Page 72 - SBR Integrated Workbook STUDENT S18-J19
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Chapter 5
Example 4
Building
On 1 January 20X1, Jessie, a public limited company, purchased a building in
order to benefit from its capital appreciation. The accountant recognised the
purchase price of $10 million as property, plant and equipment. In addition,
legal fees incurred on the purchase of $0.1 million were expensed to profit or
loss.
In the year ended 31 December 20X1, depreciation of $0.5 million was
charged on the building.
The building had a fair value at 31 December 20X1 of $11 million. Fair value
gains or losses have not yet been accounted for.
Below is an extract from Jessie’s accounting policies note in its financial
statements:
“After initial recognition, investment property is carried at fair value.’’
Explain how the above should be accounted for in Jessie’s financial
statements for the year ended 31 December 20X1. Provide journals to
correct the errors that have been made.
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