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June 2, 2016 at 4:41 am #318772Anuja Nair
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For the following question,
Qn) Biological assets include
(a) Fruits on a tree
(b) Fish in an ocean
(c) Fruits in the store
(d) Dead animals
The answer given is (a). But based on my understanding, biological assets are living plants and animals . Therefore, the answer i got is (a) and (c) . But why they didn’t include (c) as part of the answer also.
For the following question below,
Qn) Which one of the following properties would be classified as an investment property?
(a) A stately home used for executive training but which is no longer required and is now being held for resale.
(b) Purchased land for investment potential. Planning permission has not been obtained for building construction of any kind
(c) a new office building used by an insurance entity as its head office which was purchased specifically in the centre of a major city in order to exploit its capital gains potential
(d) a property that has been leased out under a finance lease
The answer given in the answer key is (b) . But the answer i got is (b) & (c). Why isn’t a property under a finance lease not a investment property ? But it says so in my textbook.June 2, 2016 at 5:11 am #318775MikeLittleKeymaster
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“c) Fruits in the store”
Alive? Fruit? In a shop? Really? What sort of living-fruit shop exists in your part of the World?
I could understand you saying “fish in the ocean” because they are “living plants and animals”
But I can foresee enormous problems with that! How are you going to count them? Or value them? Who owns them? And what about all the types of fish that we haven’t yet discovered?
No, too many problems if you include ALL living plants and animals. What about all the mosquitos in the World? Who owns them? And all the grass that grows beside the road? That’s living plants and animals
No, no. You surely cannot mean that as well
I think that you should really put “living plants and animals that are owned by the business as at the end of the accounting period”
You really do get me confused!
If the answer is (b) and you write “But the answer i got is (b) & (c)” you then go on to ask why (d) is not also an investment property “Why isn’t a property under a finance lease not a investment property ?”
So you want (b), (c) AND (d) as your answer?
Clearly (c) isn’t investment property because it’s owner occupied
Your book says that an asset held under a finance lease could be leased property ie it could have been acquired under the lease for its revenue earning potential
And your book is correct
What does your book say about an entity that acquires property in order to lease it out as a lessor? This is the main business activity of this entity … buying properties in order to lease them out
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