1.The owners of Deck Chairs Overboard Bistro Pty Ltd have alerted the accountant of the business as at 30 June 2020 that a customer suffered food poising whilst eating at the Bistro. The customer has made a claim in the Melbourne Magistrates Court against the entity. Currently, no decision has been made at, 30 June by the Court and no compensation for damages can be reliably measured. How would the claim for compensation in the Magistrates Court be reported in the financial reports, the Income Statement, Balance Sheet, and the Cash Flow Statement? Group of answer choices.

No impact on the Income Statement, an increase in Current Liabilities in the Balance Sheet and no impact on the Cash Flow Statement. No impact in the Income Statement and no impact on the Balance Sheet and cash outflow in Operating Activities in the Cash Flow Statement.

No impact in the Income Statement, No impact on the Balance Sheet however a note to the accounts and no impact on the Cash Flow Statement

An increase in expense in the Income Statement, an increase in Current Liabilities in the Balance Sheet and no impact on the Cash Flow Statement.

2.

Frontier Bicycle Technology Pty Ltd is a bicycle retailer who does not specialise in the sale of bicycles but in new technologies that will protect the ever-growing bicycle commuter from potential injury. The following information was extracted from Frontier Bicycle Technology Pty Ltd on 30 June 2020 after the inventory qualitative review was completed. The general journal entry arising from the above inventory review as per AASB 102 addressing the concept of Prudence is: DEBIT Inventory write-down $2 060; CREDIT Inventory $2 060. What would be the effect on the accounting equation if the qualitative review of prudence were not adopted? Group of answer choices

The current asset inventory would be understated by $2,060 and the inventory write-down would be understated by $2,060. The flow on impact would mean that net profit would be overstated by $2,060 and as a result Retained earnings in the statement of financial position would be overstated by $2,060.

The current asset inventory would be overstated by $2,060 and the inventory write-down would be understated by $2,060. The flow on impact would mean that net profit would be understated by $2,060 and as a result Retained earnings in the statement of financial position would be overstated by $2,060.

The current asset inventory would be overstated by $2,060 and the inventory write-down would be understated by $2,060. The flow on impact would mean that net profit would be overstated by $2,060 and as a result Retained earnings in the statement of financial position would be overstated by $2,060.

The current asset inventory would be overstated by $2,060 and the inventory write-down would be overstated by $2,060. The flow on impact would mean that net profit would be overstated by $2,060 and as a result Retained earnings in the statement of financial position would be overstated by $2,060.