PART B

 Let us assume that the financial statements for the year ending 30 June 2023 were just drafted. The meeting for the board of directors to approve the 2023 financial statements will be held on 31 August 2023. During the period between the end of the reporting period and the date the accounts are to be authorised for issue, the following events have occurred. This information should be considered in the preparation of the financial statements for the year ended 30 June 2023 before their publication. All events and transactions are material.

 On 15 July 2023, an accountant detected an error in which credit notes totalling $20,000 related to June sales were incorrectly posted against sales made in July.

 

On 20 July 2023, a fire occurred, resulting in the destruction of two of the company's delivery trucks, causing damages amounting to $40,000. While insurance will cover $35,000 of the damages, the payment of the insurance claim has been delayed due to an ongoing investigation. The loss of these vehicles has severely disrupted the company's delivery schedules.

 

1. On 31 July 2023, the Department of Occupational Health and Safety charged the company for unsafe storage practices that caused toxic materials to leak into a local creek on 18 July 2023. If the court finds the company negligent, it will be required to pay a fine of $15,000 in addition to legal and clean-up costs exceeding $10,000.

 

1. On 1 August 2023, the purchasing manager discovered that a batch of invoices related to June inventory purchases had not been processed, totalling $10,500.

 

1. On 22 August 2023, the company released a prospectus offering 5,000 debentures with a 5% interest rate, valued at $50 each, for public subscription. The debentures will be redeemable on 1 March 2025.

 

Required:

 Classify the above events as either adjusting or non-adjusting events after the end of the reporting period. Provide a brief justification for your classification. 

 

1. Based on your answer to Question 1 above, prepare the necessary journal entries for adjustments for the 2023 financial statements or note disclosures to comply with the requirements of AASB 110/IAS 10.

Answer rating: 100% (QA)

Classifying Events Adjusting Events Error in posting credit notes related to June sales in July This ... View the full answer