Tobacco Limited (“Tobacco”) manufactures cigars. The following information is available for the company for the year ended 31 December 2017. The financial statements are due to be signed by the directors at the forthcoming board meeting in May 2018:

(a) Tobacco’s revenue for the financial year ended 31 December 2017 includes £300,000 relating to the sale, in October 2017, of a consignment of special cigars to the Moravian Government to celebrate the Silver Jubilee of its ruler. Following a coup in December 2017, the ruler was deposed and the Silver Jubilee celebrations were cancelled. Tobacco does not now expect to receive payment of this debt.

(b) In January 2018 one of Tobacco’s French subsidiaries, Lum-Mette Limited, declared a dividend of €80,000 for the year ended 31 December 2017. Tobacco holds a 75% interest in Lum-Mette Limited.

(c) At the December 2017 Board meeting of Tobacco, a decision was taken in principle to dispose of Smoke Limited, a subsidiary company based in Cork. This investment was valued in the statement of financial position of Tobacco, at 31 December 2017, at

€1,300,000. On 20 January 2018 the management of Smoke Limited decided to buy the company for €2,000,000.

(d) Tobacco Limited owned 60% of Pipe Limited, which it had acquired two years earlier at a cost of €1,500,000. The financial statements of Pipe Limited for the year ended 31 December 2017 were received by Tobacco on 10 January 2018 and showed a permanent decline in the company’s financial position. The cost of Pipe Limited (€1,500,000)

was included under unquoted investments in the statement of financial position of Tobacco. A review of the financial statements of Pipe Limited indicated that the investment was now worth only €700,000.

Requirement Indicate how each of the above items should be dealt with in the financial statements of Tobacco Limited for the year ended 31 December 2017.