Highstreet Inc. is a distributor of electronic equipment. In January 2014, the company purchased a new building for its warehousing and head office requirements for a total cost of S5 million. It is now August 27, 2014, and the company has just completed renovations costing an additional $2 million and will be moving in on August 31. During these eight months, the company was able to rent out a portion of the building to a company next door for storage. Net storage revenue of $100,000 was earned during this renovation period. The elevator has just been inspected for a total cost of $150,000 and the next inspection will occur in five years as required. Based on a property inspection that was completed prior to the purchase, the inspector reported that the roof would likely last another 7 years, and the heating and air conditioning system would likely have to be replaced in 10 years. The company has determined that the roof is worth about 10% of the total original cost of the building and the heating and air conditioning system is worth about 15%. The company expects the building's useful life will be 30 years.
Instructions
(a) Assuming Highstreet follows ASPE, discuss how the costs of the building should be initially recorded. Also discuss how any additional subsequent costs should be recorded and the related depreciation costs.
(b) Assuming Highstreet follows IFRS, discuss how the costs of the building should be initially recorded. Also discuss how any additional subsequent costs should be recorded and the related depreciation.