Indicate if the following events adjusting items. If they are adjusting items discuss the effect on the financial statements. Year-end was 31 December x4 and the accounts were authorised for issue on 15 March x5. (a) Entity makes a provision for doubtful debts of 1% and the amount provided for at the end of 31 December x4 was RM500,000. On 15 January, a debtor who owed the entity RM2 million became insolvent. (b) Closing inventory was determined as RM1.5 million based on cost. Part of the inventory of RM200,000 was damaged but the store-keeper expected the goods to be sold above cost. However, these goods were sold on 19 January for RM120,000. (c) Entity signed a contract to acquire a factory building on 10 January x4. The estimated cost of the building was RM130 million. (d) On 28 February x5, the entity decided to close down its shoemaking operation which was identified as a separate operation from the rest of the entity's business. (e) The factory plant was damaged on 3 March x5 and the recoverable amount was estimated to be RM1.2 million and the carrying value was RM1.5 million. () Entity proposed the final ordinary dividend on 1 March x5. (g) The entity had provided for a contingent liability of RM425,000 but judgement made on 12 February x5 was RM500,000. (h) A civil suit was brought against the entity before the end of the financial year. The lawyers advised the company that the company would lose the case and-suffer a loss of RM1.2 million. On 10 March x5, the company and the complainant agreed to settle it out of court. The company paid RM1 million. (1) Entity was part way through the construction of an office block. The initial contract price was RM25 million. However, on 12 February x5, the contract price was revised to RM17 million.
Indicate if the following events adjusting items. If they are adjusting items discuss the effect on the financial statements. Year-end was 31 December x4 and the accounts were authorised for issue on 15 March x5. (a) Entity makes a provision for doubtful debts of 1% and the amount provided for at the end of 31 December x4 was RM500,000. On 15 January, a debtor who owed the entity RM2 million became insolvent. (b) Closing inventory was determined as RM1.5 million based on cost. Part of the inventory of RM200,000 was damaged but the store-keeper expected the goods to be sold above cost. However, these goods were sold on 19 January for RM120,000. (c) Entity signed a contract to acquire a factory building on 10 January x4. The estimated cost of the building was RM130 million. (d) On 28 February x5, the entity decided to close down its shoemaking operation which was identified as a separate operation from the rest of the entity's business. (e) The factory plant was damaged on 3 March x5 and the recoverable amount was estimated to be RM1.2 million and the carrying value was RM1.5 million. () Entity proposed the final ordinary dividend on 1 March x5. (g) The entity had provided for a contingent liability of RM425,000 but judgement made on 12 February x5 was RM500,000. (h) A civil suit was brought against the entity before the end of the financial year. The lawyers advised the company that the company would lose the case and-suffer a loss of RM1.2 million. On 10 March x5, the company and the complainant agreed to settle it out of court. The company paid RM1 million. (1) Entity was part way through the construction of an office block. The initial contract price was RM25 million. However, on 12 February x5, the contract price was revised to RM17 million.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter8: Current And Contingent Liabilities
Section: Chapter Questions
Problem 63E: Reporting Liabilities Morton Electronics had the following obligations: a. A legally enforceable...
Related questions
Question
Transcribed Image Text:1 Indicate if the following events or transactions are adjusting or non-
adjusting items. If they are adjusting items discuss the effect on the
financial statements. Year-end was 31 December x4 and the accounts were
authorised for issue on 15 March x5.
(a) Entity makes a provision for doubtful debts of 1% and the amount
provided for at the end of 31 December x4 was RM500,000. On
15 January, a debtor who owed the entity RM2 million became
insolvent.
(b) Closing inventory was determined as RM1.5 million based on cost.
Part of the inventory of RM200,000 was damaged but the store-keeper
expected the goods to be sold above cost. However, these goods were
sold on 19 January for RM120,000.
(c) Entity signed a contract to acquire a factory building on 10 January
x4. The estimated cost of the building was RM130 million.
(d) On 28 February x5, the entity decided to close down its shoemaking
operation which was identified as a separate operation from the rest
of the entity's business.
(e) The factory plant was damaged on 3 March x5 and the recoverable
amount was estimated to be RM1.2 million and the carrying value
was RM1.5 million.
() Entity proposed the final ordinary dividend on 1 March x5.
(g) The entity had provided for a contingent liability of RM425,000 but
judgement made on 12 February x5 was RM500,000.
(h) A civil suit was brought against the entity before the end of the
financial year. The lawyers advised the company that the company
would lose the case and-suffer a loss of RM1.2 million. On 10 March
x5, the company and the complainant agreed to settle it out of court.
The company paid RM1 million.
(i) Entity was part way through the construction of an office block. The
initial contract price was RM25 million. However, on 12 February x5,
the contract price was revised to RM17 million.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning