Silverfish Limited was set up in January 20X1. It earns its revenue by selling frozen fish and

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Question:

Silverfish Limited was set up in January 20X1. It earns its revenue by selling frozen fish and canned fish products. Silverfish Limited has its financial year end at 31 December. In the preparation of the financialstatements for the year ended 31 December 20X8, it is found that thefollowing issues need to be resolved:

The remuneration policy for the sales staff in Silverfish Limited includes a fixed monthly salary of $22,000 and an 8% salescommission calculated based on their individual monthly sales. Inorder to boost sales, Silverfish Limited launched an award schemein 20X8. Under this scheme, the sales representative who achievesthe highest sales in each of the three regions would win the Top ofSales Year Award. Each winner of the award would be rewarded acash prize of $100,000. The award ceremony is scheduled to takeplace on 20 March 20X9.

Silverfish Limited has commenced a lawsuit with Lemon Limitedin respect of the defective cans delivered to Silverfish Limited inSeptember 20X8. Silverfish Limited sued for a total compensationof $160,000 because the defective cans had caused contaminationto the canned products. The lawyer advised that Silverfish Limitedwould probably win the court case.Meanwhile, Lemon Limited had offered to settle the case for a lesseramount and the management is keen to settle the claim privately fornot more than $100,000 in order to save on the legal fee.

Required:

As the financial accountant of the company, you are required to adviseon the appropriate accounting treatments for each of the issues. Justifyyour answers by making reference to the appropriate accountingstandards.