question archive PERIODIC REGULAR Co
PERIODIC REGULAR Co
Subject:FinancePrice:3.87 Bought7
PERIODIC REGULAR Co. acquired a building on January 1, 20x1 for a total cost of ?24,000,000 and classified it as investment property. PERIODIC Co. uses the fair value model for its investment property. On January 1, 20x5, when the carrying amount of the building is ?16,000,000, the elevator in the building was replaced for a total cost of ?3,200,000. It is impracticable to determine the fair value of the replaced part. The fair value of the building on December 31, 20x5 is ?17,200,000. How much is the loss recognized during the year? *
a. 3,200,000
b. 2,000,000
c. no loss
d. indeterminable
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Answer:
In order to find loss we need to find out value of building and to compare it with Fair Value of Building as calculated below-:
Carrying Amount of Building 16,000,000
+Elevator Replacement 3,200,000
Value of Building 19,200,000
Fair Value of Building as on 31st December 17,200,000
therefore loss to be recognized in the books is 2,000,000(19,200,000 - 17,200,000)
Correct Answer-> 2,000,000 (Option-B)
