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Intangible Assets and Investment Property

The document discusses accounting for investment properties and other investments. It provides examples of different types of investment properties owned by companies and asks questions about accounting for: investment property amounts in consolidated financial statements; gains and losses from sale of investment properties; gains and losses from fair value changes of investment properties; annual deposits needed for a building fund; bond sinking fund amounts; gains from life insurance policy settlements; and life insurance expenses.

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56 views

Intangible Assets and Investment Property

The document discusses accounting for investment properties and other investments. It provides examples of different types of investment properties owned by companies and asks questions about accounting for: investment property amounts in consolidated financial statements; gains and losses from sale of investment properties; gains and losses from fair value changes of investment properties; annual deposits needed for a building fund; bond sinking fund amounts; gains from life insurance policy settlements; and life insurance expenses.

Uploaded by

Lei Lei
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Practical Accounting I Investment Property and other Investment

1. Jean Company and its subsidiaries provided the following properties owned by the group.

Land held for undetermined future use 1,000,000


Vacant building to be leased out under an operating lease 2,000,000
Property held for use in production 4,000,000
Property held by a subsidiary, a real estate firm,
in the ordinary course of business 3,000,000
Building owned by subsidiary and for which the subsidiary provides
security and maintenance services to the lessees 2,500,000
Land leased to a subsidiary under an operating lease 1,500,000
Equipment leased to an unrelated party under an operating lease 500,000
Building under construction for use as investment property 3,500,000

In the consolidated statement of financial position of the parent and its subsidiaries, what total
amount should be reported as investment property?
a. 6,000,000
b. 5,500,000
c. 8,000,000
d. 9,000,000
2. Princess Company purchased an investment property on January 1, 2011 at a cost of P2,2000,000.
The property had a useful life of 40 years and on December 31, 2013 had a fair value of P3,000,000.
On December 21, 2013 the property was sold for net proceeds of value P2,900,000. The entity used
the cost model to account for investment property. What is the gain or loss to be recognized for 2013
regarding the disposal of the property?
a. 865,000 gain
b. 810,000 gain
c. 100,000 loss
d. 700,000 gain
3. Adrienne Company owned three investment properties. Details of the properties are as follows:
Fair Value Fair Value
Initial Cost December 31, 2013 December 31, 2014
Property 1 2,700,000 3,200,000 3,500,000
Property 2 3,450,000 3,000,000 2,800,000
Property 3 3,300,000 3,900,000 3,400,000
Each property had an estimated useful life of 50 years. The accounting policy is to use the fair value
model for investment property. What is the gain or loss to be recognized for the year ended December
31, 2014?
a. 250,000 loss
b. 400,000 loss
c. 300,000 gain
d. 700,000 loss

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4. On January 1, 2013, Karla Company adopted a plan to accumulate funds for a new building to be
erected beginning January 1, 2017 at an estimated cost of P 20,000,000. The entity intends to make
four equal annual deposits in a fund beginning December 31, 2013 that will earn interest at 12%
compounded annually. The future value of an ordinary annuity of 1 at 12% for 4 periods is 4.78, and the
future of an annuity of 1 in advance t 12% for 4 periods is 5.35. what is the annual deposit to the fund?
a. 5,000,000
b. 4,184,100
c. 3,738,318
d. 3,149,606

5. Rochelle Company provided the following information related to a noncurrent investment placed
in trust as required by the underwriter of the bonds:

Bonds sinking fund – January 1, 2013 450,000


2013 additional investment 90,000
Dividends on Investment 15,000
Interest revenue 30,000
Administration costs 5,000
Carrying amount of bonds payable 1,025,000

What is the bond sinking fund on December 31, 2013?


a. 585,000
b. 580,000
c. 575,000
d. 540,000
6. Bernadette Company insured the life of its president for P2,000,000, the entity being the beneficiary
of an ordinary life insurance policy. The annual premium is P80,000 and the policy is dated January 1,
2010. The entity reported the following cash surrender value:
December 31, 2012 15,000
December 31, 2013 19,000
The president died on October 1,2013 and the policy is settled on December 31, 2013. What amount
should be reported as gain on life insurance settlement for 2013?
a. 1,962,000
b. 2,000,000
c. 1,961,000
d. 1,981,000
7. On January 1, 2010, Katniss Company purchased P2,000,000 ordinary life policy on its president.
The entity reported the following data for 2013:
Cash surrender value, January 1 50,000
Cash surrender value, December 31 60,000
Annual advance premium paid on January 1 100,000
Dividend received on July 1 5,000
The entity is the beneficiary under the life insurance policy. What amount should be reported as life
expense for 2013?
a. 100,000
b. 95,000
c. 85,000
d. 90,000

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