EVENTS AFTER THE REPORTING PERIOD QUESTIONS Flashcards
Included in non-current assets is a building, property A, with a net book value of £90,000 that was sold on 17th August 2017 at a price to be confirmed by independent valuers. The price was agreed by the valuers at £120,000, on 12th October 2017
Property A, the £90,000 building was sold on 17 August 2017 and therefore should not appear in the balance sheet as at 30 September 2017. Therefore it is an adjusting event, requiring assets to be reduced by £90k, and profit on sale of £30k to be taken to P&L account
Also included in non-current assets is a building, property B, with a net book value of £68,000 which was sold on 2nd October 2017 at a price of £54,000. This property had been revalued in the accounts on 1st October 2016
Property B, the £68,000 building, was not sold until 2 October 2017 and therefore the sale is a non-adjusting event. However, the fact the building was sold for £54,000 on 2nd Oct provides evidence of permanent diminution of value (£14,000 less than NBV) as at 30 Sep 2017, which is an adjusting event. This requires assets and revaluation reserve to be reduced by £14000
Included in current assets are £45,000, items of stock, as at 30 September 2017. These items of stock were sold on 2 October 2017 for £40,000
The event of actual sale of stock on 2nd October 2017 is a non-adjusting event but the sale provides evidence that the stock only had a realisable value of £40,000 rather than £45,000 at the year end and this is an adjusting event. Closing stocks and profits must be reduced by £5000
On 8 October 2017 other items of stock value at £30,000 were sold for £38,000 to a customer who subsequently went into liquidation on 14 October 2017. Included in the debtors of G S plc as at 30 September 2017 is an amount of £17,000 owed by this customer
The sale of stock on 8 Oct and the subsequent non-recovery of debt relating to that sale are both non-adjusting events. But £17,000 of debt as at 30 Sep 2017 has become irrecoverable on 14 Oct 2017. Reduce debtors and profits by £17,000
During July and August 2017, the company cashier defrauded the company of £15,000 taken from petty cash
The fraud is an adjusting event. The accounts will not be correct unless they are adjusted. Required: w/o £15,000 in profit and loss account, reduce cash balances
A fire occurred in one of the company’s warehouses where stock, included in the balance sheet at £18,000 was severely damaged. On 3rd December 2017 the company receive a cheque in full settlement from the insurers
The fire is a non-adjusting event. A note is required in notes to accounts for a material non-adjusting event
On 8 December 2017, 100 of the 124-strong workforce took strike action. The strike is anticipated to be of a shoer-term nature
A non-adjusting event. Consider if a note to the accounts is needed. Short term strike therefore note may not be needed. Decide on grounds of relevance -would non-disclosure affect ability of users of accounts to reach proper conclusions
