Application of the Fair Value Model
on January 20, 2021

question 66

Essay

Application of the fair value model
On January 20, 2021, Trail Corp. purchased a luxury apartment complex in British Columbia for $ 10 million cash. In addition to the purchase price, Trail paid transfer fees of $ 150,000 and legal fees of $ 20,000.
Wages were paid to maintenance staff during each of the following three years:
$$\begin{array} { l l } \mathbf { 2 0 2 1 } : & \mathbf { 5 1 0 3 , 0 0 0 } \\\mathbf { 2 0 2 2 } : & \mathbf { \$ 1 0 7 , 0 0 0 } \\\mathbf { 2 0 2 3 } : & \mathbf { 5 1 1 0 , 0 0 0 }\end{array}$$ Fair value information:
Dec 31, 2021: $\quad 59.1$ million
Dec 31, 2022: $\quad \$ 10.9$ million
Dex 31, 2023: $\quad \$ 11.7$ million Other information:
The complex qualifies as investment property.
Trail applies the fair value model to all its investment property.
Instructions
Prepare all required journal entries for 2021, 2022, and 2023.

Comprehend and apply the concept of break-even analysis in diverse business divisions.

Analyze the effects of common fixed expenses allocation on segment performance.

Calculate and interpret net operating income for a company based on segmented financial data.

Understand the concept of super-variable costing and its application in managerial decision making.

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Definitions:

Ice Cream

A frozen dessert made from dairy products, sweeteners, and flavorings, enjoyed as a treat or snack.

Apple Pie

A traditional dessert made from apples and pastry dough, often seasoned with cinnamon, sugar, and sometimes butter, and baked until golden brown.

Output

The total amount of goods and services produced by an economy, firm, or machine over a specific period.

Sweaters

Clothing items worn on the upper part of the body, typically knitted or crocheted, designed to keep the wearer warm.