Bags Unlimited is currently in the process of finalizing their financial statements for the year ended...

 

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Bags Unlimited is currently in the process of finalizing their financial statements for the year ended 31 December 2018. The following events occurred since 1 January 2019 and 28 February 2019: Has to be disclosed disc Prior year ear endral After year Coire eleDA. Current tax expense of R20 000 had been incorrectly debited to revenue in 2018 Reverse a B. A debtor that owed Bags Unlimited R100 000 at year-end was in financial difficulties at year end and, as a result, the company processed a doubtful debt adjustment should be 68000 of R30 000 against this account. In January 2019, the debtor's lawyers announced that it would be paying 40% of all debts/Pay 40000 lose C. A debtor that owed Bags Unlimited R150 000 at year-end had their factory destroyed in a labour strike in December 2018. As a result, this debtor has filed for insolvency and will probably pay 60% of the balance owing. Bags Unlimited was unaware of this debtor's financial difficulties at 31 December 2018. D. Inventory carried at R100 000 at year-end was sold for R80 000 in January 2019. It had been damaged in a flood during July 2018. E. A court case was in progress at 31 December 2018, in which Bags Unlimited was the defendant. No provision was raised at year-end because Bags Unlimited disputed the claims made. The court has since ruled against Bags Unlimited but has not yet indicated the amount to be paid to the claimant in damages. The company's lawyers have estimated that an amount of R300 000 will be payable. F. Bags Unlimited declared a dividend on 05 February 2019 of R25 000 P127 Required: Explain whether the above events should be adjusted for or not when finalising the financial statements for the year ended 31 December 2018. If the event is an adjusting event, provide the relevant journal entries. Bags Unlimited is currently in the process of finalizing their financial statements for the year ended 31 December 2018. The following events occurred since 1 January 2019 and 28 February 2019: Has to be disclosed disc Prior year ear endral After year Coire eleDA. Current tax expense of R20 000 had been incorrectly debited to revenue in 2018 Reverse a B. A debtor that owed Bags Unlimited R100 000 at year-end was in financial difficulties at year end and, as a result, the company processed a doubtful debt adjustment should be 68000 of R30 000 against this account. In January 2019, the debtor's lawyers announced that it would be paying 40% of all debts/Pay 40000 lose C. A debtor that owed Bags Unlimited R150 000 at year-end had their factory destroyed in a labour strike in December 2018. As a result, this debtor has filed for insolvency and will probably pay 60% of the balance owing. Bags Unlimited was unaware of this debtor's financial difficulties at 31 December 2018. D. Inventory carried at R100 000 at year-end was sold for R80 000 in January 2019. It had been damaged in a flood during July 2018. E. A court case was in progress at 31 December 2018, in which Bags Unlimited was the defendant. No provision was raised at year-end because Bags Unlimited disputed the claims made. The court has since ruled against Bags Unlimited but has not yet indicated the amount to be paid to the claimant in damages. The company's lawyers have estimated that an amount of R300 000 will be payable. F. Bags Unlimited declared a dividend on 05 February 2019 of R25 000 P127 Required: Explain whether the above events should be adjusted for or not when finalising the financial statements for the year ended 31 December 2018. If the event is an adjusting event, provide the relevant journal entries.

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