The buildings have a useful life of 40 years.
Victoria uses this property as its head office.
Property 2 was acquired many years ago for Rs. 1.5 million for its investment potential. On
31 December Year 7 it had a fair value of Rs. 2.3 million. By 31 December Year 8 its fair
value had risen to Rs. 2.7 million. This property has a useful life of 40 years.
Property 3 was acquired on 30 June Year 2 for Rs. 2 million for its investment potential. The
directors believe that the fair value of this property was Rs. 3 million on 31 December Year 7
and Rs. 3.5 million on 31 December Year 8. However, due to the specialised nature of this
property, these figures cannot be corroborated. This property has a useful life of 50 years.
Required
(a) For each of the above properties briefly state how it would be treated in the financial
statements of Victoria for the year ended 31 December Year 8, identifying any impact on
profit or loss.
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