If the asset was recorded at fair value, how much is the carrying value of the airport land rights as of December 31, 2021?
If the asset was recorded at fair value, how much is the carrying value of the airport land rights as of December 31, 2021?
Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization
Section: Chapter Questions
Problem 62P
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Question
The airport land rights were given to XYZ Airlines on June. 30, 2021. On that date, the rights were valued at P15,000,000. The agreement gives the entity 30 years over those rights. The entity incurred equipment rearrangement costs as result of these rights. As of Dec. 31, 2021, the fair value of the rights significantly declined to P7,000,000 but XYZ sees an acceptable level of profits in the upcoming years.
If the asset was recorded at fair value, how much is the carrying value of the airport land rights as of December 31, 2021?
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