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Hi Tutors,
I have the following question 13 below and hope I can receive some help and advice ( answer also attached)
My answer differs mainly in terms of the initial depreciation charge to the P/L. which I have calculated $500,000 for 2.5 years (1.1.20X3 – 30.6.20X5) as opposed to the question which charges 6 months.
As per my calculations the net income (after taking into account the revaluation gain of $500,000) gave me a final answer of $2m gain.
Am I going wrong somewhere? See Q below
Smithson Co purchased a new building with a 50?year life for $10million on1January20X3. On 30June20X5, Smithson Co moved out of the building and rented it out to third parties on a short?term lease
Smithson Co uses the fair value model for investment properties. At 30June20X5 the fair value of the property was $11million and at 31December20X5 it was $11.5million. What is the total net amount to be recorded in the statement of profit or loss in respect of the office for the year ended 31December20X5?
ANetincome$400,000
BNetincome$500,000
CNetincome$1,900,000
DNetincome$2,000,000Many Thanks
Naseam
Hi,
The net amount recorded through profit or loss for the year-ended 31 December will only include 6-months of depreciation, which I believe would be $100,000.
The gain that goes through profit or loss would be $500,000, being the increase from $11 million to $11.5 million.
The net impact is therefore $400,000 and answer A.
Thanks
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