On January $1,$ Graham Company purchased land $($the site of a new building$)$ for $$100,000.$ Soon thereafter, the state highway

department announced that a new feeder road would run next to the site. The effect was a dramatic increase in local property values.

Comparable land located nearby sold for $$700,000$ in December of the current year. Graham presents the land at $$700,000$ in its

accounts and, after reduction for implicit taxes at $33$ percent, the fixed asset total is $$400,000$ higher than historical cost with the same

amount shown separately in the shareholder equity account Current Value Increment. The valuation is fully disclosed in a footnote to

the financial statements with a letter from a certified property appraiser attesting to the $$700,000$ value.

Required:

a$.$ Assuming that the audit team decides the GAAP departure is material but not pervasive, identify how various components for the

standard report would be modified.

b$.$ Assuming that the audit team decides the GAAP departure is material and pervasive, identify how various components for the

standard report would be modified.