The chief accountant of Uncertain Ltd is not sure of the appropriate accounting treatment for a number of events occurring during the year 2012/13.

(i) A significant number of employees have been made redundant, giving rise to redundancy payments of $£ 100,000$ which have been included in manufacturing cost of sales.

(ii) One of Uncertain Ltd's three factories has been closed down. Closure costs amounted to $£ 575,000$. This amount has been deducted from reserves in the statement of financial position.

(iii) The directors have changed the basis of charging depreciation on delivery vehicles. The difference between the old and new methods amounts to $£ 258,800$. This has been treated as a charge in accounting policy and the comparative figures have been adjusted accordingly.

(iv) During October 2012 a fire occurred in one of the remaining factories belonging to Uncertain Ltd and caused an estimated $£ 350,000$ of additional expenses. This amount has been included in manufacturing cost of sales.

(v) It was discovered on 31 October 2013 that a customer was unable to pay his debt to the company of $£ 125,000$. The $£ 125,000$ was made up of sales in the period July to September 2013. No adjustment has been made in the draft accounts for this item.

Required:

(a) Write a report to the chief accountant of Uncertain Ltd with suggestions for appropriate treatment for each of the items (i) to (v), with explanations for your proposals.

(b) Amend the draft income statement to take account of your proposals.
(Association of Chartered Certified Accountants)

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Uncertain Ltd Draft Income Statement for the year ending 30 September 2013 Revenue Manufacturing cost of sales Administration expenses Gross profit Selling expenses Corporation tax (50%) Profit for the period . 5,450,490 3,284,500 2,165,990 785,420 629,800 (1,415,220) 750,770 (375,385) 375,385