Golden Properties Corporation purchased a parcel of land in March 2016 for $1 million with the intent to construct a building on the property in the near future. At the time of purchase, Golden applied the cost model and measured and reported the land at its acquisition cost as allowed in IAS 16. Golden follows IFRS. Management decided in 2017 that the land qualifies as an investment property under IAS 40 and that Golden is to apply the fair value model of accounting for investment properties effective immediately because the company believes that changing the measurement model will provide more relevant information. Independent appraisals indicate that the land's fair value at December 31, 2016 and 2017 was $980,000 and $1,050,000, respectively. Before application of the fair value model of accounting for investment properties, Golden's reported net income for the years ended December 31, 2015, 2016, and 2017 was $73,000, $41,000, and $12,000, respectively; and Golden's reported retained earnings at December 31, 2015, 2016, and 2017 was $189,000, $230,000, and $242,000, respectively. Golden has 100,000 common shares outstanding.
Instructions
Answer the following, ignoring income tax considerations.
(a) Prepare the original comparative statement of financial position as at December 31, 2016 and the original comparative income statement for the year ended December 31, 2016 for the affected accounts.
(b) Prepare Golden's journal entries, if any, to record the change in accounting policy.
(c) Prepare the restated comparative statement of financial position as at December 31, 2017 and the restated comparative income statement for the year ended December 31, 2017 for the affected accounts.
(d) From the perspective of an investor, discuss the effects of changing to the fair value model of accounting for investment properties on Golden's financial statements and earnings per share.