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Croft acquired a building with a 40?year life for its investment potential for $8 million on 1
January 20X3 At 31 December 20X3, the fair value of the property was estimated at $9 million
with costs to sell estimated at $200,000.
If Croft Co uses the fair value model for investment properties, what gain should be
recorded in the statement of profit or loss for the year ended 31 December 20X3?
Dear Sir,please help to clarify this issue
Carrying amount 7.8 million
and revaluation= 9million
surplus 1.2 million general gain
this question doesn’t ask net gain
why answer is 1 million?
The IP is revalued to fair value (the costs to sell are ignored) of $9 million. If it was originally recognised at $8 million then there is an increase of $1 million.
The costs to sell are given so as to trick you in to thinking that they are to be used when they aren’t.