Australia Ltd's directors decided on 1 April 2024 to restructure the company's operations as\ follows.\ Plant Alpha would be closed down and put on the market for sale.\ 1000 employees working in Plant Alpha would be retrenched on 30 June 2024, and\ would be paid their accumulated entitlements plus 3 months wages.\ The remaining 500 employees working in Plant Alpha would be transferred to Plant Beta,\ which would continue operating.\ Five head-office staff would be retrenched on 15 May 2024, and would be paid their\ accumulated entitlements plus 3 months wages.\ As at the end of Australia Ltd's reporting period, 30 June 2024, the following transactions and\ events had occurred.\ Plant Alpha was shut down on 1 June 2024. An offer of

$100

milion had been received\ for Plant Alpha but there was no binding sales agreement.\ The 200 retrenched employees had left and their accumulated entitlements had been\ paid. However, an amount of

$5

million, representing a portion of the 3 months wages\ for the retrenched employees, had still not been paid.\ Costs of

$1

million were expected to be incurred in transferring the 500 employees to\ their new work in Plant Beta. The transfer is planned for 1 July 2024.\ 10 of the 11 head-office staff who have been retrenched have had their accumulated\ entitlements paid, inducing the 3 months wages. However, one employee, Nokomoto,\ remains in order to complete administrative tasks relating to the closure of Plant Alpha\ and the transfer of staff to Plant Beta.\ Nokomoto is expected to stay until 31 July 2024. His salary for July will be

$15,000

and\ his retrenchment package will be

$45,000

, all of which will be paid on the day he leaves.\ He estimates that he would spend

40%

of his time administering the closure of Plant\ Alpha,

40%

on administering the transfer of staff to Plant Beta, and the remaining

20%

\ on general administration.  Please explain and calculate the restructuring provisions to be recognised as at 30 June\ \ Item 3\ 2024\ Jan 1 Australia Ltd used a prospectus inviting applications for 200,000 ordinary shares\ at an issue price of 

 $10

, with

$6

payable on application and the balance payable\ on 10 June 2024 . The issue was underwritten at a commission of

0.5%

of the total\ issued capital.\ Jan 31 Applications closed with the ordinary share issue oversubscribed by 50,000 .\ Feb 1 All shares were allotted on a pro-rata basis, and application money was refunded\ to unsuccessful applicants.\ Feb 15 The underwriter paid amounts less commission.\ June 10 The balance payable on the ordinary shares was received from holders of 180,000\ ordinary shares.

Answer rating: 100% (QA)

To recognize the restructuring provisions as of June 30 2024 we need to calculate the expected costs related to the restructuring activities outlined in the scenario 1 Retrenchment of Plant Alpha Empl... View the full answer