Caspian Pty Ltd is a business that manufactures and sells water filters. The business was established in 2013 and has grown to a large proprietary company with four owners: Olivia, Elliot, Alexandra and John. The business operates from a large factory in Melbourne and is registered for Goods and Services Tax (GST) with financial year end on 30 June. When it commenced its operations on 5 February 2013, Caspian was not able to purchase a building to manufacture water filters in and instead rented a factory. As the business has grown, the owners are considering purchasing the following assets for $440,000 (GST Inclusive) on 1 July 2021:

Asset

Fair value of asset

Land

$120,000

Building

$330,000

Equipment

$30,000

Total

$480,000

Purchasing these assets would involve additional costs: legal fees of $5,500 (GST Inclusive) to register the land in business name; $6,600 (GST Inclusive) to rewire the building; $4,840 (GST Inclusive) for a one year building insurance; $2,200 (GST Inclusive) to conduct a safety inspection of the equipment. In addition, the building will include the following necessary (not optional) fixture and fittings costs to ensure that the site is in a workable condition: $11,000 (GST Inclusive) to install solar panels; $12,100 (GST Inclusive) to install a surveillance system; $16,500 (GST Inclusive) to install a cooling/heating system.

The building is expected to have a useful life of 20 years and an estimated residual value of $60,000. The equipment is expected to have a useful life of 5 years and be used for 10,000 hours and an estimated residual value of $4,000. The equipment is expected to be used for 1,500 hours in year 1, 2,200 hours in year 2, 2,500 hours in year 3, 2,000 hours in year 4, and 1,800 hours in year 5. Caspian adopts the cost model to measure all existing non-current assets.

Because the business has seen a significant increase in demand for its products due to the pandemic in recent months, the owners believe existing non-current assets should be valued higher and it would be more appropriate to change to the revaluation model of measuring non-current assets.

Question 1: Determine the amounts to be recorded in the balance sheet if Caspian were to acquire land, building and equipment on 1 July 2021. Consider any additional amounts that need to be included in the cost of the land, building and equipment and justify why or why not they should be included. Show your calculations in a table in the appendix (the appendix is not counted in the word count).