Clarkson plc is a Company producing electronic gadgets. The business has been in existence for the last seven years. Their year-end is 30 April. The managing Director has provided you with the following three situations that relate to their company. The following events relate to the period ended 31 April 2021.

(a) A customer, Yenn plc sued Clarison plc for damages which they claim, they suffered as a result of the damaged products purchased from Clarison. The court proceedings were stills in progress at year-end. Clarison's legal practitioners have advised the management, that there's a high chance, the judges will rule in favor of the customer because of their original contract terms with the customer. Nothing was done in the financial statements to account for this at year-end. On May 25 the court ruled in favor of Yenn and ordered Clarison to pay damages of BWP2 Million in sixty days.

(b) Clarison plc incurred huge losses from its sales in March 2021 because of a reduction in the product prices. Lockdown and Covid 19 country regulations resulted in dwindling demand for the products. There was also an unpredicted launch of higher technical classic products by competitors during the period. Earlier on the Acting Accountant had hinted that an adjustment to the inventory should be done. No action has been done to the financial statement in view of this.

(C) The Board of Directors for Clarison had a meeting on 17 May 2021, in which they announced a final dividend of BWP25.00 for every share held for as at 30 April 2021.

REQUIRED

Comment on the above transactions and explain how the acting Accountant should account for them in the financial statements for the year ended 30 April 2021in reference to specific standard.

Answer rating: 100% (QA)

Solution The treatment for the above transactions in the Financial Statements of Clarkson plc for th... View the full answer