PAS 40 Multiple Choice Questions on Investment Property PDF

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A property that is held by a lessee, under an operating lease, may be held as an investment property, but only if: A. The operating lease exceeds 20 years. B. It is a hotel. C. The lessee uses the fair value model. D. None of the above. Which of the following does not define investment property? A. ...

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1. A property that is held by a lessee, under an operating lease, may be held as an investment property, but only if: A. The operating lease exceeds 20 years. B. It is a hotel. C. The lessee uses the fair value model. D. None of the above. 2. Which of the following does not define investment property? A. Property held to earn rentals. B. Property held for capital appreciation. C. Property used in the production or supply of goods or services. D. A and C. 3. Which of the following statements is true with regards to an investment property? A. An investment property generates cash flows largely independently of the other assets held by an entity. B. The value in use of investment property is significantly higher than of owneroccupied property. C. An investment property unlike owner-occupied property shall not be depreciated over its useful life. D. An investment property unlike owner-occupied property shall always be measured at its historical cost. 4. An investment property shall be measured initially at its __________. A. Cost B. Fair value C. Deemed cost D. Value in use 5. If property held under an operating lease is classified as investment property: A. All investment property will be accounted for using the fair value model. B. Depreciation will no longer be charged. C. All property held under operating leases are classified as investment properties. D. None of the above. 6. If a property is partly an investment property, and partly owner-occupied, the company should account for the property: A. As owner-occupied. B. Each portion should be accounted for separately. C. As investment property. D. As inventory. 7. If a firm provides significant ancillary services to tenants in its property: A. The service fees should be capitalized.

B. It may have to be classified as investment property, rather than as owneroccupied. C. It may have to be classified as owner-occupied, rather than an investment property. D. None of the above. 8. A parent company leases a property to its subsidiary. It may be classified as an investment property in the: A. Parent company’s individual financial statements. B. Subsidiary’s accounts. C. Consolidated accounts. D. Combined financial statements. 9. Repairs and maintenance costs are normally: A. Expensed in the statement of profit or loss as incurred. B. Capitalized. C. Recorded as deferred expenses. D. None of the above. 10. If the costs of a major repair such as replacement of walls are capitalized: A. They must be shown as a separate asset. B. The board of directors must be notified immediately. C. Any remaining costs of a previous inspection must be written off. D. All of the above. 11. Which of the following terms does this statement define: “the amount of cash or cash equivalents paid or the fair value of other consideration given to acquire an asset at the time of its acquisition or construction”? A. Cost B. Deemed cost C. Fair value D. Present value 12. If payment for an investment property is deferred beyond normal credit terms, any additional payment above the cash cost of the asset will be accounted for as: A. Cost of fixed asset B. Borrowing cost C. Repairs and maintenance D. Capitalizable 13. If one or more assets are exchanged for a new asset, the new asset is valued at: A. Fair value

B. Replacement cost C. Residual value

D. Cost 14. In the case of an exchange of assets, if the acquired asset cannot be valued: A. The carrying value of the asset given up is used. B. The residual value is used. C. The asset cannot be capitalized. D. The asset should be measured at fair value. 15. An undertaking can choose either the cost model or the revaluation model, as its accounting policy for investment property. It must apply the chosen model to: A. All fixed assets B. All investment property C. Major assets

D. Land and building 16. A gain arising from a change in the fair value of investment property should be recorded: A. As an extraordinary item B. In the revaluation reserve C. In the statement of profit or loss D. In the statement of other comprehensive income 17. Using the cost model, the asset in accounted for at: A. Cost less accumulated depreciation. B. Cost less accumulated depreciation and any impairment losses. C. Cost

D. At fair value less depreciation. 18. When an undertaking decides to dispose of an investment property without development: A. It is reclassified as owner-occupied.

B. It continues to treat the property as an investment property. C. It is transferred to inventory. D. It is reclassified as held for sale. 19. If an undertaking begins to redevelop an existing investment property for continued use as investment property: A. It continues to treat the property as an investment property. B. It is reclassified as owner-occupied. C. It is transferred to inventory. D. It is reclassified as held for sale.

20. When an undertaking uses the cost model, transfers between investment property, owner-occupied property and inventories: A. Do not change the carrying amount of the property transferred. B. Should be revalued at the date of transfer. C. Are prohibited. D. None of the above. 21. For a transfer from investment property, carried at fair value, to owner-occupied property or inventories, the property’s cost for subsequent accounting is: A. Its original cost less accumulated depreciation. B. Its fair value at the date of change in use. C. Its original cost. D. Its residual value. 22. For a transfer from inventories to investment property that will be carried at fair value, any difference between the fair value of the property at that date and its previous carrying amount is: A. Recognized in statement of profit or loss. B. Discounted to present value. C. Noted it as a contingent liability. D. Written off over the life of the asset. 23. When an undertaking completes the construction, or development, of a self-built investment property that will be carried at fair value, any difference between the fair value of the property at that date, and its previous carrying amount: A. Noted it as contingent liability. B. Written off over the life of the asset. C. Discounted to present value. D. Recognized in statement of profit or loss. 24. Compensation from third parties for items impaired, lost or sequestrated should be recorded as income: A. When the cash is received. B. When the compensation is receivable. C. When the item is lost. D. When paid. 25. The carrying amount of an item is derecognized (written out of the balance sheet/statement of financial position): A. Either on disposal or on inception of finance lease. B. On entering into a finance lease. C. On disposal. D. On acquisition.

26. The gain, or loss, arising on the sale of an asset is: A. The cash proceeds. B. The net proceeds minus the carrying value of the asset. C. The net proceeds minus the residual value of the asset. D. The fair values less cost of the asset. 27. Which of the following properties owned by an entity would be classified as an investment property? A. A property that had been leased to a tenant, but which is no longer required and is now being held for resale B. Land purchased for its investment potential. Planning permission has not been obtained for building construction of any kind C. A new office building used as entity’s head office, purchased specifically in order to exploit its capital gains potential D. A bungalow used for executive training 28. If an entity wishes to change from a cost model to fair value model under IAS 40 – Investment Property, when may it do so? A. When the board of directors approves a change B. When the value of the assets will improve with a revised model C. When a change will result in a more appropriate presentation D. When the market for these properties is fluctuation 29. Which two of the following properties fall under the definition of investment property and therefore within the scope of IAS 40? A. Property occupied by an employee paying market rent B. A building owned by an entity and leased out under an operating lease C. Property being constructed on behalf of 3rd parties D. Land held for long term appreciation...