(b) J-Mart Limited, a chain of departmental stores has distributed its operations into four Divisions i.e....

 

Transcribed Image Text:

(b) J-Mart Limited, a chain of departmental stores has distributed its operations into four Divisions i.e. Food, Furniture, Clothing and Household Appliances. The following information has been extracted from the records: (0) (ii) (iii) (iv) (v) (vi) The company allows the dissatisfied customers to return the goods within 30 days. It is estimated that 5% of the sales made in June 2015 will be refunded in July 2015. On June 2, 2015, three employees were seriously injured as a result of a fire at the company's warehouse. They have lodged claims seeking damages of Rs. 2.0 million from the company. The company's lawyers have advised that it is probable that the court may award compensation of Rs. 400,000. Under a new legislation, the company is required to fit smoke detectors at all the stores by December 31, 2015. The company has not yet installed the smoke detectors. On June 20, 2015, the board of directors decided to close down the Household Appliances Division. However, the decision was made public after June 30, 2015. The company has a large warehouse in Lahore which was acquired under a three- year rent agreement signed on April 1, 2014. The agreement is non-cancellable and the company cannot sub-let the warehouse. However, due to operational difficulties, the company shifted the warehouse to a new location. A 15% cash dividend was declared on July 5, 2015. Required Describe how each of the above issue should be dealt with in the financial statements for the year ended June 30, 2010. Support your point of view in the light of relevant International Accounting Standards. (b) J-Mart Limited, a chain of departmental stores has distributed its operations into four Divisions i.e. Food, Furniture, Clothing and Household Appliances. The following information has been extracted from the records: (0) (ii) (iii) (iv) (v) (vi) The company allows the dissatisfied customers to return the goods within 30 days. It is estimated that 5% of the sales made in June 2015 will be refunded in July 2015. On June 2, 2015, three employees were seriously injured as a result of a fire at the company's warehouse. They have lodged claims seeking damages of Rs. 2.0 million from the company. The company's lawyers have advised that it is probable that the court may award compensation of Rs. 400,000. Under a new legislation, the company is required to fit smoke detectors at all the stores by December 31, 2015. The company has not yet installed the smoke detectors. On June 20, 2015, the board of directors decided to close down the Household Appliances Division. However, the decision was made public after June 30, 2015. The company has a large warehouse in Lahore which was acquired under a three- year rent agreement signed on April 1, 2014. The agreement is non-cancellable and the company cannot sub-let the warehouse. However, due to operational difficulties, the company shifted the warehouse to a new location. A 15% cash dividend was declared on July 5, 2015. Required Describe how each of the above issue should be dealt with in the financial statements for the year ended June 30, 2010. Support your point of view in the light of relevant International Accounting Standards.

Answer rating: 100% (QA)

i Refunds for dissatisfied customers According to IAS 37 Provisions Contingent Liabilities and Contingent Assets a provision should be recognized in the financial statements when a present obligation ... View the full answer