Reference no: EM133058204
Question - On March 1, 2020, Sarasota Corp. acquired a 10-unit residential complex for $1,276,000, 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. Sarasota 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:
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Date
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Fair Value
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December 31, 2020
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$1,321,970
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December 31, 2021
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$1,254,860
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December 31, 2022
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$1,222,860
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The complex qualifies as an investment property under IAS 40 Investment Property. Sarasota has a December 31 year end.
a) Prepare the journal entries required for 2020, 2021, and 2022, assuming that Sarasota applies the fair value model to all of its investment property.
b) Prepare the journal entries required for 2020, 2021, and 2022, assuming that Sarasota applies the cost model to all of its investment property.
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