Carla Vista 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. The construction of the mall ended on December 31, 2022. Carla Vista Holdings retained the services of a real estate company to find and attract many important retailers to rent space in the shopping mall. The shopping mall was fully occupied soon after construction was completed. According to the company's accounting department, the total construction cost of the shopping mall was $64 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, 2023, and at each subsequent year end were: 2023 2024 2025 2026 $64 million $72 million $75 million $71 million The independent appraiser felt that the useful life of the shopping mall was 20 years and its residual value was $12 million. Note that the mall's rental income and expenses would be the same under both options, and thus can be omitted from the analysis for this exercise.
Carla Vista 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. The construction of the mall ended on December 31, 2022. Carla Vista Holdings retained the services of a real estate company to find and attract many important retailers to rent space in the shopping mall. The shopping mall was fully occupied soon after construction was completed. According to the company's accounting department, the total construction cost of the shopping mall was $64 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, 2023, and at each subsequent year end were: 2023 2024 2025 2026 $64 million $72 million $75 million $71 million The independent appraiser felt that the useful life of the shopping mall was 20 years and its residual value was $12 million. Note that the mall's rental income and expenses would be the same under both options, and thus can be omitted from the analysis for this exercise.
Chapter6: Corporations: Redemptions And Liquidations
Section: Chapter Questions
Problem 56P
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Question
Qw.142
Transcribed Image Text:Carla Vista 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. The construction of the mall ended on December 31, 2022. Carla Vista Holdings retained the
services of a real estate company to find and attract many important retailers to rent space in the shopping mall. The shopping mall
was fully occupied soon after construction was completed.
According to the company's accounting department, the total construction cost of the shopping mall was $64 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, 2023, and at each subsequent year end were:
2023 $64 million
$72 million
$75 million
$71 million
2024
2025
2026
The independent appraiser felt that the useful life of the shopping mall was 20 years and its residual value was $12 million.
Note that the mall's rental income and expenses would be the same under both options, and thus can be omitted from the analysis for
this exercise.
Transcribed Image Text:Prepare the necessary journal entries for 2024, 2025, and 2026 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 O for the amounts. List all debit
entries before credit entries. Record journal entries in the order presented in the problem. Enter amounts in dollars
instead of million dollars.)
Date
♦
♦
♦
Account Titles and Explanation
Debit
Credit
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