Holdem Properties Corporation purchased a parcel of land in 2010 for $1 million with the intent to construct a building on the property in the near future. At the time of purchase, and in the subsequent financial statements for the years ended December 31, 2010, and 2011, Holdem applied the cost model and measured and reported the land at its acquisition cost as allowed in IAS 16. Holdem follows IFRS and management decided in early 2012 that the land qualifies as an investment property under IAS 40 and that Holdem 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, 2010, and 2011, was $980,000 and $1,050,000, respectively. Holdem’s reported retained earnings at December 31, 2010, and 2011, were $230,000 and $290,000, respectively.
(a) Prepare the original balance sheets and income statements for the affected accounts.
(b) Prepare Holdem’s journal entry, if any, to record the change in accounting policy.
(c) Prepare the restated balance sheets and income statements for the affected accounts.