1. valuation of production equipment;(give reasons and assess the impact on the ending balance sheet and income statement.)

The financial statements will be prepared in accordance with Australia Accounting Standards; the monetary unit is the Australian dollars.

land, equipment, and greenhouses as separate asset classes. Since its inception, the company has used the cost model for valuing property, plant, and equipment. However, management now believes that the revaluation model for both land and equipment is more appropriate, under the presumption that fair value presents more relevant financial information to the potential investors.

Production Equipment 0n 1 July 2016, the company acquired a one-ofa-kind, customized piece of production equipment for blending and packaging the energy chews. The equipment was purchased for $120,000, has a salvage value of $10,000, and an estimated useful life of seven years. Portable Energy elected to depreciate the equipment using the straight-line method over seven years, with one full year of depreciation taken in the first and last years of the asset's life. Management believes all components of the equipment depreciate at the same rate. The initial batches of Dragon Energy were produced in 201 '3'. Management believes that neither the market nor the cost approach included in M5813 is relevant in this situation. As of30 June 2013, management calculated the fair value of the equipment as $130,151 based on a discounted cash ow (DCF) model calculated using its estimated cost of capital and its own assumptions about future cash flows. Table 4 presents Portable Energy's DCF model and the resulting calculations. The auditors cautioned Portable Energy's management team that the fair value revaluation model described in M33 116 must be used for all assets within the same class. The auditors also emphasised that M83 116 allows for revaluation when \"the fair value can be measured reliably," and that, after the revaluation, management needs to monitor the fair value of the asset to assure that the asset's carrying value continues to approximate the fair value. They added that AASB 13 clearly explain that present value measurements should be based on the risk- free rate and a risk premium that represents the price for bearing the uncertainty 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 equipment'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