Question

On March 1, 2020, Ayayai Corp. acquired a 10-unit residential complex for $1,280,000, paid in cash. An independent appraiser determined that 75% of the total purchase price should be allocated to buildings, with the remainder allocated to land. On the date of acquisition, the building’s estimated useful life was 25 years, with estimated residual value of $325,200. Ayayai estimates that straight-line depreciation would best reflect the pattern of benefits it will receive from the building. Fair value of the complex, as assessed by an independent appraiser on each date, is as follows: Date Fair Value December 31, 2020 $1,321,860 December 31, 2021 $1,254,560 December 31, 2022 $1,222,740 The complex qualifies as an investment property under IAS 40 Investment Property. Ayayai has a December 31 year end.

Prepare the journal entries required for 2020, 2021, and 2022, assuming that Ayayai applies the fair value model to all of its investment property. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit Mar. 1, 2020Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022 Mar. 1, 2020Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022 Mar. 1, 2020Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022 Mar. 1, 2020Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022 SHOW LIST OF ACCOUNTS LINK TO TEXT

Prepare the journal entries required for 2020, 2021, and 2022, assuming that Ayayai applies the cost model to all of its investment property. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275. Record entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit Mar. 1, 2020 Mar. 1, 2020Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022 Mar. 1, 2020Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022 Mar. 1, 2020Dec. 31, 2020Dec. 31, 2021Dec. 31, 2022

Answer 1

Dates	Investment property Value	Building	Land
On March 01, 2020	1280000	960000	320000
on December 31, 2020	1321860	991395	330465
on December 31, 2021	1254560	940920	313640
on December 31, 2022	1222740	917055	305685
Calculation of Depreciation
	960000 - 325200 / 25 = 25392 SLM Basis
Under Fair Value Method
Date	Accounting Description and General	Dr.	Cr.
On March 01, 2020	Investment Property - Building A/c Dr.	960000
	Land A/c Dr.	320000
	To Cash A/c		1280000
	( Being Investment property and Land Purchased)
on December 31, 2020	Investment Property - Building A/c Dr.	31395
	To P and L A/c		31395
	( Being Investment proeprty FV )
on December 31, 2021	P and L A/c	50475
	To Investment Property - Building A/c		50475
	( Being Investment proeprty FV )
on December 31, 2022	P and L A/c	23865
	To Investment Property - Building A/c		23865
	( Being Investment proeprty FV )
Under Cost Model Method
Date	Accounting Description and General	Dr.	Cr.
On March 01, 2020	Investment Property - Building A/c Dr.	960000
	Land A/c Dr.	320000
	To Cash A/c		1280000
	( Being Investment property and Land Purchased)
on December 31, 2020	Depreciation A/c Dr	25392
	To Investment Proeprty A/c		25392
	( Being Depreciation Charged
Notes to Accounts:
FV of the Residential Complex is 1321860 $ , where Investment property buiding is composed of 75% only.
Depreciation is Charged on SLM Basis
on December 31, 2021	Depreciation A/c Dr	25392
	To Investment Proeprty A/c		25392
	( Being Depreciation Charged
Notes to Accounts:
FV of the Residential Complex is 1254560 $ , where Investment property buiding is composed of 75% only.
Depreciation is Charged on SLM Basis
on December 31, 2022	Depreciation A/c Dr	25392
	To Investment Proeprty A/c		25392
	( Being Depreciation Charged
Notes to Accounts:
FV of the Residential Complex is 1222740 $ , where Investment property buiding is composed of 75% only.
Depreciation is Charged on SLM Basis