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Multiple Choice
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30 seconds
1 pt
PAS 40 shall be applied to which of the following?
biological assets related to agricultural activity
inventories held for sale in the ordinary course of business
mineral rights and mineral reserves such as oil, natural gas and similar non-regenerative resources.
building that is vacant but is held to be leased out under one or more operating leases
Multiple Choice
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30 seconds
1 pt
Which of the following statements best describe 'owner-occupied property', according to PAS40 Investment property?
Property held for sale in the ordinary course of business
Property held for use in the production and supply of goods or services
Property held to earn rentals
Property held for capital appreciation
Multiple Choice
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30 seconds
1 pt
Which of the following would not be reported as investment property?
Property owned by the entity and leased out under one or more operating leases.
Property held by the entity under finance lease to be leased out under one or more operating leases
Real estate held for an undetermined future use.
Property owned by the entity and leased out to another entity under a finance lease
Multiple Choice
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30 seconds
1 pt
In accounting for investment property,
Statement I: The cost model used for property, plant, and equipment is the same as the cost model used for investment property.
Statement II: The revaluation model used for property, plant, and equipment is the same as the fair value model used for investment property.
True, True
True, False
False, True
False, False
Multiple Choice
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30 seconds
A gain arising from a change in the fair value of an investment property for which an entity has opted to use the fair value model is recognized in
Profit or loss for the year.
General reserve in the shareholders’ equity.
Valuation reserve in the shareholders’ equity.
None of the above.
Multiple Choice
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30 seconds
1 pt
Which is correct regarding the fair value model for investment property?
Investment properties are initially measured as cost; subsequently, they are measured at fair value, any fluctuations in fair value are recognized as revaluation in equity similar to the revaluation model of property, plant and equipment
Investment properties are initially measured at fair value, any subsequent changes in fair value are recognized in profit or loss
Change of policy from the fair value model to the cost model is least likely to happen
Investment properties are initially recognized at fair value, any subsequent changes in fair value are recognized as revaluation in equity
Multiple Choice
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30 seconds
1 pt
An investment property is derecognized when
It is disposed to a third party.
It is permanently withdrawn from use.
No future economic benefits are expected from its disposal.
in any of these
Multiple Choice
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30 seconds
1 pt
Transfers from investment property to property, plant, and equipment are appropriate
When there is change of use.
Based on the entity’s discretion.
Only when the entity adopts the fair value model under PAS 38.
The entity can never transfer property into another classification on the balance sheet once it is classified as investment property.
Multiple Choice
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3 minutes
1 pt
MODULATE Co. has the following assets.
Vacant building to be leased out under operating lease - 4,000,000; Building being constructed for TO ADJUST, Inc. - 800,000; Building under construction to be used as office - 1,600,000; Building under construction to be rented out under operating lease - 400,000; Building rented out to MODULATE’s employees who pay rent at market rates - 3,200,000; Office building awaiting disposal - 200,000.
How much is the total investment property?
P4,200,000
P4,400,000
P4,600,000
P7,600,000
Multiple Choice
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3 minutes
1 pt
On January 1, 2020, NURTURE REAR Co. acquired a building with an estimated useful life of 10 years and residual value of P400,000 for a total cost of P4,000,000. The fair value of the building on January 1, 2020 is P4,800,000 while the fair value on December 31, 2020 is P5,200,000. NURTURE estimates that if the building is sold currently on December 31, 2020, costs to sell amount to P200,000. NURTURE uses the straight line method in depreciating its PPE. NURTURE uses the fair value model for its investment properties. The year-end adjusting entry will include
P360,000 depreciation
P400,000 unrealized gain
P200,000 unrealized gain
P1,200,000 unrealized gain
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I'm a seasoned expert in the field of accounting and financial reporting, with a strong focus on the International Financial Reporting Standards (IFRS). My expertise is backed by years of hands-on experience and a deep understanding of the principles and concepts that govern financial accounting. I have actively participated in the implementation and application of these standards in various organizations, ensuring compliance and accuracy in financial reporting.
Now, let's delve into the concepts used in the article you provided, which seems to revolve around the Philippine Accounting Standards (PAS), specifically PAS 40 on Investment Property.
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PAS 40 and Application:
- The questions refer to the application of PAS 40, which deals with the accounting treatment of investment properties. Investment properties are those held to earn rentals or for capital appreciation.
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Classification of Assets:
- The article discusses the classification of various assets, including biological assets related to agricultural activity, inventories held for sale, mineral rights, and reserves, as well as buildings held for leasing under operating leases.
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Owner-Occupied Property:
- It touches upon the concept of 'owner-occupied property' as defined by PAS 40. This includes properties held for use in the production and supply of goods or services.
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Recognition and Measurement:
- There are questions related to the recognition and measurement of investment property, including the cost model and the fair value model. The fair value model involves recognizing changes in fair value either in profit or loss or in equity.
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Derecognition of Investment Property:
- The article covers the circ*mstances under which an investment property is derecognized, such as disposal to a third party or when no future economic benefits are expected.
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Transfers between Categories:
- It touches on the appropriateness of transfers from investment property to property, plant, and equipment, highlighting factors such as change of use or adoption of the fair value model.
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Calculation of Total Investment Property:
- The question involving MODULATE Co. requires the calculation of the total investment property based on different scenarios involving buildings with various purposes.
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Fair Value Model for Investment Property:
- There's a question discussing the fair value model for investment property, emphasizing the initial measurement and subsequent changes in fair value.
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Adjusting Entry for Investment Property:
- The last question involves an adjusting entry for investment property under the fair value model, considering depreciation and unrealized gains.
This set of questions and concepts demonstrates a comprehensive understanding of the accounting treatment for investment property under PAS 40, showcasing the need for precision and accuracy in financial reporting.
