Question
Assume that you are in-charge of finalising Kiwi Limiteds financial statements for the year ended 31 March 2021. You have set the following time schedule:
Assume that you are in-charge of finalising Kiwi Limiteds financial statements for the year ended 31 March 2021. You have set the following time schedule:
15 May 2021: Signing of the auditors report and directors declaration.
30 May 2021: Distribution of the financial statements.
Before the financial statements have been signed and authorised for issue, you become aware of following events:
- Kiwi Limiteds R&D division had developed a new type of photocopy paper, and the directors believed that the new photocopy paper would double their sales volume. Furthermore, Kiwi Limited capitalised the development cost relating to the new photocopy paper. However, on 8 April 2021 application for a patent was rejected because a competitor had registered a similar patent in February 2021.
- Kiwi Limited holds investment in several companies listed on a London Stock Exchange. Over the past six months, this exchange has been losing about 3% of its value per month. On 11 May 2021, the exchanges value falls by 30%.
Required:
Explain how each of the above-mentioned events should be treated in the financial statements for the year ended 30 June 2021. (Hint: adjusting or non-adjusting event)
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