IAS 40 – Investment Properties Assignment/Quiz 1 On 31 August 2018, Corona Limited moved its manufacturing division out of the property that it owned on a freehold basis and into larger leased premises. This freehold property, consisting of land and a factory building, was immediately leased out to an unrelated party under a non-cancellable ten-year operating lease.
IAS 40 – Investment Properties
Assignment/Quiz 1
On 31 August 2018, Corona Limited moved its manufacturing division out of the property that it owned on a freehold basis and into larger leased premises. This freehold property, consisting of land and a factory building, was immediately leased out to an unrelated party under a non-cancellable ten-year operating lease.
The freehold property had originally cost N$10,400,000 (Purchased on 1 January 2013), on which date its total useful life was estimated to be 25 years and its residual value was estimated to be nil.
The freehold property was revalued for the first time on 31 December 2016:
The land was revalued upwards by N$1 million to reflect its fair value;
Further revaluations were performed on 31 August 2018 and 31 December 2018.
The following details pertain to this factory land and buildings:
Land Buildings (25-year
‘000 useful life)
‘000
Cost 1 January 2013 2 400 8 000
Carrying amount 31 3 400 4 686
December 2017
Fair value at 31 August 4 000 7 500
2018
Fair value at 31 4 180 7 900
December 2018
Land and buildings that are classified as property, plant and equipment are measured under the revaluation model, using the net replacement cost basis and are depreciated using the straight-line basis. Investment properties are measured under the fair value model.
Required:
Prepare the journal entries to record all the matters relating to the factory land and buildings, for the year ended 31 December 2018.
Please note that the quiz questions will be from the above journals.
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