Question 1

Which of the following should be included in the cost of an investment property?

Accepted Answer

A)  Start-up costs 
B)  Initial operating losses 
C)  Legal fees 
D)  Abnormal waste 
A)  Start-up costs 
B)  Initial operating losses 
C)  Legal fees 
D)  Abnormal waste C

Question 2

Gains and losses arising from changes in the fair value of investment property are recognized in profit or loss in the period they occur.

Accepted Answer

A) True 
 B)False  True

Question 3

On July 1, 20X7 Investment Entity (IE) paid $440,000 in cash for a building. IE acquired the building with the intent to earn lease rental income. IE also paid $5,000 in property transfer taxes and $4,000 for direct legal costs to complete the purchase. What amount should IE record as the initial cost of the building?

Accepted Answer

The initial cost of the building is: $440,000 + $5,000 + $4,000 = $449,000.

Question 4

A property is accounted for as a mixed-use property when

Accepted Answer

A)  the property is not held entirely for rental purposes or capital appreciation purposes. 
B)  the property is not used for a single purpose, for instance, condominiums and retail stores in the same building. 
C)  the entity purchased the property as an investment but it doesn't generate positive cash flows. 
D)  The entity hasn't determined the what the property will be used for in the future. 
A)  the property is not held entirely for rental purposes or capital appreciation purposes. 
B)  the property is not used for a single purpose, for instance, condominiums and retail stores in the same building. 
C)  the entity purchased the property as an investment but it doesn't generate positive cash flows. 
D)  The entity hasn't determined the what the property will be used for in the future.

Question 5

Investment properties should be tested for impair just like any other asset.

Accepted Answer

A) True 
 B)False

Question 6

Under the fair value model, investment property is measured at fair value, which is

Accepted Answer

A)  the price that would be received to sell the investment property in an orderly transaction between market participants at the measurement date. 
B)  the present value of the discounted cash flows. 
C)  the price that is similar to other assets that are traded in real estate market. 
D)  the price determined by an independent appraisal. 
A)  the price that would be received to sell the investment property in an orderly transaction between market participants at the measurement date. 
B)  the present value of the discounted cash flows. 
C)  the price that is similar to other assets that are traded in real estate market. 
D)  the price determined by an independent appraisal.

Question 7

What is investment property?

Accepted Answer

A)  Machinery used in the production of products. 
B)  Shares, bonds, and other marketable securities. 
C)  Vacant land purchased on which the entity plans to place a factory in the future 
D)  Land and/or building used to earn rental income. 
A)  Machinery used in the production of products. 
B)  Shares, bonds, and other marketable securities. 
C)  Vacant land purchased on which the entity plans to place a factory in the future 
D)  Land and/or building used to earn rental income.

Question 8

Property held for sale in the ordinary course of business can be classified as investment property.

Accepted Answer

A) True 
 B)False

Question 9

When an entity accounts for investment property using the fair value model, when is the value of the property revalued?

Accepted Answer

A)  At the end of the reporting period. 
B)  Whenever the value of the property changes materially. 
C)  When the sum of the next 10 year's expected cash flows from the property is less than its carrying value. 
D)  Never. 
A)  At the end of the reporting period. 
B)  Whenever the value of the property changes materially. 
C)  When the sum of the next 10 year's expected cash flows from the property is less than its carrying value. 
D)  Never.

Question 10

Agricultural Entity (AE) purchased 200 hectares of land on January 1, 20X7 and appropriately recorded it as investment property with a carrying value of $2,500,000. AE uses the fair value method to account for the property. At the end of 20X7, the fair value of the land was $2,250,000. At the end of 20X8, the land was appraised at a fair value of $2,275,000. Give the journal entries to adjust the carrying value of the land to fair value at the end of 20X7 and 20X8.

Accepted Answer

None

Question 11

Which of the following meets the definition of investment property?

Accepted Answer

A)  The property is owner-occupied. 
B)  The property used in the production or supply of goods or services, or for administrative purposes. 
C)  The property is rented to another entity. 
D)  The property is held for sale in the ordinary course of business. 
A)  The property is owner-occupied. 
B)  The property used in the production or supply of goods or services, or for administrative purposes. 
C)  The property is rented to another entity. 
D)  The property is held for sale in the ordinary course of business.

Question 12

Rental Property Entity (RPE) owns a five story building. The first floor is leased to a pizza chain restaurant for purposes of earning investment income. The remaining four floors are used as RPE's office headquarters. Under what conditions can RPE account for the first floor as an investment property?

Accepted Answer

The answer of Rental Property Entity (RPE) owns a five...

Question 13

The day-to-day repair and maintenance expenses should be included in the carrying amount of investment property.

Accepted Answer

A) True 
 B)False

Question 14

The cost of an investment property should include start-up costs.

Accepted Answer

A) True 
 B)False

Question 15

Leased property can qualify as investment property.

Accepted Answer

A) True 
 B)False

Question 16

Costs that are directly attributable to the acquisition of investment property, such as legal and brokerage fees, property transfer taxes, should be capitalized as part of the cost of the investment property.

Accepted Answer

A) True 
 B)False

Question 17

Property not initial classified as investment property cannot be classified as investment property at a future date.

Accepted Answer

A) True 
 B)False

Question 18

Why would an investment property after initial recognition be measured at cost?

Accepted Answer

A)  To be consistent with the way management accounts for other property, plant, and equipment. 
B)  Because measuring property at cost preserves the historical measures of the purchase price of the property. 
C)  Cost is more reliable and verifiable and faithfully represents the guiding principles of the Conceptual Framework. 
D)  Because fair value cannot be determined. 
A)  To be consistent with the way management accounts for other property, plant, and equipment. 
B)  Because measuring property at cost preserves the historical measures of the purchase price of the property. 
C)  Cost is more reliable and verifiable and faithfully represents the guiding principles of the Conceptual Framework. 
D)  Because fair value cannot be determined.

Question 19

Owner-occupied property can be classified as investment property.

Accepted Answer

A) True 
 B)False

Question 20

Provide three examples of investment property.

Accepted Answer

@#LAT-DLM&Land held for long-term capital apprecia

Exam 17: Investment Property

Which of the following should be included in the cost of an investment property?

Gains and losses arising from changes in the fair value of investment property are recognized in profit or loss in the period they occur.

A property is accounted for as a mixed-use property when

Investment properties should be tested for impair just like any other asset.

Under the fair value model, investment property is measured at fair value, which is

What is investment property?

Property held for sale in the ordinary course of business can be classified as investment property.

When an entity accounts for investment property using the fair value model, when is the value of the property revalued?

Which of the following meets the definition of investment property?

The day-to-day repair and maintenance expenses should be included in the carrying amount of investment property.

The cost of an investment property should include start-up costs.

Leased property can qualify as investment property.

Costs that are directly attributable to the acquisition of investment property, such as legal and brokerage fees, property transfer taxes, should be capitalized as part of the cost of the investment property.

Property not initial classified as investment property cannot be classified as investment property at a future date.

Why would an investment property after initial recognition be measured at cost?

Owner-occupied property can be classified as investment property.

Provide three examples of investment property.

Introduction to International Financial Reporting Standards Ifrs

Conceptual Framework for Financial Reporting

Fair Value Measurement

Presentation of Financial Statements

Statement of Cash Flows

Accounting Policies, Estimates, and Errors

Events After the Reporting Period

Related Party Disclosures

Earnings Per Share

Operating Segments

Inventories

Financial Instrumentsrecognition and Measurement

Financial Instrumentspresentation

Financial Instrumentsdisclosures

Property, Plant, and Equipment

Intangible Assets

Impairment of Assets

Leases

Revenue From Contracts With Customers

Income Taxes

Employee Benefits

Share-Based Payments

Provisions, Contingent Liabilities, and Contingent Assets

The Effects of Changes in Foreign Exchange Rates

Hyperinflation

Business Combinations

Consolidated Financial Statements

Investments in Associates and Joint Ventures

Joint Arrangements

Disclosure of Interests in Other Entities

Separate Financial Statements

Interim Financial Reporting

Non-Current Assets Held for Sale and Discontinued Operations

Regulatory Deferral Accounts

Borrowing Costs

Accounting and Reporting by Retirement Benefit Plans

Accounting for Government Grants and Disclosure of Government Assistance

Insurance Contracts

Exploration for and Evaluation of Mineral Resources

Agriculture

First-Time Adoption of International Financial Reporting Standard

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