square meters are still unsold and the market value of the lost had increased to P1,600 per square meter. On this date, ERICKdecided to transfer the remaining lots into investment property that is to be carried under the fair value model. There was no additional cost incurred on the change of intention on the property. What amount of gain should ERICKCo. recognize as a result of the transfer?
On January 2, 2019, ERICKCo. acquired a tract of land that is to be sold in the ordinary conduct of business. The purchase price ofthe property of P80,000,000 was paid in cash and total transaction costs of P600,000 related to the acquisition of the property was also paid at a later date. The land was subdivided into 2,000 lots (200 square meters for every lot) for an additional costof P5,500,000. On December 31, 2019, the market value of the lot was P1,500 per square meter.As of December 31, 2020, only 20,000 square meters are still unsold and the market value of the lost had increased to P1,600 per square meter. On this date, ERICKdecided to transfer the remaining lots into investment property that is to be carried under the fair value model. There was no additional cost incurred on the change of intention on the property.
What amount of gain should ERICKCo. recognize as a result of the transfer?
Step by step
Solved in 2 steps with 1 images
