government accounting

44問 • 1年前

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is land and or building held for rentals or capital appreciation. It is not held for use is the production of supply of goods or services, for administrative purposes or sale in the ordinary course of business.

Investment Property

Examples of Investment in property

1. land held for long-term capital appreciation rather than for short-term sale in the ordinary course of operations. 2. Land held for a currently determined future use. 3. Building owned by the entity (or held by the entity under a finance lease) and leased out under one or more operating leases on commercial basis. 4. Building that is vacant but is held to be leased out under one or more operating leases on a commercial basis to external parties. 5. Property that is being constructed or developed for future use as investment property. 6. Significant portion of a property that is held to earn rentals or for capital appreciation rather than to provide services and insignificant portion that is held for use in the production or supply of goods or services or for administrative purposes.

Items not considered as investment property

1. Biological assets related to agricultural activity 2. Mineral rights and reserves such as oil, natural gas, and similar non-regenerative resources. 3. Propery held for sale in the ordinary course of operations or in the process of construction or developed for such sale 4. Property being constructed or developed on behalf of third parties 5. Owner-occupied property including: a. property held for future use as owner-occupied property b. property held for future development and subsequent use as owner-occupied property c. Property occupied by employees d. owner occupied property awaiting disposal 6. property that is leased to another entity under a finance lease 7. property held to provide a social service and which also generates cash inflows 8. property held for strategic purposes and 9. property held for use in the production or supply of goods or services or for administrative purposes.

Investment property is initially measured at

cost

The measurement of cost depends on the

mode of acquisition

4 modes of acquisition

1. Cash purchase 2. Installment purchase 3. Non-exchange transaction 4. Self-construction

The cost of an investment property acquired through cash purchase comprises the _________ and ________ necessary in bringing the asset to its intended condition.

1. Cash purchase 2. Purchase price and any direct cost

Entity A purchases land to be held for capital appreciation for ₱1,000,000. Entity A pays ₱80,000 for legal services and transfer taxes related to the acquisition. Provide the journal entry to recognize the purchase of investment property

dr. investment property, land. 1,080,000 cr. cash-modified disbursement system, Regular 1,080,000

The cost of an investment property acquired through installment purchase is the ________. The difference between this amount and the total payments is recognized as _______ over the period of credit.

1. Installment purchase 2. Cash price equivalent 3. Interest expense

The cost of an investment property acquired through a non-exchange transaction is the _______at the acquisition date.

1. Non-exchange transaction 2. Fair value

Entity A receives an unconditional donation of Land with fair value of ₱1,000,000. Provide for the journal entry to recognize receipt of donated land

dr. investment property, land. 1,000,000 cr. income from grants and donations in kind. 1,000,000

The cost of a self-constructed investment property includes the costs of ______, ______, and _________. The cost of wasted materials, labor, or other sources incurred in constructing the property are recognized as expense.

1. self-construction 2. direct materials, labor, and construction overhead

Construction costs incurred are initially recorded in the ___________ pending the completion of the investment property. Upon completion, the construction costs are reclassified to the _________.

1. Construction in Progress 2. Investment Property Account

The cost of an investment property does not include

1. Start up cost 2. operating losses 3. Abnormal amounts

Investment properties are subsequently measured under the______. Under this model, investment properties are measured at ___________

1. cost model 2. cost less accumulated depreciation and accumulated impairment losses

The______ which is available to business entities, is not allowed for government entities.

Fair value model

_____ Shall be made only when there is a change in use, as evidenced by the following.

1. Transfers to or from investment property

Transfers to or from investment property shall be made only when there is a change in use, as evidenced by the following. 1. __________ for a transfer from investment property to owner-occupied property. 2. __________ for a tranfer from owner-occupied property to investment property. 3. __________ of an operating lease (on a commercial basis) to another party, for a transfer from inventories to jnvestment property. 4. __________ , for a transfer from investment property to inventories.

1. Commencement of owner-occupation 2. End of owner-occupation 3. Commencement of an operating lease 4. commencement of development with a view to sale

A government entity accounts for transfers to or from investment property at________. Accordingly, __________ shall arise from the transfer, except when the transferred asset is impaired, in which case, impairment loss shall be recognized first before making the reclassification.

1. cost 2. No gain or losses

Illustration: Transfers to Investment Property Case A: From PPE to IP Entity A transfers a building with a historical cost of ₱1,000,000 to investment property. At the date of transfer, the building has an accumulated depreciation of ₱400,000 and an accumulated impairment losses of ₱100,000. Provide for the journal entries

dr. Investment property, building. 500,000 dr. accumulated depreciation-building 400,000 dr. accumuated impairment losses-building 100,000 cr. Building. 1,000,000

Case B: From Inventories to IP Entity A transfers a building held as inventories with a carrying amount of ₱1,000,000 to investment property. Provide for the journal entries

dr. investment propery, buildings. 1,000,000 cr. merchandise inventory. 1,000,000

Illustration 2: Transfers from Investment Property Case A: From IP to PPE Entity A transfers a building with a historical cost of ₱1,000,000 to owner-occupied property. At the date of transfer, the investment property has an accumulated depreciation of ₱400,000 and an accumulated impairment losses of ₱100,000. Provide for the journal entry

dr. buildings. 500,000 dr. accumulated depreciation-IP,buildings. 400,000 dr. accumulated depreciation-IP, Buildings 100,000 cr. Investment property, Buildings. 1,000,000

Case B: From IP to Inventories Entity A decides to redevop the building referred to in Case A above with the view of subsequent sale . Provide for the journal entries

dr. Merchandise inventory. 500,000 dr. accumulated depreciation-IP, Buildings 400,000 dr. Accumulated Impairment losses- IP, building, 100,000 cr. Investment Property, Buildings. 1,000,000

An investment property is derecognized when it is _______ or when it is_________ from use and no future economic benefits or service potential is expected from its disposal. When an investment property is derecognized, the difference between the net disposal proceeds (if any) and its carrying amount is recognized as ___________

1. disposed 2. permanently withdrawn 3. gain or losses in surplus or deficit

An asset is impaired if its _____________. The excess represents __________ which shall be recognized in surplus or deficit.

1. Carrying amount exceeds its recoverable amount. 2. impairment loss

Is the higher of an assets’s fair value less cost to sell and value in use. Is the present value of the estimated future cash flows expected to be derived from the continuing use of an asset and from its disposal at the end of its useful life.

1. recoverable amount 2. Value in use

At each reporting date, an entity shall assess whether there is an indication that an asset may be impaired. If such indication exists, the entity shall_____. An entity shall consider the following indications of impairment:

estimate the recoverable amount of the asset

An entity shall consider the following indications of impairment

1. external sources of information 2. internal sources of information

External sources of information: 1. Significant decline in the asset’s _____ 2. Significant changes in _______, ________, ______ or _____ environment that adversely affect the recoverable amount of an asset. 3. Increase in ___________that adversely affect the discount rate used in calculating an asset’s value in use, and consequently, its recoverable amount.

1. market value 2. technological, market, economic, or legal 3. market interest rate

Internal sources of information 1. _______ or physical damage of an asset. 2. _______in the expected use of an asset that adversly affect its recoverable amount. 3. _______ of the construction of an asset before it is completed. 4. Indications that the economic performance of an asset is, or will be, _______.

1. Obsolescene 2. Significant changes 3. Cessation 4. Worse than expected

After impairment, depreciation charges on an asset will be based on its

recoverable amount

If there is an indication for impairment, recoverable amount is determined for an individual asset, except when this is not possible, in which case the recoverable amount of the__________ where individual asset belongs is determined.

Cash generating unit

Is the smallest identifiable group of assets held with the primary objective of generating a commercial return that generates cash inflows from continuing use that are largely independent of the cash inflows from other asets or groups of assets.

Cash generating unit (CGU)

An impairment loss is recognized if the CGU’s carrying amount

exceeds its recoverable amount.

The impairment loss is allocated to the individual assets in the CGU on a _________, based on their carrying amount.

Pro rata basis

In allocating an impairment loss, the carrying amount of an individual asset shall not be reduced below the highest of:

1. its fair value less costs to sell 2. its value in use 3. zero

The reversal of impairment is recognized in________ in the period of reversal

surplus or deficit

Illustration: On January 1, 2021, Entity A acquires a building to be held as investment property for a total cost of ₱1,200,000. The building is estimated to have a 30-year useful life and a 5% residual value. Entity A uses the straight-line method of depreciation. The annual depreciation is ₱38,000 [(1.2M x 95%)/30%] Provide for the journal entry

dr. Depreciation-investment. property. 38,000 cr. accumulated depreciation-investment property, buildings. 38,000

On December 31, 2025, Entity A determines that the building is impaired and makes the following estimated: Fair value less costs to sell. ₱650,000 Value in use. ₱750,000 The impairment loss is computed as follows: Recoverable amount (higher). 750,000 Carrying amount [1.2M-(38,000x 5 years)]. 1,010,000 Impairment loss. (260,000) Provide for the journal entry

dr. impairment loss-investment property. 260,000 cr. accumulated impairment losses-investment property, buildings. 260,000

Residual value is revised to 5% of the recoverable amount The revised annual depreciation for the subsequent periods is ₱28,500 [(750k x 95%)/25] Provide for journal entry

dr. depreciation-investment property. 28,500 cr. accumulated depreciation-investment property, buildings.

On december 31, 2028, Entity A determines an indication that the impairment loss recognized in the prior period may no longer exist. Entity A makes the following estimates and computations: Fair value less costs to sell. ₱800,000 Value in use. 900,000 The new recoverable amount is ₱900,000 (higher) Carrying amount -12/31/25! 750,000 Accumulated depreciation (85,500) (28,500x 3 years) Carrying amount -12/31/28. 664,500 Historical cost. 1,200,000 Accumulated (original) depreciation (38,000x 3 years). (304,000) Carrying amount had no impairment loss been recognized in prior period. 896,000 12/31/28 The reversal of impairment is computed as follows From the graph above, the gain or reversal of impairment loss is ₱231,500 (896,000-664,500) Provide for journal entry to recognise reversal of imoairment

dr. accumulated impairment losses-231,500 cr. investment propertyc, buildings reversal of impairment loss. 231,500

Compensation from third parties for an investment property that was impaired, lost or given up shall be recognized in ___________ when the compensation becomes receivable.

surplus or deficit

Illustration: A building held as investment property was razed by fire. The building has a historical cost of ₱1,000,000 and an accumulated depreciation of ₱400,000. The building is insured for ₱700,000 Provide for the journal entry to recognize the loss from the fire

dr. loss of assets. 600,000 dr. accumulated depreciation—Investment property, buildings 400,000 cr. investment property. 1,000,000

When the insurance claim is approved and becomes receivable, the entryis as follows

dr. due from GOCCs. 700,000 cr. Other service income. 700,000

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Charles Jaojao · 26問 · 1年前

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