(1)what is the valuation of land (2)what is the valuation of equipment

Portable Energy Ltd store. In fall 2015, David Tee initiated a crowdinding campaign with help from the Tiquitise - a mwiling platlin in Australia. Tix goal was to raise sullicienil capital to launch Portable Energy, a privately held company that manufactures and sells portable energy chews" for active people on the go. The company successfully raised $250,000 during the six-month campaign sullicient le cinct all coils related to the acquisition acquipment and materials naked to province its single product, Dragon Energy Dragon Energy is a portable energy chew favoured by amateur and professional athletes. The product is extremely popular with bikers, runners, and biathletes because ul'ils CTITYY kick and the essential vilunits and minerals delivered thatwally through ils mique ingredicils. The all-nalwal athletic lucl is preluced using two CONAMICT: maple syrup and a 'secret caffeine blend consisting of coffee, coconut oil, and dragon fruit extract that the company promotes as the Dragon Blend." The campany grows its own fruits: this process is complex and carefully tratinged. The plants pruduce fruit kur live months each year, geticTally from Septemt through March, in greenhouses situated in Dandenong South, Victoria, Australia. The pure maple sytun is imported from Canada. The maple syrup and "Dragem Blend" are mixed together at the company's teile facility. The chctyy chews arc packaged anu sokl cline through the company's website. At the beginning of 2018, Portable Energy entered into a contract with a property owner to use Retail Unit A in a department store in downtown Melbourne to sell its products. The contract is Rior live years, and Retail Unil A is part of a larger relail space with many relail mits in the parlic Portable Energy began producing energy chews in 2017 and has experienced consistent demand since the prodhuet hit the market. The theme preluct and manufacturing press attracted the atletition of several private investors. Given these developunctats. Assurance International, an audit firm, was hired to audit the company's financial statements for the year envling 30 Junie 2018. The lancial statemetils will be prepared in accordance with Australia Accounting Standards: the municiary wil is the Australian kars. Portable Energy treats land, equipment, and greenhouses as separate asset classes. Since its inception, the company has used the cost model for valuing property, plant, and equipment. Towever, managemenil now believes that the revaluatic mexlel lior both land and quipment is more appropriate, under the presumption that fair value presents more relevant financial information to the potential investors. Some financial information, prepared by Portable Energy Accountilatil, ix parenched in Tables 1 and 2. The company locate the payininis associated with the use of Retail Unil A in the department store part of its operating expenses. Land for Growing Purposes Al the end of 2015. Perlable Thiergy paid $80,000 for one acte a land on the outskirts of Dandenong South. An active market exists for similar pieces of land in the region; Portable Energy can access the markets at any time. Management believes the fair value estimate lia the land should be classified nx T.evel 1 in the l'air value Hicrarely. They are fairly certain that the land would not sell for less than $100,000, less selling costs of $5.000 and greenhouse removal costs of $2.000. As such, they propose that the land be reported at a fair value of $93.000, i.e., at their assessment of its fair value less costs of disposal. The recent selling prices of land in the area are presented in Table 3. TABLET Statement of Comprehensive Income as Prepared by Management For the Year Times June 30 Sales Tevene Cost of sales: variabile costs of presductie Cost of sales: fixed costs of precabouse operations Cost of sales: fixed costs of production operations Cost of sales: depreciation expense Gross prfit Administrative and camerating expreni Nel less Other comprehensive income - equipment revaluation (180.151 - 88.572) Other comprehensive income - land revaluation (93.000 - 80,000) Comprehensive income (loss) 2017 $200 (XX) 1.500X) 30.000 30.000 20.191 (30.191) 100,00%) (1.30,194) 2018 S3160.000) 270).CHX) 30.000 30.000 20.191 9.806 10K).CH (90,194) 91.579 13.000 11.383 (130.191) TABLK 2 Operating Assets Drafted by Management 2018 $93.000 180.131 2017 $80.000 120.000 (15.714) 112.000 (8,960) 287,426 112.000 (1.3,440) .371.711 Land (2017 at cost, 2018 at the value) Preciclem equipmenil (2017 al cost; 2018 al fair value) less Calel clenecintim Greenhouses, at cost Tess center clepintim (25 years) Subtotal Capitalized greenhonne Carls: Cirowing cnvrunent Dragon Crucit seecks Total greenhouse costs Total operating assets 12.000 2.CKM) 11.000 301.326 12.000 2,00) 11.000 385.711 TABLE 3 Voix and Markel (Active) Marke/Region Datulerung Springvalo Berwick Price'ACTE SKS.CD S60.000 $70,000 3 Production Equipment On 1 July 2016, the many Acuired a one-of-a-kind, customized piece of production equipmeil lor blending and packaging the clergy chews. The quicTIL was purchased fix $120,000, has a salvage value of $10,000, and an estimated useful life of seven years. Portable Energy elected to depreciate the cuipment using the straight-linc method over seven years, with me lull year of depreciatim taken in the first and last years of the assets lili. Management believes all components of the equipment depreciate at the same rate. The initial batches of Dragon Tcry WCTC produced in 2017. Managemcil believes that ticilher the market that the cost approach included in A ASB13 is relevatilin this situation. As of 30 June 2018, management calculated the fair value of the equipment as $180,151 based on a discounted cash flow (DCF) model calculated using its estimated cost of capital and its own assumptions about future cash llows. Table 4 pieci Portable Tinergy's DC mkel and the resulting calculations. The alion cultimal Perlable Energy's management team that the fair valuc revaluation model described in AASB16 must be used for all assets within the same class. The auditors also emphasised that AASB16 allows for revaluation when the l'air value can be measure relially:" and that, aller the revaluation. TATARCTICTI need to mamit the fair value of the asset to assure that the asset's carrying value continues to approximate the fair value. They added that ASB 13 clearly explain that present value measurements should be based on the risk- free rate and a risk peithal etmeSTIS the price for bearing the imcertainly inherent in the cash flows. Management replied that they believe the fair value is important to report under the company's current circumstances and that they believe their estimates are appropriate. Based upon a conversation between the auditors and the equipmenil's manufacturer, the cost for a similar piece of production equipment, roughly approximating the current condition of Portable Energy's equipment, ranges from $110,000 to $125,000. Use of Retail Unit A in a Department Store Portable Energy is granted the right to use Retail Unit A in the department store. Based on the terms in the contract, the property owner can require l'ortable Energy to relocate to another retail unit. In that case, the properly OWTICT is required to provide Portable Tiergy with a relail wil of similar quality and specifications to Retail Unit A and to pay for the relocation costs. The contract requires Portable Energy to use Retail Unit A to sell its goods during the hours that the larger retail space is xx. Portable Clicrgy makes all of the decisimis all the use of the Telail mit during the picriel dl 114c. For example, Portable Tinergy decides on the mix olgunls sold from the unit, the pricing of the goods sold, and the quantities of inventory held. Portable Energy also controls physical access to the unit throughout the five-year period of use. The contact requires Portable Tiergy ky make lixcul payments to the property OWTILT, as well As variatlc paymicils that are a percentage ol'sales from Retail Unil A. The properly Wnct provides cleaning and security services, as well as advertising services, as part of the contract. TARIF 4 Memntk Pruum Flat Dicamil Cuxli Fh IDCF) Algeria anel Maill 2011 2019 2001 2022 2003 The Prime Sahiti 0000 IRO ana 280 29 400 Kreve pws 100,909 1L6,00 132,6-10 105.000 Welcil pinhen Cannano (1200(914430) 1355455 (210) Annual fixed costs of greembouse o serious 20.000 (30,000) Allir snizenx 40.CINI (511,0K (1000) (10000) Net cash low 11,000 18 LCO 52.183 Die Chical scarill 180 151 7664 25,543 15157 Han hulle Peterprise 120.000 Accumulated deprecated and vears! 15,711 31,128 Benk 104265 Fair vals -henk velur OLO Portable Energy Ltd store. In fall 2015, David Tee initiated a crowdinding campaign with help from the Tiquitise - a mwiling platlin in Australia. Tix goal was to raise sullicienil capital to launch Portable Energy, a privately held company that manufactures and sells portable energy chews" for active people on the go. The company successfully raised $250,000 during the six-month campaign sullicient le cinct all coils related to the acquisition acquipment and materials naked to province its single product, Dragon Energy Dragon Energy is a portable energy chew favoured by amateur and professional athletes. The product is extremely popular with bikers, runners, and biathletes because ul'ils CTITYY kick and the essential vilunits and minerals delivered thatwally through ils mique ingredicils. The all-nalwal athletic lucl is preluced using two CONAMICT: maple syrup and a 'secret caffeine blend consisting of coffee, coconut oil, and dragon fruit extract that the company promotes as the Dragon Blend." The campany grows its own fruits: this process is complex and carefully tratinged. The plants pruduce fruit kur live months each year, geticTally from Septemt through March, in greenhouses situated in Dandenong South, Victoria, Australia. The pure maple sytun is imported from Canada. The maple syrup and "Dragem Blend" are mixed together at the company's teile facility. The chctyy chews arc packaged anu sokl cline through the company's website. At the beginning of 2018, Portable Energy entered into a contract with a property owner to use Retail Unit A in a department store in downtown Melbourne to sell its products. The contract is Rior live years, and Retail Unil A is part of a larger relail space with many relail mits in the parlic Portable Energy began producing energy chews in 2017 and has experienced consistent demand since the prodhuet hit the market. The theme preluct and manufacturing press attracted the atletition of several private investors. Given these developunctats. Assurance International, an audit firm, was hired to audit the company's financial statements for the year envling 30 Junie 2018. The lancial statemetils will be prepared in accordance with Australia Accounting Standards: the municiary wil is the Australian kars. Portable Energy treats land, equipment, and greenhouses as separate asset classes. Since its inception, the company has used the cost model for valuing property, plant, and equipment. Towever, managemenil now believes that the revaluatic mexlel lior both land and quipment is more appropriate, under the presumption that fair value presents more relevant financial information to the potential investors. Some financial information, prepared by Portable Energy Accountilatil, ix parenched in Tables 1 and 2. The company locate the payininis associated with the use of Retail Unil A in the department store part of its operating expenses. Land for Growing Purposes Al the end of 2015. Perlable Thiergy paid $80,000 for one acte a land on the outskirts of Dandenong South. An active market exists for similar pieces of land in the region; Portable Energy can access the markets at any time. Management believes the fair value estimate lia the land should be classified nx T.evel 1 in the l'air value Hicrarely. They are fairly certain that the land would not sell for less than $100,000, less selling costs of $5.000 and greenhouse removal costs of $2.000. As such, they propose that the land be reported at a fair value of $93.000, i.e., at their assessment of its fair value less costs of disposal. The recent selling prices of land in the area are presented in Table 3. TABLET Statement of Comprehensive Income as Prepared by Management For the Year Times June 30 Sales Tevene Cost of sales: variabile costs of presductie Cost of sales: fixed costs of precabouse operations Cost of sales: fixed costs of production operations Cost of sales: depreciation expense Gross prfit Administrative and camerating expreni Nel less Other comprehensive income - equipment revaluation (180.151 - 88.572) Other comprehensive income - land revaluation (93.000 - 80,000) Comprehensive income (loss) 2017 $200 (XX) 1.500X) 30.000 30.000 20.191 (30.191) 100,00%) (1.30,194) 2018 S3160.000) 270).CHX) 30.000 30.000 20.191 9.806 10K).CH (90,194) 91.579 13.000 11.383 (130.191) TABLK 2 Operating Assets Drafted by Management 2018 $93.000 180.131 2017 $80.000 120.000 (15.714) 112.000 (8,960) 287,426 112.000 (1.3,440) .371.711 Land (2017 at cost, 2018 at the value) Preciclem equipmenil (2017 al cost; 2018 al fair value) less Calel clenecintim Greenhouses, at cost Tess center clepintim (25 years) Subtotal Capitalized greenhonne Carls: Cirowing cnvrunent Dragon Crucit seecks Total greenhouse costs Total operating assets 12.000 2.CKM) 11.000 301.326 12.000 2,00) 11.000 385.711 TABLE 3 Voix and Markel (Active) Marke/Region Datulerung Springvalo Berwick Price'ACTE SKS.CD S60.000 $70,000 3 Production Equipment On 1 July 2016, the many Acuired a one-of-a-kind, customized piece of production equipmeil lor blending and packaging the clergy chews. The quicTIL was purchased fix $120,000, has a salvage value of $10,000, and an estimated useful life of seven years. Portable Energy elected to depreciate the cuipment using the straight-linc method over seven years, with me lull year of depreciatim taken in the first and last years of the assets lili. Management believes all components of the equipment depreciate at the same rate. The initial batches of Dragon Tcry WCTC produced in 2017. Managemcil believes that ticilher the market that the cost approach included in A ASB13 is relevatilin this situation. As of 30 June 2018, management calculated the fair value of the equipment as $180,151 based on a discounted cash flow (DCF) model calculated using its estimated cost of capital and its own assumptions about future cash llows. Table 4 pieci Portable Tinergy's DC mkel and the resulting calculations. The alion cultimal Perlable Energy's management team that the fair valuc revaluation model described in AASB16 must be used for all assets within the same class. The auditors also emphasised that AASB16 allows for revaluation when the l'air value can be measure relially:" and that, aller the revaluation. TATARCTICTI need to mamit the fair value of the asset to assure that the asset's carrying value continues to approximate the fair value. They added that ASB 13 clearly explain that present value measurements should be based on the risk- free rate and a risk peithal etmeSTIS the price for bearing the imcertainly inherent in the cash flows. Management replied that they believe the fair value is important to report under the company's current circumstances and that they believe their estimates are appropriate. Based upon a conversation between the auditors and the equipmenil's manufacturer, the cost for a similar piece of production equipment, roughly approximating the current condition of Portable Energy's equipment, ranges from $110,000 to $125,000. Use of Retail Unit A in a Department Store Portable Energy is granted the right to use Retail Unit A in the department store. Based on the terms in the contract, the property owner can require l'ortable Energy to relocate to another retail unit. In that case, the properly OWTICT is required to provide Portable Tiergy with a relail wil of similar quality and specifications to Retail Unit A and to pay for the relocation costs. The contract requires Portable Energy to use Retail Unit A to sell its goods during the hours that the larger retail space is xx. Portable Clicrgy makes all of the decisimis all the use of the Telail mit during the picriel dl 114c. For example, Portable Tinergy decides on the mix olgunls sold from the unit, the pricing of the goods sold, and the quantities of inventory held. Portable Energy also controls physical access to the unit throughout the five-year period of use. The contact requires Portable Tiergy ky make lixcul payments to the property OWTILT, as well As variatlc paymicils that are a percentage ol'sales from Retail Unil A. The properly Wnct provides cleaning and security services, as well as advertising services, as part of the contract. TARIF 4 Memntk Pruum Flat Dicamil Cuxli Fh IDCF) Algeria anel Maill 2011 2019 2001 2022 2003 The Prime Sahiti 0000 IRO ana 280 29 400 Kreve pws 100,909 1L6,00 132,6-10 105.000 Welcil pinhen Cannano (1200(914430) 1355455 (210) Annual fixed costs of greembouse o serious 20.000 (30,000) Allir snizenx 40.CINI (511,0K (1000) (10000) Net cash low 11,000 18 LCO 52.183 Die Chical scarill 180 151 7664 25,543 15157 Han hulle Peterprise 120.000 Accumulated deprecated and vears! 15,711 31,128 Benk 104265 Fair vals -henk velur OLO