Page | 1
PAS 40 Investment Property
QUIZ:
1. Which of the following qualifies for classification as an investment property?
a. Property that is currently being developed for future use as investment property
b. Investment property that is currently being developed for future use as owner-occupied
property
c. Property that is leased out to another entity under a finance lease
d. Building being rented from another entity and leased out under various operating sub-leases
2. The distinguishing characteristic that identifies an investment property from the other assets of
an entity is
a. changes in fair value of the asset is recognized in profit or loss.
b. the property does not derive cash flows separate from the other assets of the entity.
c. it generates separately identifiable cash flows from the other assets of the entity.
d. it earns rental as part of the ordinary operations of the entity.
3. Under this model, an investment property is measured at cost less accumulated depreciation
and accumulated impairment losses.
a. Impairment loss model c. Fair value model
b. Cost model d. Gorgeous model
Use the following information for the next two questions:
Entity A acquires an investment property for ₱1,000,000 cash. Additional costs incurred are as
follows:
● Repairs and remodelling before occupancy, ₱50,000.
● Legal costs of transferring title to the property, ₱20,000.
● Repairs after occupancy, ₱15,000.
The investment property is estimated to have a remaining useful life of 10 years and a residual
value equal to 5% of initial cost.
4. Entity A uses the straight line method of depreciation. How much is the carrying amount of the
investment property under the cost model after one year?
a. 914,850 c. 968,350
b. 923,100 d. 872,100
5. Entity A uses the straight line method of depreciation. The investment property has a fair value
of ₱980,000 at the end of Year 1. How much is the carrying amount of the investment property
under the fair value model after one year?
a. 980,000 c. 986,350
b. 973,200 d. 837,900
“Call upon me in the day of trouble; I will deliver you, and you shall glorify me.”
(Psalms 50:15)
- END –
Page | 2
Solution:
1. A
2. C
3. B
4. C (1,000,000 + 50,000 + 20,000) = 1,070,000 historical cost;
1,070,000 x 95% = 1,016,500 depreciable amount ÷ 10 = 101,650 annual depreciation;
1,070,000 – 101,650 one-year depreciation = 968,350 carrying amount after one year
5. A 980,000, the fair value at year-end.
