For the second half of 2021, the following items require attention:

 

1) Accounts receivable are stated at $1 million on 31 December 2021 and a provision of 5% is made on the balance for bad and doubtful debts. In the first half-yearly interim financial statements, 4% was provided on the balance as at 30 June 2021.

 

2) Inventory loss of $10,000 was provided in the first half-yearly interim financial statements for an item with cost $100,000. At the year end of 31 December 2021, the item has a net realizable value of $105,000.

 

3) A provision of $200,000 is made for restructuring in the second half-yearly interim financial statements. The restructuring plan is approved by the management on 22 December 2021 but due to the holidays, is announced on 3 January 2022.

 

4) ABC holds a bond with semi-annual interest payment on every 1 August and 1 February. The accountant of ABC accrues for five months' interest receivable at the year end in the second half-yearly interim financial statements.

 

5) Up to 31 December 2021, ABC adopts the cost model for investment properties. On that day, it decides to change to the fair value model with effect from 1 January 2021 for both the annual financial statements and the interim financial statements for the second half-year.

 

Required: Make a report to the directors of ABC to discuss the appropriate accounting treatment for the above items in the interim financial statements for the second half-year.

Answer rating: 100% (QA)

To the Directors of ABC I am writing this report to discuss the appropriate accounting treatment for the following items in the interim financial statements for the second halfyear ending 31 December ... View the full answer