INVESTMENT PROPERTIES

INVESTMENT PROPERTIES QUESTION 1 a. Define investment property and state THREE (3) properties that are not considered as investment properties according to MFRS 140 Investment Property. (5 marks) b. On 1 January 2016, Zebra Berhad acquired a building at a cost of RM9,000,000. The company incurred legal fees of RM50,000, The building was rented out to Cemerlang Berhad at RM10,000 per month. The fair value of the building on 31 December 2016 and 31 December 2017 was RM10,500,000 and RM9,500,000 respectively. It is the policy of Zebra Berhad to adopt the fair value model in the subsequent measurement of its investment properties, The estimated useful life of the building was 50 years. Required: a)Determine the value of the building to be recorded in the book of Zebra Berhad at 1 January 2016, 31 December 2016 and 31 December 2017. (2 marks) b)Determine the amount to be recorded on the Statement of Profit or Loss for the year ended 31 December 2016 and 31 December 2017. (2 marks) c)Prepare the journal entries for year ended 31 December and 2017. (6 marks) c. On 1 July 2017, Melisa Berhad moves out from its present office in Kuantan to a new office in Sepang. The building in Kuantan was then rented out to Merlin Berhad. The building in Kuantan was acquired on 1 July 2013 at a cost of RM8,500,000. It was depreciated on a straight-line basis over 40 years. The fair value of the building on 1 July 2017 was RM8, 000,000. Required: Advise Melisa Berhad on the accounting treatment and prepare journal entry for the transfer of owner-occupied property to investment property on 1 July 2017 in accordance with MFRS 140 Investment Property. (5 marks) QUESTION 2 a. Define investment property in accordance with MFRS 140 Investment Property. (3 marks) b. Medina Berhad acquired a building at a purchase price of RM6,050,000 on 2 January 2015. The legal fees incurred to acquire the building amounted to RM500,000. The acquisition is eligible for a trade discount of RM50,000. The building has 20 floors, and all floors are rented out. The fair value of the building on 31 December 2016 and 31 December 2018 were RM6,720,000 and RM6,600,000 respectively. Depreciation on building is using a straight-line method over 50 years. Required: a) Medina Berhad adopts the cost model in accordance with MFRS 140 Investment Property, determine the carrying value of the building as at 31 December 2016 and 31 December 2018, (5 marks)