QUESTION 1

OWL company has the following balances in its financial statements as at 31 December 2021:

	$000
Investment property	2,500
Building (Cost: $6,000,000)	4,800
Air-conditioning system (Cost: $500,000)	200
Machinery (Cost: $4,500,000)	3,000

The estimated lives of the building structure, air conditioning system and machinery are 25 years, 10 years and 15 yearsrespectively. When the air conditioning system is due for replacement, it is estimated that the old system will be dismantled and sold for $50,000.The replacement was done on 1 January 2021.

Fair value model is used for investment property, and it had revalued to $3.25million.

Depreciation is time-apportioned where appropriate.

Required:

(a) Use the information as above to discuss the accounting treatments for the assets of OWL Company as at 31 December 2021.

(b) Apply the IAS 16 Property, Plant and Equipment, explainthe accounting treatment for revaluation increase and decrease in accordance with.