Toby and Talea McKellar are the joint owners of Beaut Beach Caravan Park, which is near a swimming beach popular during the summer months. The park provides not only camping facilities for caravans and tents but also up-market cabins with kitchenettes and ensuites. For the year ended 30June 2016, Toby and Talea determined the following financial information for their business:

Cash on hand Buildings purchased Income — cabins Salaries and wages Supplies used Other equipment purchased

$20000 420000 272000 220000 71000 63000

Accounts payable Accounts receivable Income — camping Supplies on hand Other expenses

$87000 8000 185000 15000 45000

A real estate agent valued the buildings at $500000 on 30 June 2016.

Required

a. Prepare an income statement for Beaut Beach Caravan Park for the year ended 30 June 2016.

b. Prepare a balance sheet for the business as at 30 June 2016.

c. Explain why you have used a particular valuation for the buildings in the balance sheet.