Question

In: Accounting

Sandhill Holdings Inc., a publicly listed company in Canada, ventured into construction of a mega-shopping mall...

Sandhill Holdings Inc., a publicly listed company in Canada, ventured into construction of a mega-shopping mall in Edmonton, which is rated as the largest shopping mall in North America. The company’s board of directors, after much market research, decided that instead of selling the shopping mall to a local investor who had approached them several times with excellent offers that he steadily increased during the year of construction, the company would hold this property for the purposes of capital appreciation and earning rental income from mall tenants. Sandhill Holdings retained the services of a real estate company to find and attract many important retailers to rent space in the shopping mall, and within months of completion at the end of 2017, the shopping mall was fully occupied.

According to the company’s accounting department, the total construction cost of the shopping mall was $50 million. The company used an independent appraiser to determine the mall’s fair value annually. According to the appraisal, the fair values of the shopping mall at December 31, 2017, and at each subsequent year end were:

2017		$50 million
2018		$60 million
2019		$65 million
2020		$61 million

The independent appraiser felt that the useful life of the shopping mall was 20 years and its residual value was $8 million.

Note that the mall’s rental income and expenses would be the same and thus can be omitted from the analysis for this exercise.

Prepare the necessary journal entries for 2018, 2019, and 2020 if it decides to treat the shopping mall as an investment property under IAS 40: Use fair value model. (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 journal entries in the order presented in the problem.)

Date

Account Titles and Explanation

Debit

Credit

__________

___________

_____________

Prepare the necessary journal entries for 2018, 2019, and 2020 if it decides to treat the shopping mall as an investment property under IAS 40: Use Cost model. (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 journal entries in the order presented in the problem.)

Date

Account Titles and Explanation

Debit

Credit

_________________

__________________

___________________

Expert Solution

ekkarill92 answered 1 year ago

Larkspur Inc., a publicly listed company, has a building with an initial cost of $436,000. At...

Larkspur Inc., a publicly listed company, has a building with an initial cost of $436,000. At December 31, 2020, the date of revaluation, accumulated depreciation amounted to $109,000. The fair value of the building, by comparing it with transactions involving similar assets, is assessed to be $359,700. Prepare the journal entries to revalue the plant under the revaluation model using the asset adjustment method. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If...

Moon Inc., a publicly listed company, has a building with an initial cost of $400,000. At...

Moon Inc., a publicly listed company, has a building with an initial cost of $400,000. At December 31, 2020, the date of revaluation, accumulated depreciation amounted to $110,000. The fair value of the building, by comparing it with transactions involving similar assets, is assessed to be $330,000. Prepare the journal entries to revalue the building under the revaluation model using: the asset adjustment (direct) method the proportionate method Use the information from 1 above. On January 5, 2021, Moon sold...

Ingalls Company is a jeweler located in a shopping mall in a midsize city in Ohio....

Ingalls Company is a jeweler located in a shopping mall in a midsize city in Ohio. During December of Year One, an unfortunate accident occurs. Mrs. Rita Yeargin trips over a giant, singing Rudolph set up by the mall management and goes sprawling into Ingalls’s store where she cracked her head on a display case. She spent several days in the hospital with a sprained ankle, severely bruised elbow, and a concussion. Prior to the end of the year, Mrs....

Harrison Holdings, Inc. (HHI) is publicly traded, with a current share price of $ 40 per...

Harrison Holdings, Inc. (HHI) is publicly traded, with a current share price of $ 40 per share. HHI has 30 million shares outstanding, as well as $ 61 million in debt. The founder of HHI, Harry Harrison, made his fortune in the fast food business. He sold off part of his fast food empire, and purchased a professional hockey team. HHI's only assets are the hockey team, together with 50 % of the outstanding shares of Harry's Hotdogs restaurant chain....

Harrison Holdings, Inc. (HHI) is publicly traded, with a current share price of $31 per share....

Harrison Holdings, Inc. (HHI) is publicly traded, with a current share price of $31 per share. HHI has 28 million shares outstanding, as well as $65 million in debt. The founder of HHI, Harry Harrison, made his fortune in the fast food business. He sold off part of his fast food empire, and purchased a professional hockey team. HHI's only assets are the hockey team, together with 50% of the outstanding shares of Harry's Hotdogs restaurant chain. Harry's Hotdogs (HDG)...

Concord Cosmetic Inc. (ACI), a cosmetic product manufacturer, is a publicly listed company. ACI is preparing...

Concord Cosmetic Inc. (ACI), a cosmetic product manufacturer, is a publicly listed company. ACI is preparing earnings per share data for 2020. The following is a summary of the activity for ACI during 2020: 634,000 common shares issued and outstanding at December 31, 2019 94,000 common shares issued for cash on April 1, 2020 Repurchased 58,800 common shares on June 1, 2020 Two-for-one stock split on September 1, 2020 Required: weighted average number of shares outstanding for the year ended...

Ridley Inc. is a small, publicly traded construction company with 50 million shares outstanding trading at...

Ridley Inc. is a small, publicly traded construction company with 50 million shares outstanding trading at $10 a share. Ridley has: Unlevered beta of 1.1 One bank loan with interest payments of $5 million a year for 5 years and a principal payment (FV) of $250 million Rating of Baa, for which the default spread is 2% Marginal tax rate of 40% The risk-free rate is 2.5%, and the equity risk premium is 5.5%. What is the current cost of...

QUESTION 1: CONSTRUCTION/CIVIL FRAUD A major infrastructure company, Mega Construction Corp. had been awarded a road...

QUESTION 1: CONSTRUCTION/CIVIL FRAUD A major infrastructure company, Mega Construction Corp. had been awarded a road construction contract by the government. For execution of the project, the company had sub-divided the geographies and execution areas and invited bids for the sub-contracting. The company had publicized a whistle-blower policy and received a complaint from one of the bidders about possible collusion between certain bidders. The matter was sought to be investigated by the management of the company. As the company’s fraud...

You are the auditor of a publicly listed company. In the kickoff meeting for the audit...

You are the auditor of a publicly listed company. In the kickoff meeting for the audit 2018, the chairman of the board of director, who is also a controlling shareholder presented to you the following financial information: Budget for the year of 2019 (based on last 5 months’ trading results of 2018) $ million Unaudited financial information for the year ended 31 December 2018 $ million Revenue 5,000 4,500 Total assets 5,000 4,500 Net assets 2,500 2,250 Profit before income...

Sandhill Company is constructing a building. Construction beganon February 1 and was completed on December...

Sandhill Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $2,700,000 on March 1, $1,800,000 on June 1, and $4,500,000 on December 31.Sandhill Company borrowed $1,500,000 on March 1 on a 5-year, 10% note to help finance construction of the building. In addition, the company had outstanding all year a 12%, 5-year, $3,000,000 note payable and an 11%, 4-year, $5,250,000 note payable. Compute avoidable interest for Sandhill Company. Use the weighted-average...