1) The document discusses accounting for investment property, noncurrent financial assets, and noncurrent assets held for sale. It provides examples of how to classify different types of assets and record transactions related to these accounts.
2) It includes problems that address the classification and accounting for investment property, advances to officers, prepaid insurance, sinking funds, and assets held for sale. Sample journal entries are provided for transactions such as purchases, sales, and impairments.
3) Accounting topics covered include depreciation, fair value changes, prepaid expenses, and gains or losses on disposals. Guidance is given on presenting these accounts in financial statements.
1) The document discusses accounting for investment property, noncurrent financial assets, and noncurrent assets held for sale. It provides examples of how to classify different types of assets and record transactions related to these accounts.
2) It includes problems that address the classification and accounting for investment property, advances to officers, prepaid insurance, sinking funds, and assets held for sale. Sample journal entries are provided for transactions such as purchases, sales, and impairments.
3) Accounting topics covered include depreciation, fair value changes, prepaid expenses, and gains or losses on disposals. Guidance is given on presenting these accounts in financial statements.
1) The document discusses accounting for investment property, noncurrent financial assets, and noncurrent assets held for sale. It provides examples of how to classify different types of assets and record transactions related to these accounts.
2) It includes problems that address the classification and accounting for investment property, advances to officers, prepaid insurance, sinking funds, and assets held for sale. Sample journal entries are provided for transactions such as purchases, sales, and impairments.
3) Accounting topics covered include depreciation, fair value changes, prepaid expenses, and gains or losses on disposals. Guidance is given on presenting these accounts in financial statements.
INVESTMENT PROPERTY, OTHER NONCURRENT FINANCIAL ASSETS
AND NONCURRENT ASSETS HELD FOR SALE
PROBLEMS
8-1 Investment Property (a), (b), (c), (e), (g), (o), (r) with option to or not to report as investment property
(d) not shown in the financial statements (f) Property, Plant and Equipment (h) Property, Plant and Equipment, until consummation of lease (i) Inventories (j) Inventories (k) Construction in Progress (Inventories) (l) Property, Plant and Equipment (m) Property, Plant and Equipment (n) Property, Plant and Equipment (p) Property, Plant and Equipment (q) not shown, unless leased under finance lease (PPE)
8-2 (Sebastian Corporation) a. Purchase price P 8,600,000 Commission to real estate agent 430,000 Costs of clearing the land (net of timber and gravel recovered amounting to P65,000) 70,000 Total cost . P 9,100,000
b. Down payment P 4,000,000 Market value of shares issued (20,000 x 240) 4,800,000 Present value of non-interest bearing note issued (2,000,000 x 2.4869) 4,973,800 Total cost of land and building P13,773,800
Cost allocated to land (30% x 13,773,800) P 4,132,140 Cost allocated to building (70% x 13,773,800) P 9,641,660
8-3 (Precious Realty Corporation) 1/2/12 Buildings 8,200,000 Accumulated Depreciation Building Held as Investment Property
4,200,000
Buildings Held as Investment Property 8,200,000 Accumulated Depreciation - Buildings 4,200,000
Chapter 8 Investment Property, Other Non-current Financial Assets & Non-current Assets Held for Sale
83 8-4 Absolute Corporation Cost Model (a) Investment Property at December 31, 2012 Land P 5,000,000 Building Cost P20,000,000 Accumulated Depreciation 20,000,000/40 x 3 1,500,000 18,500,000 Total Investment Property P23,500,000
(b) Amounts and Accounts Taken to Profit or Loss Rent Revenue P 3,000,000 Depreciation Expense (500,000) Administrative and Security Salaries (200,000) Property Taxes (120,000) Maintenance (340,000) Profit P1,960,000
Fair Value Model (a) Investment Property at December 31, 2012 Land P6,800,000 Building 20,000,000 Total Investment Property P26,800,000
(b) Amounts and Accounts Taken to Profit or Loss Rent Revenue P 3,000,000 Change in Fair Value of Investment Property Land 800,000 Building 1,000,000 Depreciation Expense (500,000) Administrative and Security Salaries (200,000) Property Taxes (120,000) Maintenance (340,000) Profit P3,760,000
8-5 Raymond Company 1. Building Construction Fund Cash Cash
2. Building Expansion Fund Securities Building Expansion Fund Cash
3. Building Expansion Fund Securities Interest Receivable Building Expansion Fund Building Expansion Fund Cash
4. Building Expansion Fund Cash Dividend Income
5. Building Expansion Fund Expenses Building Expansion Fund Cash
Chapter 8 Investment Property, Other Non-current Financial Assets & Non-current Assets Held for Sale
84 6. Building Expansion Fund Cash Interest Receivable Building Expansion Fund Interest Income
7. Building Expansion Fund Securities Building Expansion Fund Cash
8. Building Expansion Fund Cash Building Expansion Fund Securities Gain on Sale of Building Expansion Fund Securities Interest Income
9. Building Expansion Fund Cash Dividend Income
10. Building Expansion Fund Cash Building Expansion Fund Securities Gain on Sale of Building Expansion Fund Securities
11. Buildings Building Expansion Fund Cash
12. Cash Building Expansion Fund Cash
8-6 Cordero Corporation a. Required Semiannual Deposit = P15,000,000/ FV of annuity of 1 discounted at 4% for 20 periods = P15,000,000 / 29.7781 = P503,726
b. 1/2/12 Bond Sinking Fund Cash 503,726 Cash 503,726
6/30/12 Bond Sinking Fund Cash 523,875 Cash 503,726 Interest Income (503,726 x 4%) 20,149
12/31/12 Bond Sinking Fund Cash 544,830 Cash 503,726 Interest Income 41,104 4% ( 503,726 + 523,875) = 41,104
8-7 Dorina Company a. Entries for 2008 through 2013
7/01/08 Prepaid Life Insurance 120,000 Cash 120,000
12/31/08 Life Insurance Expense 60,000 Prepaid Life Insurance 60,000
Chapter 8 Investment Property, Other Non-current Financial Assets & Non-current Assets Held for Sale
85 06/30/09 Prepaid Life Insurance 120,000 Cash 120,000
12/31/09 Life Insurance Expense 120,000 Prepaid Life Insurance 120,000
06/30/10 Prepaid Life Insurance 120,000 Cash 120,000 12/31/10 Life Insurance Expense 120,000 Prepaid Life Insurance 120,000
06/30/11 Prepaid Life Insurance 120,000 Cash 120,000
12/31/11 Life Insurance Expense 120,000 Prepaid Life Insurance 120,000
12/31/11 Cash Surrender Value* 36,000 Life Insurance Expense 36,000
06/30/12 Prepaid Life Insurance 120,000 Cash 120,000
12/31/12 Life Insurance Expense 120,000 Prepaid Life Insurance 120,000
Cash Surrender Value 13,000 Life Insurance Expense 13,000
3/31/13 Life Insurance Expense 30,000 Prepaid Life Insurance 30,000
Receivable from Insurance Company 4,000,000 Prepaid Life Insurance 30,000 Cash Surrender Value 49,000 Gain on Insurance Settlement 3,921,000
*The cash surrender value of life insurance may be recognized on the anniversary date (June 30, 2011 and every June 30 thereafter). No proportionate adjustment, however, is necessary at year end because there is no actual increase in cash surrender between anniversary dates.
b. If the president or his heirs were the beneficiaries of the policy, the premiums paid shall be charged to employees benefit expense and no cash surrender value will be set up by the company.
8-8 Solidbank
a. P10,000,000 x 0.3220 = P3,220,000 b. Interest Income in 2011 = 12% x P3,220,000 = P386,400 c. 1/1/11 Advances to Officers 3,220,000 Prepaid Compensation Expense 6,780,000 Cash 10,000,000 Chapter 8 Investment Property, Other Non-current Financial Assets & Non-current Assets Held for Sale
86 12/31/11 Advances to Officers 386,400 Interest Revenue 386,400
d. Amortized Cost at December 31, 2012 = 3220,000 + 386,400 + 432,768 = 4,039,168 8-9 Patriarch, Inc. a 12/31/11 Machinery Group Held For Sale 1,400,000 Accumulated Depreciation Machinery 1,200,000 Impairment Loss Machinery 200,000 Machinery 2,200,000 Machinery Tools 380,000 Machinery Parts 220,000
b. 07/17/12 Cash (1,520,000 60,000) 1,460,000 Machinery Group Held For Sale 1,400,000 Gain on Sale of Machinery 60,000
8-10 (Invecargill Ltd.) a. 08/01/12 Impairment Loss Equipment 15,000 Loss from Decline in NRV of Inventory 5,000 Accumulated Depr- Equipment 15,000 Inventory 5,000
b. Assets Held for Sale 350,000 Accumulated Depreciation 95,000 Impairment Loss 30,000 Plant 220,000 Equipment 160,000 Inventory 75,000 Goodwill 20,000
c. 02/01/13 Cash (380,000 30,000) 350,000 Assets Held For Sale 350,000
Chapter 8 Investment Property, Other Non-current Financial Assets & Non-current Assets Held for Sale
87 8-11 Correction: Change March 1 to March 31 Cost = 42,000 3/5) = 70,000 Accumulated Depreciation = 70,000 42,000 = 28,000 (a) Mar. 31 Depreciation Expense (14,000 x 3/12) 3,500 Accumulated Depreciation 3,500 Asset Held for Sale 36,000 Impairment Loss 2,500 Accumulated Depreciation 31,500 Equipment 70,000
Dec. 31 Asset Held for Sale 2,500 Recovery of Previous Impairment 2,500
(b) Dec. 31 Impairment Loss 1,000 Asset Held for Sale 1,000
MULTIPLE CHOICE MC1 C MC2 C MC3 B MC4 A MC5 B MC6 C MC7 C MC8 D MC9 B MC10 A MC11 B MC12 A MC13 D MC14 B MC15 C MC16 A MC17 B 10M + 20M = 30M MC18 A Revaluation surplus is credited; transfer is from owner-occupied property. MC19 D 20,000,000 15,000,000 MC20 D 18,000,000 x 39/40 = 17,550,000; depreciation = 18,000,000/40 = 450,000 MC21 C FV = 20,000,000; gain = 20,000,000 18,000,000 = 2,000,000 MC22 A 110,000 (115,000 80,000) = 75,000 MC23 D 9,000,000 1,500,000 = 7,500,000 which is lower than carrying amount of P8,000,000. MC24 D (9,200,000 1,300,000) 7,500,000 = 400,000 MC25 C 2,000,000 x 0.7972 = 1,594,400 1,594,400 x 12% x 6/12 = 95,664; 1,594,400 + 95,664 = 1,690,064 MC26 B 100,000 + (200,000 160,000) = 140,000 MC27 D 40,000 (108,000 87,000) 6,000 = 13,000 MC28 B 2,250,000 + 450,000 + 75,000 + 150,000 25,000 = 2,900,000 MC29 C 5,000,000/ 5.11 = 978,500