On January 2, 2018, Randy Corporation acquired a track of land that is to be sold in the ordinaryconduct of business. The purchase price of the property of P50 million was paid in cash and a totaltransaction costs of P500,000 related to the acquisition of the property was also paid at a later date.The land was subdivided into 2,000 lots (200 square meter for every lot) for an additional cost ofP5,500,000. On December 31, 2018, the market value of the lot was P1,500 per square meter.As of December 31, 2018, only 20,000 square meters are still unsold and market value of the lot hadincreased to P1,600 square meter. On this date, Randy Corporation decided to transfer theremaining lots into investment property that is to be carried under the fair value model. There wasno additional cost incurred on the change of intention on the property. What amount of gain shouldRandy Corporation recognize as a result of the transfer?

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Description: On January 2, 2018, Randy Corporation acquired a track of land that is to be sold in the ordinaryconduct of business. The purchase price of the property of P50 million was paid in cash and a totaltransaction costs of P500,000 related to the acquisit

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On January 2, 2018, Randy Corporation acquired a track of land that is to be sold in the ordinary conduct of business. The purchase price of the property of P50 million was paid in cash and a total transaction costs of P500,000 related to the acquisition of the property was also paid at a later date. The land was subdivided into 2,000 lots (200 square meter for every lot) for an additional cost of P5,500,000. On December 31, 2018, the market value of the lot was P1,500 per square meter.

On January 2, 2018, Randy Corporation acquired a track of land that is to be sold in the ordinary conduct of business. The purchase price of the property of P50 million was paid in cash and a total transaction costs of P500,000 related to the acquisition of the property was also paid at a later date. The land was subdivided into 2,000 lots (200 square meter for every lot) for an additional cost of P5,500,000. On December 31, 2018, the market value of the lot was P1,500 per square meter.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter9: Acquisitions Of Property

Section: Chapter Questions

Problem 26P

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