Reference no: EM132508442

The following events took place while Hippy Ltd is finalising its account for the year ending 30 June 2020:

1. Up until 30 June 2019, Hippy Ltd depreciated its land and buildings on a straight-line basis over their useful lives. On 1 July 2019 the directors decided, relying on the information provided by the local council, to revise the total useful lives of a heritage building. As at 1 July 2019, the building had a carrying amount of $1,500,000, no estimated residual value and a remaining useful life of 30 years. Useful life would have been 25 years if the change had not been effected. No depreciation has been provided for the year ended 30 June 2020.
2. On 5 July 2020, it was discovered that a loan payable totalling $28,500 had been paid during April 2019 but the payment was incorrectly recorded as interest paid. The loan payable was left in the books at 30 June 2020. 
3. Both events described above are material. Ignore any tax effect.

Required:

For the events described above:

Question 1. State, which of the following would best describe the circumstance of the event:

1. change in accounting policy;
2. change in accounting estimate; or
3. prior period error.

Question 2. Explain your decision in relation to both the events described above and discuss the appropriate accounting treatment based on your decisions. Provide any relevant entries and/or note disclosures required for the year ended 30 June 2020. Support your answers with reference to the relevant accounting standards.

Note: Narrations are not required for all journal entries.