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Tutorial Investment Property

The key factor in classifying a property as an investment property is whether the primary purpose is to generate rental income. A real estate company that buys a building to lease office spaces qualifies as an investment property, as does an investment fund that acquires apartment complexes for tenants. A manufacturing company's factory and an agricultural company's barn and farmland would not qualify as they are used for the companies' own operations. A mixed-use property purchased by Byenoon Bhd with retail shops leased to tenants and residential units operated as rentals would qualify as an investment property.

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19 views3 pages

Tutorial Investment Property

The key factor in classifying a property as an investment property is whether the primary purpose is to generate rental income. A real estate company that buys a building to lease office spaces qualifies as an investment property, as does an investment fund that acquires apartment complexes for tenants. A manufacturing company's factory and an agricultural company's barn and farmland would not qualify as they are used for the companies' own operations. A mixed-use property purchased by Byenoon Bhd with retail shops leased to tenants and residential units operated as rentals would qualify as an investment property.

Uploaded by

2022696728
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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INVESTMENT PROPERTY

QUESTION 1

A.

The key factor in classifying whether a property is an investment property or not is the
primary purpose for which it is acquired.

i A real estate company in Gopeng bought a commercial building with the sole purpose
of generating rental income from leasing office spaces to various businesses.

ii A manufacturing company based in Kamunting acquires a large piece of land and


constructs a factory building on it to support its core manufacturing operations.

iii An investment fund company located in Teluk Intan acquires a portfolio of residential
apartment complexes with the primary objective of generating rental income from tenants.

iv An agricultural company in Tanjung Tualang purchased farmland and constructs a barn


on it for storing farm equipment and livestock, with no intention of leasing or earning rental
income from the land and building.

v A restaurant chain in Kuala Kangsar acquired a building to house one of its restaurant
locations, using the building exclusively for its restaurant business.

Required:
State whether the following properties would qualify as investment property or not according
to MFRS 140 Investment Property.
(5 marks)
B.

Byenoon Bhd, a company located in Ipoh, Perak purchased a mixed-use property on 1 January
2020 that includes a building with both retail shops on the ground floor and residential
apartments on the upper floors. The building has an estimated useful life of 25 years. The
company lease out the retail shops to external tenants and operate the residential apartments as
rental units. The property also offers ancillary services such as a shared parking lot and a
common courtyard. The initial cost of this investment property includes acquisition costs of
RM4,200,000 and legal fees for related acquisition of RM300,000. As at 31 December 2022,
Byenoon Bhd incurred the following relevant expenses and collected rental income related to
the investment property:

The company adopted the fair value model to account for its investment property and the
revaluation model for its property, plant and equipment.

Required:
i Explain the accounting treatment in relation to the above scenario as of 1 July 2021
and 1 July 2022.

(5 marks)
ii. Prepare an extract Statement of profit loss and other comprehensive income of Byenoon
Bhd for the year ended 31 December 2022.

(5 marks)
(Total: 15 marks)

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