Platinum Valley Limited purchased land that included a derelict building of no value and for which the company had no use. Platinum demolished the old building and hired a contractor to construct a new building to be used as a production and distribution centre. The following cost information is related to the acquisition, removal and construction of the new building.

Land and building, purchase price 350,000

Net cost of removal of old building 80,000

Architect and survey fees (all for new building) 20,000

First year insurance premium on new building 5,000

First contractor payment 350,000

Second contractor payment 100,000

Third contractor payment (final) 300,000

Equipment to be used in production 100,000

Preparation and surfacing of a parking lot 100,000

Lighting for parking lot 40,000

Platinum estimates the residual value of the new building to be $100,000 based on the current value of a building that is already 30 years old (the estimated useful life of the building).

The construction of the building and parking lot was completed on 1 January 2004. Platinum?s year end is 31 December. The estimated useful lives of the assets are:

Building 30 years

Equipment 16 years

Parking lot 20 years

Parking lighting 20 years

In early January 2007, due to changes in the real estate market, the building was appraised by an expert as having a fair value (depreciated replacement cost) of $ 1,100,000. Management intends to revalue the building per 1 January 2007 and to recognize the new value at this date. Furthermore, the valuation expert and management estimate that the useful life of the building should be changed to 50 years. Its estimated residual value remains unchanged at $ 100,000.

Note that Platinum, with respect to the accounting of revaluations, estimates the revaluation against the gross carrying amount of thee asset and restates the net amount to the revalued amount of the asset.

Required

• Prepare a schedule of the cost of the land, the building, equipment, the parking lot and the lighting for the parking lot.
• Compute the revaluation as per 31 December 2007 and the depreciation for 2007.
• An entity shall choose either the cost model or the revaluation model as its accounting policy and shall apply that policy to an entire class of property, plant and equipment. Briefly explain these two models.

Platinum Valley Limited purchased land that included a derelict building of no value and for which the company had no use. Platinum demolished the old building and hired a contractor to construct a new building to be used as a production and distribution centre. The following cost information is related to the acquisition, removal and construction of the new building. Land and building, purchase price 350,000 Net cost of removal of old building 80,000 Architect and survey fees (all for new building) 20,000 First year insurance premium on new building 5,000 First contractor payment 350,000 Second contractor payment 100,000 Third contractor payment (final) 300,000 Equipment to be used in production 100,000 Preparation and surfacing of a parking lot 100,000 Lighting for parking lot 40,000 Platinum estimates the residual value of the new building to be $100,000 based on the current value of a building that is already 30 years old (the estimated useful life of the building). The construction of the building and parking lot was completed on 1 January 2004. Platinum's year end is 31 December. The estimated useful lives of the assets are: Building 30 years Equipment 16 years Parking lot 20 years Parking lighting 20 years In early January 2007, due to changes in the real estate market, the building was appraised by an expert as having a fair value (depreciated replacement cost) of $ 1,100,000. Management intends to revalue the building per 1 January 2007 and to recognize the new value at this date. Furthermore, the valuation expert and management estimate that the useful life of the building should be changed to 50 years. Its estimated residual value remains unchanged at $ 100,000. Note that Platinum, with respect to the accounting of revaluations, estimates the revaluation against the gross carrying amount of thee asset and restates the net amount to the revalued amount of the asset. Required 1. Prepare a schedule of the cost of the land, the building, equipment, the parking lot and the lighting for the parking lot. 2. Compute the revaluation as per 31 December 2007 and the depreciation for 2007. 3. An entity shall choose either the cost model or the revaluation model as its accounting policy and shall apply that policy to an entire class of property, plant and equipment. Briefly explain these two models