On January 2, 2020, KENNYInc. made a test of impairment on one of the buildings carried as plant asset. The test on impairment revealed a recoverable value of P12,000,000 on that building. The carrying value of this building as of January 2, 2020, is P16,000,000 with a remaining useful life of 10 years.On January 2, 2022, KENNYdecided to convert this particular building into an investment property that is to be carried at fair value. The cost of converting the building is insignificant but as a result of the change in the usage, the fair market value of the building was reliably valued at P19,000,000. 1.What amount of realized revenue/impairment recovery should KENNYrecognize in its profit or loss statement on the date of the transfer? 2.What amount of unrealized gain/revaluation surplus should the company recognize in its shareholders’ equity on the date of the transfer?
On January 2, 2020, KENNYInc. made a test of impairment on one of the buildings carried as plant asset. The test on impairment revealed a recoverable value of P12,000,000 on that building. The carrying value of this building as of January 2, 2020, is P16,000,000 with a remaining useful life of 10 years.On January 2, 2022, KENNYdecided to convert this particular building into an investment property that is to be carried at fair value. The cost of converting the building is insignificant but as a result of the change in the usage, the fair market value of the building was reliably valued at P19,000,000.
1.What amount of realized revenue/impairment recovery should KENNYrecognize in its profit or loss statement on the date of the transfer?
2.What amount of unrealized gain/revaluation surplus should the company recognize in its shareholders’ equity on the date of the transfer?
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