Question 1

Explain how Sandin Ltd should account for the following items/situations, justifying your answers by reference to the conceptual frameworks definition of accounting elements.

1. Receipt of artwork of sentimental value only
2. Sandin Ltd is the guarantor for an employees bank loan:
   1. You have no reason to believe the employee will default on the loan.
   2. As the employee is in serious financial difficulties, you think it likely that he will default on the on the loan.
3. Sandin Ltd receives 1,000 in Hefe Ltd, trading at $4 each, as a gift from a grateful client.
4. The panoramic view of the coast from Sandin Ltds caf windows, which you are convinced attracts customers to the caf.
5. The court has ordered Sandin Ltd to repair the environmental damage it caused to the local river system. You have no idea how much this repair work will cost.

Question 2

Melvin Ltd reported the following balances at the end of December 2019. Prepare a Statement of Profit or Loss and a Statement of Financial Position.

Accounts payable	$16,000	Inventory	$36,000
Accounts receivable	30,000	PPE - Land	80,000
Long term bank loan	26,000	PPE - Vehicles	8,000
PPE* - Buildings	151,000	Retained earnings (open)	60,000
Cash	48,000	Sales	400,000
Ordinary shares	150,000	Supplies	3,000
Cost of goods sold	180,000	Supplies expense	6,000
Equipment	70,000	Wages expense	40,000

• PPE = Property, plant & equipment